Are you earning more income, but not saving any more of it? Have possessions, foods and entertainment that were once luxuries become necessities? Beware!… The Lifestyle Creep may be stalking you.
Lifestyle Creep is defined by Investopedia as “a situation where people’s lifestyle or standard of living improves as their discretionary income rises either through an increase in income or decrease in costs”.
Put simply, this means “the more money you have, the more money you spend”.
Like a stalker creeping in the shadows, watching your every move, Lifestyle Creep slowly creeps up on you. As you go about your daily life, you don’t even notice Lifestyle Creep lurking in the shadows… Until bam! The creep jumps out from behind the bushes and you suddenly realise that you make good money, but have not a lot to show for it!
Unfortunately, Lifestyle Creep is something that affects a significant proportion of us… Including myself.
Generally, Lifestyle Creep presents itself in a manner similar to my story:
After I finished school, I went straight to University in 2005. I had a part-time job and was able to get Youth Allowance support from the Government. Whilst not a lot of money, this income allowed me to cover the essentials and have a little bit left to have a few beers and maybe do some kind of fun activity every now and then.
After the third year of doing this, my beloved and I wanted to move in together, so in 2008 we moved into a share house with just one friend. Despite picking up an extra shift at work, I was still spending down to my last few dollars.
3 years later in 2011, we decided to move in together just ourselves. In order to afford this, we got second jobs tutoring at our University. As I had a bit more cash due to my second job, I shopped for a few nice things for our home to make it more homely.
After finishing our degrees, we moved to Brisbane in 2012 and got professional jobs. After working for a year, my net income was about $750 per week. As I was now a “proper adult” I acquired new furniture and clothes, and we went on regular holidays.
… Fast forward to September of 2016 (6 months before my 30th birthday), whereby my net income had increased to $1000 a week. We went on regular holidays to 4 star hotels, had a regular turnover of clothes, shoes and furniture, and were looking at refinancing our car loan from $25,000 to $30,000 so we could upgrade to a newer, bigger, fancier car (even though our existing car was fine)…. And so on and so forth!
My weekly income and expenditure over this period looked something like this:
| 2005 | 2008 | 2011 | 2012 | 2016 | |
| Rent/Mortgage | 65 | 85 | 120 | 215 | 237 |
| Phone | 7.50 | 10 | 10 | 15 | 19 |
| Groceries | 40 | 50 | 72 | 90 | 119 |
| Alcohol | 20 | 25 | 24 | 30 | 35 |
| Internet | 10 | 10 | 10 | 10 | 10 |
| Utilities | 20 | 25 | 42 | 40 | 53 |
| Petrol | 20 | 40 | 40 | 10 | 10 |
| Car Maintenance | 10 | 10 | 16 | 21 | 30 |
| Car Repayments | 0 | 0 | 0 | 73 | 124 |
| Public Transport | 0 | 0 | 0 | 34 | 38 |
| Clothes | 5 | 10 | 20 | 30 | 30 |
| Eating out | 10 | 30 | 30 | 40 | 47 |
| Entertainment | 5 | 10 | 13 | 20 | 20 |
| Furniture & Decor | 5 | 0 | 20 | 40 | 66 |
| Holidays | 20 | 35 | 30 | 50 | 70 |
| Insurances | 10 | 10 | 10 | 20 | 40 |
| Pets | 0 | 0 | 0 | 10 | 30 |
| *Total Costs | 247.50 | 350 | 457 | 748 | 978 |
| *Total Income | 250 | 350 | 462 | 752 | 1029 |
| *Total Savings | 2.50 | 0 | 5 | 4 | 51 |
A pretty graphical representation of aforementioned data
As you can see, the more money I earned over these 11 years, the more I spent.
We all know that spending more throughout time is inevitable due to factors such as inflation, having children and buying a house. However, the issue with my expenditure was that it was increasing primarily in the “luxury” categories such as holidays, decor, eating out and entertainment. Consequently, I was acquiring more fancy stuff and going on fancier holidays, but I still wasn’t saving much.
Before I knew it, the Lifestyle Creep had me cornered. I was in a bad cycle of acquiring fancy stuff, was saving barely anything and was accumulating more car loan and credit card debt.
Advice (from someone who wishes they had received this advice earlier)
If the above story sounds like you, then I have just one piece of advice for you… Check yourself, before you wreck yourself!
Whether your 30, 50 or 70, it’s never too late to turn the lights on and scare away that money thirsty, debt-inducing stalker, Lifestyle Creep.
No matter how much you earn, Lifestyle Creep will make you spend more and more on fancy stuff to try and keep up with, or outshine, the Jones’.
At the end of the day, fancy stuff is not an accurate indicator of wealth or success… Anyone can have fancy stuff… That’s why loans exist and the banks are rich!
Cheers, TFC.
” Check yourself, before you wreck yourself!”
Great advice! I gave into lifestyle creek when I purchased a brand new car in 2012. My boss promised to give me a raise but it never came through. Eventually, I switched jobs and increased my income but that increase was used to pay for the car.
As of now, I have three payments left on that foolish purchase.
It’s one of those things that gets the better of most of us unfortunately. Congrats on only having 3 payments to go… That’s a great achievement!
The Creep is real. And He, or is it She?, is quite insidious.
I’ve never budgeted. Never had to.
And I feel like we live pretty frugal! Almost no clothing purchases, no new tech, we only travel every few years.
But somehow we spend a lot!
Biggest causes in an otherwise frugal family:
1. Better food. As I’ve been able, I slowly buy higher and higher quality food. I don’t think I’m silly about it. It’s not novelties. But things like grass fed or free range meats and organic foods. When I was more concerned about my “budget” (not a real budget, but, when cost control was a serious concern) I was more concerned about what was cheap or on sale, and would structure how I ate around that. NOW, I’ll still try to buy on sale, but, we go shopping with a list (still a good idea) and we buy what we plan to buy regardless of it’s on sale.
2. Home improvement and maintenance. I suppose, now that we’re homeowners, the money that many others would spend on clothes, electronics and travel has translated to home spending. Over 2018 we got a new roof at $7500 for our POLE BARN. Not even our house! I also count nearly 5k in spending on home improvement stores. Granted, we’ve got a big property.
Point is, it can be really strange how the lifestyle inflation and what you allow yourself to freely spend on increase as earnings increase, even if your perception of yourself is that you’re really frugal.
Agree with both of those! Huge influences on the creep!
Social media plays such a huge role in enabling lifestyle creep. When you see friends and family in new homes, new cars, and taking elaborate vacations it can leave you with a feeling of missing out. The constant barrage of advertisement makes it challenging not to spend up to what we make.
Being able to mostly avoid lifestyle inflation is such an important part of being financially sound. As difficult as it is to avoid the temptations of lifestyle inflation, it’s even more difficult to try to unwind an expensive lifestyle.
Absolutely!
It’s the same principle as – the more time you have, the more time you use. We need to impose boundaries on ourselves or we’ll take everything we can get! Great post 🙂
Absolutely. We definitely need boundaries! Thanks for your feedback.
I like this post! I voted for you in the Rockstar Rumble.
Good luck!
Thanks very much! 😊