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:
|Furniture & Decor||5||0||20||40||66|
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 you’re 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!