Avoid Lifestyle Creep — How to Keep Spending Under Control as You Earn More Money
Written by
Cara Danielle Brown
Edited by
Angela Corry
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Lifestyle creep is typically defined as the practice of spending more money as one earns more money. Did you get a raise? Time for a fancier car. A promotion that doubled your earnings? Time for a bigger house! And so on.
See the problem? This pattern of behavior can severely limit the ability to save for the future and compromise overall financial stability.
So how exactly can you keep your spending in check as your earnings grow? GOBankingRates looked to experts for advice on this age-old dilemma.
Consciously Set Aside 15 – 20% for Retirement
Before money is put toward designer clothes or a trip to Bora Bora, first consider whether you’re saving for retirement. Consciously setting aside money eliminates a chunk of income you can easily drop on frivolous merchandise. It’s not that spending one’s hard-earned money is wrong; it’s that spending too much money while maintaining too little foresight is what gets people into trouble.
“I would say the minimum should be 15% of your income and your goal should be 20%,” stated founder and CEO at Solomon Financial, Brad Clark. “The problem most people run into is they get a pay raise and immediately figure out how to spend it. The mindset should be, I got a pay raise, am I saving at least 20%? […] don’t let your 65-year-old self down because you couldn’t tell yourself ‘no’ today.”
Live Within Your Values
Nathan Astle, founder of the Financial Therapy Clinic, explained that avoiding lifestyle creep doesn’t have to be about reducing your quality of life; it’s about being intentional regarding what you value spending money on. Which expenses truly improve your life and which are the ones you’ve just become accustomed to having? If you value education, an academic course may be worth the money; expensive restaurant dinners may not.
“Ask yourself questions like, ‘how do I know my money is going to the places I want?’ or ‘what does living within my values look like?'” stated Astle. “The clearer you are about why you care about the financial choices you are making, the less pull you will feel to make your life look like something else (Keeping Up with the Jones’s).”
Create a “Fun Budget”
Never spending your paychecks on anything nice can paradoxically set you up for a spending binge later on. It’s important to enjoy life and celebrate the wins; it’s just essential your spending doesn’t go overboard in the process. Moderation is key. So to have fun while ensuring a spending binge isn’t in your future, try to allocate a “fun budget.”
Fun money “helps you remember a budget isn’t all about restrictions,” read an article posted to Ramsey Solutions. Occasionally, allow yourself to buy Starbucks! Exactly how much money to put toward this fun budget will heavily depend on one’s individual income, debt and savings goals. Your fun budget could be $10 or $10,000 — but, when it’s gone, it’s gone. No exceptions.
Behave As Though the Raise Never Happened
It’s not that a raise in and of itself causes one to spend more money; it’s the mindset that you can now get away with spending more money sans guilt. And before you know it, money is flying out the door. Need a guardrail? Forget all about the raise… as much as possible anyway. Out of site, out of mind.
“Behave as though the raise never happened,” stated Georgi Todorov, founder at Create & Grow. “Create automatic transfers to direct the additional money directly into savings or investments before you ever notice it.”
Jay Zigmont, founder and CEO of Childfree Wealth, advised automating your spending limits by putting “all, or nearly all, of your raise towards your 401k or your savings rather than in your checking account […] the reality check is that you lived last year on your paycheck without the raise, you may be able to do the same this year.”
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