I’m a Financial Advisor: Here’s How You Can Limit Lifestyle Creep and Still Live Well

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If you’ve worked your way up the ladder and you’re living the good life, that is great. But it’s important to make sure you’re not living too large.

Lifestyle creep happens when you start earning more money on a regular basis but also start proportionally spending more, said Andrea Osorio, senior wealth advisor at Citi Personal Wealth Management.

“For example,” she said, “it means buying designer shoes even when you already have a perfectly good pair in your closet — minus the logo — or even something as simple as paying extra for delivery when you could easily pick it up yourself to save on delivery fees.”

She said it’s not too hard to inadvertently get caught up in lifestyle creep.

“You can end up getting on this treadmill where the more you make, the more you spend — and, if you’re not careful, it can creep up on you and take away from your larger goals in life,” she said. “If you let lifestyle creep go unchecked, it can stop you from getting out of debt, going on that dream vacation, buying a home, saving for the future or reaching any of your personal goals in life.”

If you’re moving forward at work, make sure you’re using the larger salary you’re earning to grow in other areas.

“Progressing in your career is a positive milestone in your life goals,” said Abby Wendel, president of consumer banking at UMB Bank. “Just make sure to approach the salary bump with a smart financial plan.”

Know How To Spot Lifestyle Creep

Lifestyle creep got its name because it can easily sneak up on you, Wendel said.

“You can find yourself spending more,” she said, “whether it’s smaller splurges like going out to eat more often or purchasing more luxury goods like fancy olive oils, to larger expenses like a second car or vacation home.”

If any of the following signs sound familiar, she said you might have a case of lifestyle creep:

• “Your income has increased, but you didn’t similarly increase how much you’re saving.
• “You’ve become too comfortable with your financial situation and have stopped officially budgeting.
• “You no longer track your purchases or account balances like you used to.
• “You find yourself becoming nonchalant to the prices of goods and services you really want — ‘I have the money, why not?’
• “You notice that you’re suddenly racking up debt even while pulling in a larger paycheck — a telltale sign of overspending.”

Set a Budget

No matter the size of your paycheck, you always need a budget. Osorio said to evaluate your monthly expenses to determine how much money is left at the end of the month to put toward your goals. Make adjustments as needed.

“Although the percentage of income allocated towards each category will be different for everyone,” she said, “it’s important to understand where your money is going and if it’s where you want it to be. Having this perspective can help you identify where you are overspending and what can be scaled back.”

When your budget is in place, she said, it can be used as a tool to evaluate and balance your needs and wants.

“Ask yourself if the thing you are looking to purchase is something that you really need and fits within your budget or whether it is something that moves you further away from your goal(s),” she said.

Don’t Rush To Create a Realistic Budget

“Take a few days, weeks, months or whatever you need to understand how and where you’re spending,” Osorio said. “Giving yourself time to carefully evaluate your choices can help you save on things that may not be needed, cutting back on impulse and emotional buys.”

She said having the budget and financial goals noted above can help you rationally assess whether your next purchase makes sense financially.

 “Maybe you didn’t realize just how much you were spending on your daily coffee runs or sushi nights,” she said. “These tools give you a chance to reconsider those purchases to get you closer to your goal(s).”

Understand Why Lifestyle Creep Is Happening

Initially, lifestyle creep can start as an innocent feeling of satisfaction from rewarding yourself for the achievement of earning more money, Osorio said.

“It can also come from something as simple as telling yourself, ‘I worked hard for this, so I deserve it,'” she said. “And you should celebrate your successes, but there are many ways to do so that don’t involve going over budget and letting lifestyle creep get the better of you.”

If you don’t step back and think about what makes you happiest in life, she said, it’s easy to overspend and find yourself filled with regret when the bills are due at the end of the month.

Learn How To Get Back on Track

“It’s not too late to reverse the lifestyle creep trend if you’ve found yourself overspending,” Wendel said. “Once you’ve audited your weekly and monthly expenses, find ways to reduce the outflow.”

Here are the steps she said you need to take.

Review Automatic Purchases

“We live in the age of the subscription service model, so check everything from streaming services to monthly coffee deliveries and auto-refill shopping purchases,” she said.

If you’re not using a service — or know you don’t really need it — cancel it.

Tone Down Luxe Grocery Lists

“Have you noticed yourself saying ‘yes’ to any grocery impulse?” she asked. “Consider meal planning to prevent waste and reduce your exotic ingredient recipes.”

Simplify Your Social Life

“Carefully track your entertainment, restaurant and other out-of-home expenses to ensure you balance fun and financial savvy,” she said.

Pay Off Debt

“If you’ve been using credit cards or other lending options to pay for your recent expenses, immediately reassess spending and make a payoff plan,” she said. “When building your budget, don’t forget to account for interest accrued from credit cards or loans.”

Be Mindful of Discretionary Purchases

“It’s always beneficial to set short-term and long-term financial goals, even if the goal is simply to ‘plus up your everyday experiences,'” she said.

Ultimately, she said setting realistic goals can allow you to achieve financial success, without falling victim to lifestyle creep.

“If something like a vacation home or a gold-star charcuterie spread is really important to you, then it will be similarly important to create a budget and plan to accomplish that goal without sacrificing your financial stability,” she said.

You should enjoy the money you work hard to earn, but not so much that you sacrifice your financial health and subsequently derail your future goals.

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