8 Ways Lifestyle Creep Keeps You From Building Your Wealth
Written by
Joel Lim
Edited by
Rebekah Evans
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You’re making decent money. You don’t feel like you overspend. And you don’t have a ton of bills. So, you wonder, why aren’t you building more wealth? You should be doing much better right now than you feel like you are, you figure. So what’s happening?
You’re not alone. Only 22.1% of Americans have more than $100,000 invested and it is at that financial point that your wealth really starts to grow, according to 24/7 Wall St.
Read on to explore the everyday actions you’re taking or not taking, that are holding you back from joining that 22%.
You Increase Your Cost of Living Every Time You Get a Raise
It’s tempting — so tempting — to move into a bigger apartment, get a better car or start shopping at Whole Foods instead of Food 4 Less as you start to make more money. It makes sense. You’re tired of living frugally when you’re not, in fact, at that financial level anymore.
But this mistake is probably the biggest reason you’re not accumulating more wealth, even though you’re technically “doing better.”
How To Change: You don’t have to put every extra dollar you make into investments, but you do have to put some of it in there. As you first start getting raises and promotions, aim to contribute at least 50% of your raise to your investment portfolio, which is what Poor Swiss suggested. As your lifestyle improves, contribute a great percentage of each raise to investments until you reach your desired goal.
You Make Luxury Your Normal
If you look at most genuinely wealthy people in the United States, they don’t live wild and flashy lives. They tend to live simple lives with simple items for their necessities. They prioritize financial security over “things.” It’s a good approach to take to your lifestyle.
You don’t need the most expensive shoes, jacket or watch. And chances are, you don’t need a massive house with more bedrooms than you have family members. But you do need to add to your investment portfolio, where your investments can earn you 12% in returns, according to Ramsey Solutions. Your Chanel bag won’t get you there.
How To Change: Make a deal with yourself that you’ll treat yourself on occasion and the rest of your money will go toward necessities and growing your wealth. It’s a mindset shift you need to make to prioritize financial security.
You Try To Live Like an Influencer
You’ve likely heard of this one as “keeping up with the Joneses.” It happens to the best of us. Your friends, neighbors and family members are living the good life and doing the things you want to do.
So you feel like you need to do and pay for those things as well, in order to fit in. Or they invite you to places you can’t really afford to go, but you go so you can be part of the group. It becomes a vicious cycle. You cannot keep up with it and invest your money at the same time.
Now, with Instagram and TikTok, you’re also getting lifestyle pressure from influencers who convince you that you need certain items or a trip in order to live a good life. Guess what: You don’t.
How To Change: Start hanging out with people who prioritize financial security and investments. You’ll learn to fit in with them and grow your wealth.
You Keep Signing Up for Stuff
Subscription fatigue is real. You sign up for Netflix and Hulu. But now you also need Disney+ and Apple TV. And you need that gym membership, but your kids need to go to the YMCA. Plus, you like that yoga studio and you love that magazine about fitness and another one about yoga. Before you know it, you’re spending hundreds of dollars on subscriptions you’re probably not even using.
How To Change: Sign up for a subscription manager app like Experian that will track your subscriptions for you and help you cancel the ones you’re not using. Then invest that money in the market.
You Buy Things on Credit
As a general rule, if you have to pay for it with a credit card, you can’t afford it — which means you shouldn’t buy it. With the exception of major purchases like a home or a vehicle, you should be paying for purchases with cash.
This is because credit cards and loans will charge you interest, which eats away at even more of your potential wealth. It also means you’re overpaying for those items, because those $250 shoes quickly become $350 shoes after months of interest charges.
How To Change: Make a general rule for yourself that you’ll save for big purchases rather than financing them.
You Have No Budget Discipline
You set a budget every month, but somehow, halfway through the month, you’re off track. Then, you decide to forget the budget for this month and start again next month. It’s like a financial diet. You crash and burn and start again, only to crash and burn again. And your wealth doesn’t grow.
How To Change: Just like with a diet, it helps to track your spending. Use a budget app like Rocket Money to track your spending. Some will even cancel your subscriptions for you.
You’re Not Automating Investing
If you’re not doing it automatically, you’ll either forget or talk yourself out of it. You’ll find items to buy, eat out more and your monthly income will be gone before you know it.
How To Change: Set up automatic transfers from your paycheck or your checking account biweekly to transfer to your brokerage account. Then all you have to do is invest that money. Once it’s invested, you’re way less likely to cash it out.
You’re Mistaking Your Income for Real Wealth
If you think you’re rich because you make a lot of money on your paycheck, think again. According to Schwab, real wealth is money that is working for you, not the money you earn or the money you spend. It means you have assets. It means you have freedom. It means you’re not worried about losing your job and becoming homeless. Because that’s exactly what can happen to anyone who makes good money but doesn’t have real wealth.
How To Change: Start putting a portion of every dollar you earn to work for you. Set up a free brokerage account, learn about investment funds and start earning interest on your income. You’ll never mistake income for wealth again.
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