Avoiding Lifestyle Creep

So you’ve finally received that long awaited promotion and pay raise. Your investment portfolio has done really well and you all of a sudden have an influx of cash at your disposal.

Mentioned above are just some of the reasons why your standards of living may improve rapidly. Other reasons include (but are not limited to) winning the lottery, rapid decrease of living expenses etc.

Many amongst us have difficulty dealing with additional funds becoming available. It might prove especially hard for someone who’s denied themselves any luxury for an extended period of time. In such cases, lifestyle creep is all but certain to get you.

What is it?

Lifestyle creep is something that occurs when the discretionary income of an individual increases, letting the individual spend more on anything that comes after necessities. The paradox herein is that additional discretionary income can increase the costs of one’s necessities as well. This happens when an individual becomes accustomed to a certain lifestyle, and thus ‘wants’ of the past become ‘needs’ of the present.

Lifestyle creep does not discriminate by age or gender. Young and old, male and female, are as likely to give in to it. And, while in itself there is nothing wrong with increasing one’s standards of living, maintaining these increased standards can be very taxing, especially – in the long term. Consider that your current career and salary are never to be taken for granted. Or – would you really want to work forever, because you wasted away your retirement funds?

How to avoid it?

Whether the lifestyle creep is yet to set in or you’re already fallen victim to it – you can fight it. And the best thing is – it’s free, and you only need to work on yourself.

Establish a budget

The road to riches starts at the strategic level. While not all budgets are created equal, the main goal for this is to plan ahead for your expenses. If you know about the 50/30/20 budget rule, it states that 50% of your income should cover all of your needs. Creating a monthly budget should help you remain below the 50% threshold. If you’re spending above that, there are a few ways you can fix that:

  1. Increase your income. This is the toughest option for many. Chances are you’re already swamped with duties and chores as it is, and adding more will just burn you out. That might not work in the long term. However, if you do have some free time on your hands – you might want to use it efficiently. Maybe you have a valuable skill that can earn you some extra money each month – try and explore all your options.
  2. Reduce your expenses. While not as difficult as the first suggestion, sometimes reducing expenses on an already tight budget can be close to impossible. For some of us, there’s still a chance, though. You can try downsizing your lifestyle, which could in turn reduce the amount you spend on your monthly necessities. Consider walking or biking instead of driving your car. Spend less on small-but-expensive commodities, like take out, take away coffee etc.

Set and reach for your goals

Take the same strategic approach to set even more long-term goals than a monthly budget. Whether it’s your retirement plan or simply a 10-year investment goal, having something to focus on can go a long way in ensuring that you at least think twice before spending.

Make sure you reward yourself from time to time

As much as indulging yourself in expenses can be a bad thing, so can be submitting yourself to a too strict of a regiment. Psychology is an important factor in any long-term venture. Therefore – keep your dopamine levels in check by addressing your ‘wants’ from time to time. A pragmatic example of doing this would be setting aside a specific fund for just such expenses, so you never spend more than intended.

Maintain control

Modern times pose many challenges, not the least of which is maintaining control of the many aspects of your own life. Easier said than done, right?

Then again, even if you won’t be able to control some things, you can certainly control how and when you spend your money. So, be sure to take advantage where able. In rugby terminology – you take every tackle you’re given.

Lifestyle creep is one beast you want to cage, rest assured. But, what if the beast’s out of the cage already? Good news – you can control your lifestyle creep easily. As long as you follow at least some of the suggestions written above, you will limit the impact and damage lifestyle creep poses.

Be aware!

After finishing school and starting your career, your standard of living will be on a rise year after year. It’s perfectly normal to fall into bad habits as far as your spending goes. After all – you’ve earned it. But…

It’s one thing to earn your lifestyle creep. But funding your lifestyle with loans and credit cards is another beast altogether. With all of its positive attributes, this is where the internet can feed into a disaster. Many young and old individuals have access to all sorts of media thanks to the internet. Unfortunately, more often than not, this media is focused on promoting a certain level of living – luxury. And many fall victims to this corruption.

As with many other things, you can always strive to be better with your finances. It goes for generating more income, proper investment strategies, savings and budget, too. Stay mindful of your goals, and you will do just fine!