Always Feeling Broke? You Could Be A Victim Of Lifestyle Creep | The Money Manual

Always Feeling Broke? You Could Be A Victim Of Lifestyle Creep

My dad would drop my brothers and me off at school in his old truck while other kids were hopping out of brand new SUVs. I would ask my dad why we didn’t have a brand new car like the other families, and he would tell me that his old car worked perfectly fine so there was no need for a new one. But now, looking back on it, I realize he and my mom were avoiding lifestyle creep, or the tendency to increase your standard of living with increased pay.

Lifestyle Creep Explained

Lifestyle creep works something like this: First, you get out of college and rent an apartment with roommates. But then you get a raise at your job, and you have the extra money, so you move out and into your own apartment. And then you get another pay raise, so you start buying fancier clothes and going out to dinner more often. If you had stayed in that first apartment, with the roommates, then you would have more money in your savings account right now. However, maybe the extra space at your new apartment offers you the solace to do better at work, and then you are able to get another raise.

Lifestyle Creep Is Not A Black And White Issue

Sometimes you have to splurge in some areas of your life for a bigger payoff in the long run. That could be a monetary payoff, like a raise, or it could be a mental health payoff, like peace of mind or even happiness. However, it’s important to note the areas in which you should spend and the areas in which you should save. Let’s take my parents for example. While they have always driven older cars, they splurge in other areas of their life, like owning a vacation home. For them, the satisfaction they receive from owning this second home is greater than the satisfaction they would receive from driving brand new cars. Basically, spend money on the things that are important to you and save money on the things that are less important to you.

How To Avoid Lifestyle Creep In Your Own Life

Let’s say you just got a raise at work. Up until this point, you have been living frugally. You have roommates, you eat at home for most meals, and you don’t go on unreasonable spending sprees. And now, with all of the extra money coming in each month, you can afford to get your own apartment and go out for food and drinks with your friends more often. However, just because you can afford this higher standard of living doesn’t mean you should go overboard. If you plan on buying a home one day or having a family, then the sooner you start saving, the more money you will have to pay for a down payment on a house or for your children’s education. It’s easy to see what is right in front of you, but don’t be blinded by the flashing lights. Take a step back, assess your options, and make calculated decisions. Don’t deny yourself of your needs, but a little self-discipline never hurt anyone. And if you feel you’re beginning to live ahead of your means, try the 10-day saving challenge.