What is Lifestyle Creep: How to Identify and Avoid It
Posted On May 8, 2021
Lifestyle Creep. We have all seen this behavoir pattern bubble up amidst our circle of friends or family. First, your friend Nicole receives a huge promotion at work. Suddenly, the 3 bedroom apartment in Brooklyn with 2 other roommates doesn’t cut it anymore. Nicole then moves into a 1 bedroom apartment and increases her rent by 30% percent. Now, her larger paycheck is mainly going towards the new apartment with no increase in savings—the resulting increase in net worth $0.
The unfortunate part is, lifestyle creep almost seems like a normal progression of people who find themselves in their 20s and 30s.
What is Lifestyle Creep?
Lifestyle creep, also known as lifestyle inflation, is an increase in one’s spending as a result of an increase in income. In many cases, one feels expected to keep up with appearances as items once considered luxuries become necessities.
Why does Lifestyle Creep Happen?
When many young professionals enter their late 20s and early 30s, they often experience their first jump within the corporate ladder. The former associate has now been promoted to a managerial, leadership or supervisory role.
They are simply no longer vying for entry-level positions. Therefore salaries, raises and bonuses are significantly larger that most entry-level positions.
Social Media and Your Peer Group Play a Large Factor
In the age of Instagram, In-your-face-advertising, and seemingly “overnight success,” these professionals feel entitled to or perceive societal pressures to live a way that seems enviable, glamorous, and materially enriched.
As someone who works in finance NYC, it’s easy to get caught up in lifestyle creep without even realizing it. There is always someone with a nicer apartment, nicer clothes, more exclusive vacations, and high-end meals. If they have it, so should you. It’s just what you do.
And the moment that becomes more accessible, usually via a promotion or a raise, the money goes straight to a slow but inflated lifestyle. You typically don’t even realize it’s occurring until it’s too late.
How Do You Identify & Prevent It?
Do you find yourself often justifying the seemingly inconsequential expenses for apparently valid reasons?
Are you now going a $150 a month gym when you used to go to Planet Fitness for $10 a month?
Yep….that’s lifestyle creep.
Or, do you order the $50 bottle of wine at dinner when you used to buy the $25 bottle? You guessed it, lifestyle creep.
Does the stylist in the more trendy area of downtown seem better just because they cost more than the “barber” to whom you’ve become accustomed? That is also lifestyle creep.
Now, these are very subtle differences. Even I find myself justifying reasons to spend “a little extra” when the cheaper option is sufficient.
When you find yourself vying for the more expensive option, take a step back, and think about whether you really need it, or you are looking to satisfy a deeper feeling. It’s a complex and almost unavoidable scenario most millennials will face at some point.
How to manage Lifestyle Creep
When I am checking my monthly expenses on Personal Capital, I usually take a nice hard look at my discretionary spending. It’s important to set a budget to help manage Lifestyle Creep.
How much did I spend that much eating out this month?
Did I buy a bunch of junk that I don’t really need for my apartment or house?
Did I spend a bunch of money on clothes at Nordstrom when the Gap used to be just fine?
You will always think of a reason to justify your spending.
After all, would you ever do something that didn’t make sense at that point in time, but was silly in retrospect? Yep, I do it all the time.
Money is a tool, not an end.
If you get a raise or promotion, that is a reason to celebrate. You only live once, after all. You shouldn’t feel ashamed to celebrate success. And you shouldn’t expect yourself to be eating ramen noodles and canned tuna after ten if while simply hoarding 90% of your salary.That’s not healthy either
The point is, we should be aware of how and where we are spending our money and be able to manage our finances accordingly. You never know when an unexpected expense may occur.
Have you experienced Lifestyle Creep? How did you realize it was happening to you and what did you do about it?
Founder and author of realworldpersonalfinance.com [RWPF]. A blog dedicated to personal finance for millennials that want its readers to know they can be perfectly imperfect. Over the past 10 years, his net worth went from -$108,000 to $365,000, mainly through debt reduction, living below his means, and navigating the corporate world. There have been mistakes along the way, and he is still learning too. He's here to offer honest opinions and real insight that's based on his own personal experiences.