Marketing Specialist Nia immediately celebrated her raise with a wardrobe glow up she’s been wanting for a year—there will always be next month to be frugal anyway. Even as her salary rose, she found that her savings were stuck and it’s been this way for months.
Money, especially the clean, hard-earned kind, is meant to be spent and during a two-year lockdown where very little has gone right, opening a parcel weekly for that serotonin boost has become a coping mechanism.
When people get an increase, it presents an opportunity to live the dream, leaving individuals with a potent feeling of fulfillment, until it gets to a point where you need another increase to sustain new, more luxurious needs. It’s called lifestyle creep and it's the reason people like Nia feel like they just don't have enough.
What is lifestyle creep?
Lifestyle creep is “increasing your spending at the rate at which your income increases,” author Jason Vitug said in his book You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.
The more money you make, the more you spend, preventing you from saving or achieving long-term financial goals. So even if you do get a salary increase, you may find yourself living paycheck to paycheck.
A lot of it can be attributed to keeping up with the Joneses, or seeing others own luxury items and spending just as much, if not more, just to stay in the race.
Upbringing and environment can also contribute to lifestyle creep, especially if you’re surrounded by people who spend on their wants once the salary hits the bank.
Most people in the middle of lifestyle creep are usually nearing retirement and are realizing way too late that they spent and spent without saving. Still, younger indviduals can also fall prey to lifestyle creep given the presence of social media, ads, and personal mindsets.
You won’t even notice
This inflation of lifestyle doesn’t come overnight. Most times, it will be small purchases like new clothes or shoes, then gadget upgrades or appliances. Then getting a place or a car becomes the new want. Goals get bigger, and it proves difficult to downgrade your lifestyle as the current wants have become a right instead of a choice.
Basic utilities like electricity, water, internet, and food will always be part of the equation, but as income increases, so does the “need” for other services: gym memberships, maintaining the quality of designer goods, streaming subscriptions, or even check-ups for your car.
With more cash in your wallet, previously unattainable things are within your reach: “What seemed like luxuries at one point in time became standard, so I sought more expensive wants. I didn’t realize at the time I was experiencing lifestyle inflation,” Vitug said.
Getting a condo unit all to yourself after landing that high-paying job might not seem like much, but since you’re busy, you may need to hire extra hands to keep it clean. All the fancy appliances may need repairs if broken.
If you’re extra busy, takeout is the go-to instead of cooking cheaper meals yourself. You’ll also feel the need to dress up nicer to represent your new, upgraded life.
“If your lifestyle is inflating, then you are going to find it difficult to save money, get out of debt, and invest in your retirement,” he added.
If you end the month without any money left for savings or retirements, it’s time to pause and assess your spending.
How to fight lifestyle creep
The first step is always acknowledging it’s a problem and committing to solving it, or at least taking steps to tone down the excesses of your current lifestyle.
To do so, you need to be more aware of where your money goes through a budget. Everyone gets paid differently, with their own utilities and priorities, so you’ll first have to determine what your true needs are.
“Clarify your values and know what is important to you,” Vitug said. Once your basic needs are fulfilled, you have to sit on your goals and your future. Vitug said this part is very personal, as financial milestones will often feel hollow if you’re living a lifestyle you don’t want to.
“For many people, talking about money is difficult enough, so adding a discussion about how money makes them feel is nearly impossible,” Vitug said. Still, confronting these realities will help you manage money better.
As someone who suffered lifestyle creep, I found that the best way to save was to automate it. Before I could even spend my salary, my online banking app automatically puts a portion of it into savings. That way, there are no barriers to saving and the separated fund remains untouched for when I need it.
Decluttering is also a good way to remind yourself how much you have, and potentially put items you no longer use up for sale. Seeing all the stuff you accumulated in one place can drive the point home that you were spending way too much.
Moving forward, you’ll have to make active choices and doublethink your purchases.
“Keep your living expenses way below your means, spend less, and save more and invest in things that appreciate in value,” Vitug advised.