What is Lifestyle Creep? PLUS 4 Ways to Avoid Lifestyle Inflation
Post updated may, 2023
What Is Lifestyle Creep?
Let's talk about lifestyle creep or lifestyle inflation. "Lifestyle creep" or "lifestyle inflation" is when a person starts spending more money once they start earning more money. It seems a little odd, right? Isn't the point of a raise to help you afford some of those things that had previously been out of reach? Well, yes AND it's important to be mindful of not overspending and feeling like you are on the constant treadmill of needing to earn more and more money. There are healthy ways to manage the increase in income or decrease in debts owed.
How Lifestyle Creep Looks
Here's how lifestyle creep showed up in my life. My partner and I purchased a home in a nice neighborhood a couple of years ago. We upgraded a bit in terms of space; our previous house was around 800 square feet, our current one is 1200 square feet (plus a garage!! Oh, the joys of a garage during Michigan winters!). Already that means we are spending more to heat and cool the house. Our previous yard was an overgrown mint garden; now, we have a few square feet of an actual yard. Those are the "obvious" lifestyle creep items. The subtler ones look like becoming a regular at a conveniently located and popular deli drive-through. Justifying the price to pay for parking downtown because I walked to work that day. Upgrading to the pre-made fruit plate instead of making a fruit salad for the neighborhood potluck. These, my friends, are examples of lifestyle creep.
Lifestyle creep is one of the most significant issues I see with people in their 30s. It's as though they forget that they were able to subsist off of ramen and happy hours 5-10 years earlier. I'm not advocating for a continued version of your 20-something-self's lifestyle. Social media and targeted ads mean we are constantly receiving tailor-made messages about things ready to eat up our additional income. My Instagram feed is full of ads for comfy loungewear, bespoke dog toys, and sales pitches for freelancers promising me a 7-figure business after signing up for a life-changing webinar. The temptation is real to add a few of those things to an online shopping cart, especially when you have more money at your disposal. "I can afford it, now!" you tell yourself.
The good news is there is a way to make more money, have more "things," and not succumb to spending all your hard-earned money when you start making more of it.
How to Avoid Lifestyle Inflation
Ready to avoid lifestyle creep? Here's how you do it, intentionally in four steps.
Step 1: Plan Ahead for Financial Goals
Dream about and write out what you would do with an extra $2, $5, or $10k annually. Would you upgrade your washer and dryer? Put a bit more towards your student loan debt? Take that dreamy AirBnB vacation? Or would it be nice to have a bit more fun money each month not to feel guilty about that annual sale at your favorite store? My guess is that this financial dream seems achievable if you had an extra bit of money.
Remind yourself of that vision if and when you get your next pay raise. Better yet, write it down in the notes section of your phone. I keep a Google doc of the things I want to purchase or use my money currently out of reach. I reference it when I earn more money or get a tax refund. Doing this helps me enjoy my extra income, while avoiding lifestyle creep by spending with alignment and intentionality.
Step 2: Be aware of Emotional Spending
Emotional spending is what happens when we seek out a purchase to help up feel good. You aren't alone. Our brains perceive shopping as exciting or new, which lights up our brains' dopamine receptors. This is why people describe shopping as feeling "like a rush," it activates the same aspect of your brain that drugs or alcohol do. We all have emotional triggers or soft spots that make it tricky to say "no" to certain items. Maybe your Achilles is the "choose what you pay" section on Everlane or the weekend getaways that land in your inbox courtesy of Airfare Watchdog.
Some people call this “luxury lifestyle on a budget,” I prefer to think about it as honoring your dreams and emotional relationship with money. Revisit the list of dream items from step one of dealing with lifestyle inflation. Does the flash sale get you closer to achieving that? If so, go for it! If not, hit pause and return to it later. Spending in alignment with your goals and values also makes it less likely that you'll experience buyers remorse.
step 3: Talk to Your Friends About Money
When you experience lifestyle inflation symptoms, it can feel uncomfortable to talk to your friends about money. However, if you keep flaking on your friends with no explanation, you run the risk of damaging that relationship. Instead of ghosting each invitation, tell them what's going on. You could say, "I'm actually trying to save up for a bigger apartment. Could we do food trucks for lunch instead of the fancy sit-down restaurant?" or "I'm spending more money now that we are in a new neighborhood. I'm just hitting pause on extra expenses right now." In most cases, your friends will understand and often be empathic of what's happening. And, if they aren't, might I suggest that they probably weren't the greatest friend in the first place?
step 4: What to do with a pay raise
You should be getting a pay raise annually that at least keeps pace with inflation. If not, take this as a flashing neon sign to set up a meeting with your boss to talk about increasing your income — plan for this raise or “income creep.” Most baseline raises are low, about 2.5%, as that more or less captures inflation. When you get that 2.5% bump (going from $95k to $97,375k), pretend that you are still earning your "old" salary of $95k. Siphon off that additional increase in pay and reference the dream you'd written down. See if you can now afford that item or experience with your pay raise. If there is additional money left over after funding that dream, consider throwing extra money at your retirement or student loans. That's how you make a pay raise work for you and avoid lifestyle creep.
Plan for Lifestyle Creep
Now you know what lifestyle creep is, have an idea of how to plan for it, spend intentionally, and use your pay raise. If you have fallen victim to lifestyle creep, you aren't alone. Consider working with me, a financial therapist, to help you examine the emotional reasons that might be keeping you from enjoying your increased income.