According to Investopedia, “lifestyle creep occurs when an individual’s standard of living improves as their discretional income rises and former luxuries become new necessities.” In my opinion, lifestyle creep is a stealer of wealth. It’s a formidable opponent that must be recognized and defeated. Unlike other obstacles in life, lifestyle creep doesn’t take you head on. It creeps up on you, sometimes even without you realizing it. Then, when you do realize it, it’s too late. In today’s post, I’ll discuss how I’ve experienced lifestyle creep and my plans to combat this sneaky foe.
Recognizing The Problem
It’s very hard to fix a problem if you don’t recognize you have one. In my case, I’ve determined that I am experiencing a bit of lifestyle creep.
I recently moved to my new location. The move brought with it increased income. That’s been nice. But, it also has brought with it new expenses, which I’ve talked about before. But, as a quick recap, I bought a car, applied for two new credit cards, and, in the process, racked up thousands of dollars in debt.
The problem is that I haven’t cut back on my lifestyle at all. Indeed, if anything, I’ve actually increased it. Now, despite having a car, I spend a lot on Uber. I also spend a lot on parking fees at the garage for when I travel, which is all the time. I have dry cleaning bills up the wazoo, and eating out every day remains an expensive habit. At least I take comfort in the fact that my daily trip to Starbucks is a constant in my life.
What’s really sad is that as I am writing this, I realize that I need to get a better suitcase and a good pair of dance shoes. For some reason, I just can’t stop spending money.
The Solution
Time! There is an old saying that “time heal all wounds.” I agree. Let’s take my suitcase and dance shoes as an example. After I purchase the suitcase, I won’t be buying another for some time. The same thing applies to the dance shoes. Once I make that purchase, that’s it. There will come a time when I’ve fully transitioned to my new location and standard of living. Then, it’s just a matter of maintaining a standard of living that I am comfortable with.
I won’t bore you with the fact that I also need to buy the latest iPhone!
Once I’ve determined a minimum standard of living, I will then use the excess to continue to build my dividend portfolio. I must say though that I feel fortunate enough to be able to maintain my current levels of contribution to my portfolio. Arguably, I might be better putting that on pause and clearing up some of this debt. But, I like to think that I can walk and chew gum at the same time. Getting out of debt and investing doesn’t have to be an either/or concept. It can be a balanced approach, and that’s how I’ve decided to tackle my current problem of lifestyle creep.
Conclusion
If you’re not careful, lifestyle creep can steal from your ability to build wealth. I’ve spent so much money over the past couple of months, to the point where I wish I wasn’t so wasteful. For example, yesterday I spent $20 to buy cards in one of my favorite games, Hearthstone, which I’m actually playing right now as I am writing this post. I didn’t even get good cards! So that was $20 down the drain. But, I justify and rationalize the purchase saying that I make enough money to do that. I probably just have to learn not to feel guilty about such wasteful spending. Or, better yet, I must realize the problem for what it is – lifestyle creep. As such, it must be weeded out and eradicated.
Do you experience lifestyle creep? How do you manage it? What are your thoughts on this post? Let me know by commenting below.
Lifestyle creep can definitely be a tricky beast–we have definitely been guilty of it ourselves, particularly as our kids got older and began to get involved in more activities. Fortunately we have never taken on any debt with the exception of a 0% financing when we finished our basement, and then we paid that off well in advance.
The part that raises a little red flag for me in your post is the note about justifying and rationalizing your purchases because you make enough money. On one-off things that is fine, but when you use that same mentality on all purchases they quickly add up and that’s when you find out you’re back in debt and you’ve spent up to or in excess of that higher paycheck. Indulgences here and there can be fine, but be honest with yourself about them and don’t try to justify them for anything other than what they are.
Wish you all the best on taming that lifestyle creep, paying off the new debt, and getting back to the investments!
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Great points DivvyDad. I don’t necessarily disagree. One of the good things that have come out of this recent experience is just how much I hate the idea of having debt and how quickly I am working towards getting out of debt. Too many people get comfortable with the idea of always being in debt. That’s definitely not me!
I haven’t had lifestyle creep in a long time. Ever since I kicked my habit of continuously buying dvd’s I slowly eliminated the need of buying stuff. That doesn’t mean I don’t buy anything, because if I want something I have the funds to buy it. But usually I come to the conclusion that I really don’t need it.
Ofcourse I also have a family to take care of now so that forces some responsibility on you as well.
Great to know you kicked the habit Mr. Robot. Even though I recognize that I have a little bit of lifestyle creep, I’m trying not to let it get too much out of control. I will continue my practice of having a minimum level of investment which is my counter to any lifestyle creep that occurs.
Lifestyle creep is a matter of degree. If you see no lifestyle creep at all you are probably doing a poor job of growing. Because as a starving student or entry level worker you live cheap. As you get more income and life experience you begin to learn that the cheapest products are not always the best value so you chose to spend more to get much more. As long as you are following a financial plan that makes sense it also makes sense to adjust your living expenses upward at a reasonable, slow pace because the optimum value of expenses is not the minimum you can possibly sustain unless you are some world class frugal stoic. If you are a normal person with a good game plan you can live an increasingly rich lifestyle without jeopardizing your financial goals. I’ve always felt that any gain in income should be used three ways, to enjoy, to invest and to give away.
Well said Steveark. It’s all about finding the right balance for you and yours.
Making money also comes with responsibility on finances. Payments and taxes. You need to plan ahead.
Always a good thing to have a plan Brisbane. I totally agree.
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I can relate on a few of those things for sure. Eating out a lot if just so easy and convenient, but it is expensive. Luckily I have self control when it comes to games as I don’t spend money on any of the “freemium” phone games I play. I also need a new pair of shoes lol. Although in my defense, they are legit tennis shoes not just every day tennis shoes. I actually wore the toe out so bad I can see through the shoe. Since they are built for more durability, I get a good 3 or so years out of them since they are only used when playing tennis. Just haven’t gotten around to getting a new pair, they are so expensive, over $100. One of these days I am sure and it will be worth it.
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you sound like me. I have a pair of shoes that I need to replace but just haven’t gotten around to it yet. It seems like I could do well having two pairs but just haven’t decided to shell out the money. Over $100 is a lot.
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