How To Avoid Lifestyle Creep
In the last four years I have nearly quadrupled my income yet my spending remains roughly the same.
With the prevalence of social media it is easy to want to “keep up with the Joneses” when your salary increases, but you have to make a conscious decision to spend wisely and avoid lifestyle inflation.
Lifestyle creep is when your expenses increase proportionately to your salary so you end up spending more and saving the same amount. You should take that and flip it- spend the same amount and save more! That is how you will build long term wealth.
Read on to find out how you can avoid lifestyle creep.
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Deciding What Your Top Priorities Are
As you start to earn more money, you will inevitably grow less frugal. There is nothing wrong with spending money on things you enjoy, but you have to decide what your top priorities are.
For me, I decided to allocate more of my earnings to traveling, eating healthy, and a pricier gym membership (~$130/mo).
Since I know my top priorities, it becomes easier to avoid lifestyle creep in other areas. Where most people run into problems is they increase their expenses in all areas of their lives, leading to a significant increase in spending.
Housing Expenses
Is housing your largest monthly expense? It is for most people. I’m 27 years old and I’ve never paid more than $1,000/mo on rent or my mortgage.
As your income increases, it becomes tempting to move to a more luxurious apartment or buy a larger home than you need. While there is nothing wrong with this, you have to make sure it aligns with your values.
If you choose to spend more on a downtown apartment, you will have to cut back in a different area. For me, housing is not my top priority. I want to live in a nice, comfortable area but I do not care about having the best amenities or latest upgrades. This is where I am able to save a large chunk of money.
Luxury Cars
Buying a sleek car might be on your wishlist, but there are ways to do it smartly and safely. If a luxury car is your top priority, then try to wait to shop at the end of the month when salespeople need to meet their quotas. You should also do your research and visit a few autocenters before committing to a car.
Designer Brands
The other category that’s easy to spend money on is designer fashion. As you start earning more, keeping up with the fashion trends can become more important to you. I would recommend looking into clothing rental subscriptions such as Haverdash, Rent the Runway, and FashionPass so you can wear popular clothes without breaking the bank. Renting clothes is also more sustainable than succumbing to fast fashion trends.
Bottom Line
Increased expenses with an increased income are pretty inevitable, but you just have to make sure they align with your values. Try to focus on categories that will improve your experiences, health, or investments. A lot of lifestyle creep is associated with trends and impulse buys so taking a step back and checking in with your priorities can really help you stay on track.
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