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Why You Should Avoid Lifestyle Creep

lifestyle creep dangers
❝Wealth consists not in having great possessions, but in having few wants.❞ -Epictetus

Reflecting on life several years ago, I realize I like my lifestyle. It's comfortable. We do things that we enjoy. I like my work. I'm comfortable.

I like my wardrobe. Yet, I started shopping at Jos A. Bank. I thought that was a pretty good in-between. Colleagues at work get their clothes from Brooks Brothers, but I'm not like them; that's a waste of money.

I like my car. Yet, it's closing in on 10 years old and I want a black sedan with leather interior and a sunroof. Dog fir gets all over the cloth seats and it's hard to clean, and a sunroof seems cool. All my colleagues have expensive European cars, but I just want a small domestic car. European cars are too much.

I like camping and hiking. Yet, I start taking more expensive vacations. My boss goes on several trips every year to Napa Valley, Naples, New York, and even Europe. I don't need to go on so many trips, though; that's too much money.

As I started making more money, I started spending more money. I was deceiving myself. I didn't spend quite as much as my peers - a clear (to me) justification that I am still, in fact, frugal.

The flip side of that coin, however, is that I had a comfortable lifestyle and spent more money to increase my lifestyle.

Lifestyle Creep Defined

In a nutshell, lifestyle creep refers to how the cost of our lifestyle tends to creep up as we start making more money.

Let's assume you have a comfortable lifestyle that you're perfectly happy with. All your needs are being met, you have hobbies you enjoy, you like your work, and you're generally satisfied with your life.

Now, what happens when you get a good raise, your partner gets a great promotion, or you receive an inheritance?

If you're like most people, your vacations would start to cost a little bit more. You would start to go to more expensive restaurants. You would eventually upgrade your cars. If it was enough of a bump, you might even upgrade your home.

That is, the cost of your lifestyle creeps higher to keep up with your income.

lifestyle creep

Why Lifestyle Creep Happens

It's important to understand this isn't usually something we do on purpose. With rare exceptions, nobody says, "I am going to start spending more money." But, that's what we do.

Often we nonconsciously chase our neighbors. When our neighbors and friends have what we don't have, that affects us. Further, deep down we believe that a more expensive lifestyle will make us happier. Often the hard work that lead to the promotion or raise has us justifying our lifestyle creep by telling ourselves "we earned it."

We don't usually do this with intention, and even if we somehow did intend to increase our lifestyle, we do that analysis only considering our present selves without regard for our future selves.

keeping up with the Joneses

Increasing Your Lifestyle Is Not Necessarily Bad

You might be skeptical about my seeming bashing of increasing your lifestyle, and you should be. However, I want to point out that I am not saying increasing your lifestyle is bad. I am saying that increasing your lifestyle with intention is quite different from letting your lifestyle increase accidentally.

To make this distinction, we can think about our lifestyle costs in three different ways. Our current lifestyle is what our lifestyle is right now. Our desired lifestyle is our ideal world. Our actual lifestyle is how much we are actually spending on our lifestyle.

Increasing your lifestyle from current to desired is part of a healthy, intentional financial living. Lifestyle creep comes in when your actual lifestyle cost increases without you knowing about it.

lifestyle creep isn't necessarily bad

Your Lifestyle Is Your Choice

You get to decide what kind of life you want. I have to make it clear that "what kind of life you want" does not give you permission to live beyond your means. We have to design a lifestyle that fits your personality, needs, values, and desires, in a way that you can afford - that is, balances the needs in the present and in the future.

Living a lifestyle you can't afford not only prevents you from saving, it digs you into debt.

live below your means to combat lifestyle creep

Overcoming Lifestyle Creep

Intention and conscious awareness are how we overcome lifestyle creep. By that, I mean we should work on creating habits we want to work on, and automate our decisions wherever we can. We should also work to use our money to support what's most important to us.

Focus on Habits and the Future

Focusing on the future means thinking about what your ideal future looks like. Put yourself in your shoes three years from now. What does that look like ideally? What behaviors do you need to implement or stop in order to get there? When you know what you need to do, automate as much as possible. Automation means you spend the time to implement your systems, then you don't have to make those decisions anymore. Save your willpower for other areas of your life.

Support Your Values

Letting our lifestyle costs increase because of our neighbors, friends, or family members gets in the way of us living our best lives. What others' values are none of our business. Getting clear about what's important to us and aligning our money with that is the key to living a life with purpose and meaning.

You don't have to consider yourself frugal, although you can if you want. Frugality might make you think of sacrifice. Sacrifice gives us a sense of deprivation. Instead, understanding the need to balance the present and the future, and reframing frugality as simplicity, you'll be able to live a more intentional life.

overcoming lifestyle creep

Increasing your lifestyle isn't bad in and of itself. Letting your lifestyle creep up over time without your awareness is the problem. It gets you away from living your values. It keeps you from saving more, delaying your financial independence.

You only have one life. Live intentionally.

Related Money Health® Reading
References and Influences

James Clear: Atomic Habits

BJ Fogg: Tiny Habits

Daniel Gilbert: Stumbling on Happiness

Note: Above is a list of references that I intentionally looked at or thought about while writing this article. It is not meant to be a definitive list of everything that influenced my thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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