How to recognise lifestyle creep (and how can you avoid it)

Shoestring Jane explores lifestyle creep, where higher income just leads to more spending. To avoid it, create a budget, set financial goals, and beware of common pitfalls.

What is lifestyle creep exactly? When I first heard the term, I realised it perfectly described a situation I had experienced when I was younger.

The more I earned, the more I seemed to spend! I had nothing to show for my increased income apart from more outgoings. 

Lifestyle creep happens when your income increases, your standard of living improves and things that you once considered luxuries or treats gradually become necessities.

While I am not suggesting that you never treat yourself or allow yourself to spend on things that add value to your life, lifestyle creep can stop you from achieving financial goals that may be within your reach if you manage your money effectively.

Flicking a mental switch

For example, you may have already planned a holiday. However, lifestyle creep is the inner voice that tells you that you can not only upgrade your hotel room but, rather than lying by the pool relaxing as you initially planned, you can also book some treatments in the spa, hire a car and go on loads of excursions.

Lifestyle creep can sneak up on you so that you develop a taste for the finer things in life. Your new job or pay rise may mean you can finally afford to join a fancy gym, and that’s a just reward.

However, be aware of mentally flicking a switch that allows you to spend more freely without having a plan for your money. A bigger home, a better car, designer clothes, and meals in upmarket restaurants are fantastic, but can you afford it all?

Lifestyle creep can lead to bigger debts to match your larger income. It doesn’t matter how big your salary is, the old adage always applies. If you spend more than you earn, you can quickly find yourself in trouble.

As Mr Micawber says in David Copperfield, “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

How can you avoid lifestyle creep?

Create a budget

Budgets may seem dull as dishwater, but half an hour spent setting one up and a few minutes here and there reviewing it can pay dividends.

Work out all your monthly income alongside all of your outgoings. Track your discretionary spending over the past few months to help you set a realistic budget for this and cut down on unnecessary expenditures.

Your budget should allow money for treats and fun. This way, you can reward yourself for your hard work and success whilst ensuring all your expenses are covered and you are moving towards your goals.

This article may be helpful to get you started with creating a budget.

Have a plan for your money

Know what your goals are for your money. If you want to pay off your mortgage as quickly as possible, buy a new car or save for a home deposit, allowing large amounts of income to trickle away will soon sabotage your dreams.

Decide what your financial goals are and organise yourself and your budget to make them happen. Set up automatic payments so that money goes into savings and investments, your pension, or your emergency fund as soon as you get paid!

Common lifestyle creep pitfalls

Here are some common purchases involved in lifestyle creep. Check how many you have succumbed to.

Recipe box kits

It may be convenient to have all the ingredients for your meals delivered, along with some delicious-sounding recipe cards. However, in this instance, convenience costs a lot. It is much cheaper to plan your meals, write a shopping list and take it to the supermarket.

Subscriptions

There was a time when the only subscriptions most of us had were for newspapers and magazines. Now, you can sign up for multiple TV packages, music streaming, audio  and e-books, cosmetics boxes, and more besides.

To stop yourself from getting carried away with subscriptions, review them regularly to see if you are getting good value and can afford them. If not, cancel.

Health and self-care items

Have you found yourself paying for a personal trainer rather than just using the gym? Do you have a regular salon hair colour when you used to buy a home box kit? Has a weekly massage become an essential where once it was a very occasional luxury? 

Self-care is essential for your well-being, but it doesn’t have to consume a huge chunk of your income. Remember when a walk in the fresh air or a home manicure was enough? Whilst they are nice to have, many self-care expenses are not essential. Leave space in your budget for those that matter, but be aware this is an area of spending that can get out of hand. 

Takeaway food

Takeout food delivery has become a huge industry. A population forced to stay home during the pandemic, along with the advent of easy-to-use apps and a growing network of delivery drivers, has led to a position where it has never been so easy to grab a takeaway. Very tempting after a busy day at work!

I actually deleted the apps to give me a chance to pause and consider whether I really want to spend £40 on a meal for two or get something out of the freezer …

Accommodation

As soon as my daughter began earning enough to live in a flat on her own, she did. Two years on, although she still enjoys her own space, she resents the amount of her salary that disappears into her landlord’s pocket! She would like to save a deposit to buy her own home and thus is planning to scale down and find a shared living space again.

It is easy to over-extend when it comes to accommodation. After all, we all want to live somewhere comfortable. Most experts recommend paying no more than 30% of your income on rent. 

These represent just the tip of the iceberg regarding lifestyle creep temptations and I am sure you can add a few more to the list.

Being aware of lifestyle creep is the first step to containing it. Make a budget, set some financial goals and recognise your spending temptations. You can use your extra income to create a financially secure future rather than wondering where all your money went.

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