The Creep, Lifestyle Creep
Do you remember the first time you bought yourself a Kate Spade purse? You told yourself it was a one time purchase, a girl only needs one fancy purse. Now your closet is full of Kate Spade, and Louis Vuitton and Burberry purses and every one is there for a particular occasion. You need them all, they are no longer special purchases. If you can relate, then you’ve experienced lifestyle creep.
The term lifestyle creep is used to describe how people’s spending habits increase as their income increases, or their expenses decrease and things that had been considered luxuries become necessities. One obvious time when there is potential for lifestyle creep is after a promotion, when your income has gone up. Another time is when your expenses have gone down, this is most common after completing repayment of a loan. Who doesn’t want to celebrate paying off their student loans?
Think back to your first couple of years living on your own. Do you live in a nicer home or apartment now? Do you buy nicer clothes? Go on more expensive vacations? Or more frequent vacations? These are all examples of spending habits that can be considered lifestyle creep. Most times, luxury items are going to be things you didn’t always buy. It can be as simple as the coffee you buy on your way to work every morning. Like most of us, you probably used to make coffee at home, before life got too busy and you could afford the few extra dollars a day. Now you can’t imagine going back to that homemade brew.
Lifestyle creep is not just an increase in spending, it is also that these more expensive purchases no longer feel like luxury items to you. When they become integrated into your new standard of living, they are no longer special treats, but instead have become your new standard of living. To remove these more expensive items from your lifestyle and go back to an earlier standard of living, would no longer meet your needs today. Can you imagine someone telling you now the only vacations you can take are to places where there is a friends couch to crash on? How did we live like that??
Now, increasing your spending isn’t always a bad thing, and certainly most people do increase their spending as they progress in their careers, but the important thing is to do so consciously. When you receive your next promotion, consider how you will use that increase in pay. To combat lifestyle creep, you can put some or all of it right into savings and help you put more away for later much faster. Maybe a portion of it can go towards a special treat, but try to make that special treat a one time expense, so it isn’t something that is going to consistently eat away at your increase. If you have been wanting to stay at the Ritz for your next vacation, do it, but make a conscious effort to acknowledge this doesn’t mean every vacation going forward will be a 5 star accommodation experience.
The best way to combat lifestyle creep is to make a budget and stick to it. When creating your budget, think about what is truly a necessity and what is really a luxury. This will help decide if this item gets its own line item on your budget or if it falls in the category of special treats on special occasions (which should also have a line item on your budget).