7 Brilliant Hacks to Defeat Lifestyle Creep

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Most people think that a raise or a better-paying job can solve all their financial problems. What they don’t realize is that as their income grows, so do their expenses. This is known as a lifestyle creep and it happens more often than you think.

A survey by CNBC found that 58% of Americans are living paycheck to paycheck. Even if they got paid twice or thrice as much, there’s no guarantee that they’ll save more or spend less. However, there are ways to ensure you don’t suffer this dilemma. In this article, we’ll explore what a lifestyle creep is, how it affects your finances, and what you can do to prevent it!

What is a lifestyle creep?

In simple terms, a lifestyle creep is when your income and expenses grow bigger over time. Ideally, getting more money from your salary should help you build your finances over time. For instance, you can use your extra money to invest in a new home, a better retirement plan, or a more effective insurance policy.

However, people tend to spend more on what they want when they get better pay. By adding more expenses, either from buying luxury items or non-essential treats, the pay raise feels useless. Imagine spending 90% of your income every month, even if it’s doubled. No matter how much you get paid, you still only save a fraction of your salary.

The best way to illustrate a lifestyle creep is through your clothes. Imagine that you get a holiday bonus worth $500. As you hold the cash in your hands, you remember your wardrobe today. It’s decent but not impressive. With the bonus, you decide to go out and buy new clothes for yourself. By the time you get all the nice clothes and brands imaginable, you realize that you spent $400 in the process.

This is the danger of lifestyle creep. Even if you got nice clothes, you end up ruining the potential of your hard-earned cash. Yes, you have every right to enjoy the fruits of your labor. However, that doesn’t mean you have to live from paycheck to paycheck. Without proper foresight and planning, you’ll never reach your financial goals.

How does a lifestyle creep affect me?

As mentioned before, a lifestyle creep can disrupt your financial plans. However, it can be a sneaky thief that hits you before you even realize it. These are three possible ways that a lifestyle creep damages your financial future.

It feeds your expensive habits.

Getting paid more isn’t always ideal if you don’t know how to manage it properly. People tend to spoil themselves once they get enough funds. Think of the last time you got a raise or a bonus. How did you spend that cash? Did you use it on a long vacation or a new car?

While these aren’t bad choices, you have to temper how often you spend your cash. Otherwise, you’ll only feed these expensive habits and make them your standard in the future.

It makes saving and investing much harder to do.

Another problem with lifestyle creep is that it hinders your financial growth. Because your expenses grow with the income, you’ll find it hard to save or invest your cash. While it’s not impossible, it’s difficult to make meaningful numbers when you spend so much.

Remember that a better salary is only one part of the equation. Without good savings or financial investments, you’ll still fall short of your goals. Speaking of which…

It keeps your financial goals out of reach.

Every meaningful investment in life requires two things: a good budget and a good plan. If you’re facing lifestyle creep, you might ruin your plans even if you have good money. Think of what kind of financial goals you want to achieve.

For example, you can either become a homeowner, a business owner, or a self-made millionaire. However, if you let your expenses get out of hand, you’ll never get to be any of these things. Unless you start reeling back your costs of living, you’ll spend the rest of your days imagining what could’ve been.

What can I do to deal with a lifestyle creep?

Now that you know how a lifestyle creep can hurt your finances, it’s time to fight back. There are several methods you can use to keep your expenses safe and manageable. Here are seven brilliant hacks you can use to defeat lifestyle creep ASAP!

1. Build and adjust your lifestyle budget.

The first and most important step is to create and outline your lifestyle budget. Think of it as a roadmap for where your money goes. With a detailed budget plan, you can see what you spend and how much you pay for it. This can help you determine which costs are necessary (i.e. water, electricity) and which ones aren’t (i.e. app subscriptions, cars).

Keep in mind that everyone’s lifestyle differs from one another, so always reflect on your expenses first. That way, you’ll build a proper budget that fits your way of life and satisfies all your needs.

2. Take time to think before every purchase.

One of the worst habits you can get from a lifestyle creep is impulse purchasing. Studies show that 87% of Americans buy things on impulse. What’s worse is that more than half of these shoppers admit to spending $100!

Before you go and buy, take a deep breath and think your purchase over. Is it really necessary to have that item? Do you see yourself using it every day? If you can’t say yes to these questions, you’re better off walking away. If you must buy it, remember that an expensive item isn’t always a practical one.

3. Explore alternative rewards or options.

One reason why people fall for a lifestyle creep is the allure of a reward. They want to treat or gift themselves for all the hard work and effort they’ve given. However, before you waste all that cash, think twice about the reward you want. Why spend that much money if there are alternatives that can give you the same satisfaction?

For example, sweet tooths might want to enjoy a delicious lava cake. However, bananas and other fruits can liven up your taste buds without costing half as much as that. Before you settle on a deal, always think of what the other choices can be. Only then should you make a conscious decision.

4. Focus on your financial needs first.

To limit your spending habits and protect your paycheck, always focus on paying off your financial needs first. Prioritize your responsibilities, from groceries to mortgages. That way, once you pay for everything necessary, you can focus on your plans for the leftover cash.

5. Invest your extra cash to build an emergency fund.

One way you can make that extra money worthwhile is by making it your emergency fund. Those familiar with this blog will know how important I think a backup budget is. For newcomers, an emergency fund is your last resort savings. This money is meant to pay for any unexpected expenses, such as car accidents or surgeries.

With this fund, you can feel financially secure even if something bad happens. Think of it as your personal insurance plan for any and all problems in the future, both planned and unplanned!

6. Look for like-minded people to help your spending habits.

When I was busy saving money and protecting my cash, it was a hard adjustment for me and my friends. There were times when we would go to a nice restaurant and they would spend on fine wine and cuisines. Meanwhile, I ordered something simple, like water and a salad. It took a lot of discipline and self-control to avoid that lifestyle creep.

If you want to ensure that you don’t suffer the same crisis, surround yourself with people that have the same financial goals. Being in a group that wants to save money and cut down expenses can make all the difference. This way, all of you can work together to grow in wealth and in life!

7. Plan your rewards carefully.

This last step might seem confusing. As mentioned earlier, people tend to fall for a lifestyle creep because they want to reward themselves. However, that doesn’t mean rewarding yourself is bad. The issue is how you spend and how much you spend for it. Maximizing your rewards shouldn’t be about buying what looks good or seems fun.

Focus instead on making your rewards a part of the goals you set. For example, if you save enough money to buy a house, explore listings online. If you make your rewards part of your financial goals and investments, you’ll be spending your money properly. That way, you get to avoid a lifestyle creep and give yourself the chance to reach for those lifelong plans.

Takeaways:

Lifestyle creep occurs when your income and expenses grow in tandem. This happens when you choose to spend your extra money on your lifestyle, instead of investing or saving it.
A lifestyle creep can cause serious problems in your financial life.
This includes encouraging expensive habits, hindering your ability to save and invest, and keeping your long-term financial goals out of reach.
There are seven different methods you can use to prevent lifestyle creep:
Create and adjust your budget by identifying what’s necessary and what’s not.
Avoid impulse purchases by carefully considering the necessity and value of every item before you buy it.
Find less expensive ways to reward yourself. For example, healthy snacks can be more effective than indulgent sweets.
Always pay for essential needs first. The leftover money can then be allocated according to your budget plan.
Save extra money for unexpected expenses. It’s like a personal insurance plan for life’s surprises.
Find support and inspiration in people who share your financial goals. Make your rewards part of your financial goals. Spend money in ways that contribute to your long-term plans rather than feeding a temporary desire.

Ultimately, defeating lifestyle creep is all about making mindful spending decisions and focusing on long-term goals.

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