As you progress in your career, you might find yourself making more money. While you can savor the moment — professional milestones should be celebrated! — be mindful of your money, so you can avoid lifestyle creep.
What is lifestyle creep (aka lifestyle inflation)?
When you increase your spending as you earn more money, you’re experiencing lifestyle creep, or lifestyle inflation. Over time, this increased standard of living can sometimes make you feel like you actually have the same or less money on-hand than you did before.
Why does lifestyle creep matter?
Lifestyle creep often happens gradually over time, which makes it hard to notice. Of course, it can be rewarding to plan for splurges here and there, but boosting multiple aspects of your lifestyle adds up and could inhibit other important parts of your financial life. Regularly spending on fancy restaurants, generous gifts and high-end travel might result in sacrificing investment in your retirement or building generational wealth for your family.
It can be rewarding to plan for splurges here and there, but boosting multiple aspects of your lifestyle adds up.
I recently experienced lifestyle creep when my partner and I realized how much we were spending at restaurants. What used to be reserved for special occasions had slowly become a weekly occurrence. Not only did the meals feel less special, they also inevitably impacted our bank account. As I reflected, I realized overspending on weekly restaurant meals did not align with the values we set for our partnership.
With a refocus on what’s truly “enough” for us — enjoying tasty food and spending time together — we’ve shifted from dinners out to finding fancy recipes to cook together at home. That shift from mindless spending to a more thoughtful approach allows us to enjoy what we love in a way that honors our values.
How to avoid (or slow down) lifestyle creep
Even if you’ve already found yourself in a situation where your lifestyle has become more expensive, consider these ways to reduce lifestyle creep.
1. Review your spending and minimize recurring expenses
No matter how much money you earn, keeping an eye on your spending is the best way to avoid lifestyle creep. On a monthly basis, look over the money you have coming in and going out to ensure your spending isn’t increasing. As needed, find opportunities to reduce your spending on non-essentials.
One area where lifestyle inflation can really creep up on you is recurring charges. While some of these costs can be hard to avoid, reducing recurring payments will help you maintain financial flexibility. Where possible, negotiating rates or refinancing can help lower your costs in a pinch. Some other payments you may be able to lower include:
Utility bills
Insurance premiums
Subscription and membership fees
2. Use tools to your advantage
Automating your finances to ensure your money goes where it needs to can be a helpful way to avoid lifestyle creep. Create a values-based spending plan, which is a type of budgeting method that aligns your expenses with your values. When your spending speaks to what’s most important to you, it can be easier to keep it in check.
In addition, Ally Bank’s spending and saving buckets can help you better understanding where your money is going. Seeing a high balance sitting in your checking account can feel like an invitation to spend — but if you set up transfers into your savings account or retirement fund, you can pay yourself first before you spend money elsewhere.
3. Unveil the emotions behind your lifestyle creep
We all have a money story that reflects our personal narrative about money, as well as our learned beliefs about money. Dig into your emotions about money and your own money story. You may find you are subconsciously spending based on beliefs of what you think a person with more money should do.
Understanding your money story will help you uncover what’s really important to you — what values do you want to keep at the forefront when you spend money? How much is “enough” for you, and does that “enough” need to change as your income increases?
Control the creep
Slowing down your lifestyle creep doesn’t mean you need to sacrifice all your fun spending. When you understand where your money tendencies come from (aka your money story) and align your spending with your values, you can feel more confident that your money is being used in a meaningful way for you.
