How to Beat Lifestyle Creep and Meet Your Money Goals

We hate to say it, but spending money can feel good. It can feel really good, especially when you start spending money to improve your lifestyle. This is why it can be so tempting to spend more once you experience an increase in income. For example, why would you want to live life the same after working so hard to get a promotion? The urge to treat yourself is all too real. 

This is called lifestyle creep. It’s understandable why it happens, but more often than not, it happens without you realizing it. But you can enjoy life and still meet your financial goals by being aware of lifestyle creep and curbing it when necessary.

What is lifestyle creep?

Lifestyle creep, also known as lifestyle inflation, is a spending phenomenon that occurs when you suddenly have extra money come into your life. Typically, lifestyle creep occurs after getting a raise, promotion, or a new job with increased income. It can also happen to those who experience windfalls like inheritances.

Once you have more cash on hand, it’s really easy to increase your spending habits to improve your lifestyle with non-essential or luxury purchases. Some people may choose to upgrade their housing, buy a nice car, shop more, or dine out frequently. 

Lifestyle creep doesn’t refer to a one-time splurge to celebrate a significant milestone like getting promoted. Instead, lifestyle creep represents higher expenses becoming a part of your regular spending once your income increases. For example, signing a more expensive car lease or adding a weekly manicure to your budget would contribute to lifestyle creep. 

Higher spending amid increased income hinders financial progress. Learn to manage it for sustained financial success and security. Prevent lifestyle creep for lasting financial health. It's easy to succumb, but mindful habits ensure a secure financial future. Gradual spending growth is natural, but prioritizing saving and investing is crucial for achieving financial goals over time.

Is lifestyle creep a bad thing?

Lifestyle creep isn’t necessarily a bad thing if you still leave room in your budget to make progress toward financial milestones like saving for retirement or buying a home. If you can afford to spend more and keep building a solid financial future, then you are in a good place.

When this phenomenon becomes a problem is if it stops you from saving money, paying down debt, or growing an investment account. When you have more discretionary income, striking a balance between improving your lifestyle and your finances is important for long-term financial success. Deriving excessive changes may lead to financial burnout, impacting security. Strive for a balanced approach to maintain healthy financial habits.

Lifestyle creep examples

The reason lifestyle creep can be so damaging to your finances is that it can be challenging to recognize when it’s happening to you. To make it easier to fight lifestyle creep, here are some signs of lifestyle creep in the real world:

• Cars. Upgrading cars means higher payments, insurance, and maintenance costs. Careful consideration prevents overspending and financial strain in the long run.
• Housing. Renting a more expensive apartment or buying a pricier home can lead to substantial increases in housing spending. 
• Dining and entertainment. From eating out more to concerts to travel, there are a lot of fun ways to increase your spending gradually. 
• Fun purchases. When you have an increase in income, it’s easier to spend money on new phones, clothes, and other exciting purchases regularly. 
• Memberships and subscriptions. Regular spending changes, like new memberships or subscriptions, can harm long-term financial health. Be cautious to maintain financial well-being.
• Services. As you make progress at work, it is tempting to outsource chores like cleaning, gardening, and grocery shopping, but this comes at a cost. 
• Lifestyle upgrades. Do you usually fly coach but now always book first-class tickets? Are you going to dinner at fancier restaurants than you used to? Maybe you start splurging on regular massages, higher quality furniture or buy clothes more often. It’s really easy for even small changes in your spending to add up quickly. 

Slightly increased spending in specific areas isn't wrong. Awareness helps maintain financial balance and ensures spending aligns with priorities. Higher-income may lead to upgrading living spaces. The transition from a studio to a one-bedroom is a natural progression for many. Where lifestyle creep becomes problematic is when your spending expands in a variety of categories. Try to keep a close eye on where you spend more money to make sure it’s the best use of your funds. 

How to avoid lifestyle creep

Being aware that lifestyle creep can happen to anyone is the first step to not letting it negatively affect your finances — so good for you! Understanding lifestyle creep's impact on finances, let's explore steps to control spending and safeguard your financial progress for the future.

Step 1. Create a budget

If you want to make changes to your lifestyle after a salary increase or a financial windfall, that is fine in moderation. Sit down and look at your budget closely to see where you can increase your spending and where you can cut back. Even if you have more money at your disposal, it’s always a good idea to see where you can save a little extra money on unnecessary purchases.

When creating your budget, make room for financial goals like building an emergency fund, investing in retirement accounts, paying down debt, or saving money. Try to increase how much you spend on those categories before you start spending more on unnecessary purchases. 

Related: How to budget: 5 simple steps

Step 2. Automate savings and debt payments

Speaking of savings, once you decide how much you can afford to save or put towards credit card debt or other types of debt each month, automate that spending. You can set up automatic transfers from your checking account to debt payments or to your savings account each month to help you prioritize your financial goals. Doing so can make it easier not to spend that money on something else accidentally.  

Step 3. Learn to avoid impulse purchases

Impulse purchases happen to the best of us and in the early days of having a new influx of cash, lavish spending patterns are even easier to succumb to. To prevent lifestyle creep, try to practice mindfulness when shopping and think carefully about every single purchase you need and if you truly need it at that moment. It’s always a good idea to walk away from unnecessary purchases initially — you can usually come back to them later. 

Step 4. Track your progress

Once you have your new budget in place for a while, circle back to it regularly to see what’s working for you and what isn’t. You can also check in on how much progress you made toward your financial goals, like saving for a new car or paying off student loan debt. If you find there are areas of your budget you can cut back on, you can always increase how much money you allocate to your money goals on a monthly basis. 

FAQs

What is lifestyle inflation?

Lifestyle inflation is another way of saying lifestyle creep. When you hear someone use the term lifestyle inflation, that is in reference to someone increasing how much money they spend after getting a raise, finding a higher paying job, inheriting money, or experiencing some kind of financial windfall. 

What is the 50/30/20 rule?

The 50/30/20 rule is a common budgeting method that involves divvying up your after-tax income into three specific categories. Each month, you will allocate 50% of your income to necessities like housing or health care, 30% for discretionary spending like travel or clothing, and 20% for financial goals like paying down debt or saving money. The goal of this budgeting method is to distribute spending in a healthy way without depriving yourself too much of the things that make life fun, like going out to eat. 

Learn more about the 50/30/20 rule.

How do you stop lifestyle creep?

One of the best ways to stop lifestyle creep is by being conscious of your spending. The easiest way to be aware of how much money you spend is to create a budget and stick to it. You can make room in your budget for fun spending, but you can also make meeting your financial goals a priority. 

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