What You Need To Know About ‘Lifestyle Creep’

Although the phenomenon is natural and expected, there are ways to keep it from eating away at your savings.

Overspending has always been somewhat easy, but these days, it’s even more so. Although you might attribute that reality to terms like “funflation” and “money dysmorphia,” don’t overlook another insidious trend: lifestyle creep.

Lifestyle creep might be a natural and expected phenomenon, but it’s not without its downsides. To prevent such issues, HuffPost asked personal finance experts to explain this concept and share their tips for staving off the temptation.

What is lifestyle creep?

“Lifestyle creep refers to the fact that we often spend more money as our income rises,” said Kimberly Palmer, a personal finance expert at NerdWallet. “Lifestyle creep can happen as a result of a desire to ‘keep up with the [Joneses]’ where we see other people spending more so we do the same.”

As a result of this phenomenon, people may spend extra money on experiences and things they don’t need — like designer clothing, luxury cars or real estate. There are also less extreme examples across the spectrum.

“You get a raise, and suddenly, you’re upgrading your phone, eating out more often, and splurging on vacations,” said Bola Sokunbi, the founder of Clever Girl Finance. “It’s tempting to spend more because you feel like you can afford it or you might feel you deserve to treat yourself, leading to higher spending.”

It’s only natural to want to improve your quality of life by purchasing nicer things or to feel drawn to the picture-perfect lifestyles you see on social media. Lifestyle creep is often nefariously gradual.

“This is a slow increase in spending that often goes unnoticed until it starts to affect your lifestyle and savings,” said Dasha Kennedy, creator of The Broke Black Girl blog and a financial activist at Chime. “As your income increases, so does your spending, often on things that don’t add value.”

What are the upsides and downsides?

“Some upsides to lifestyle creep include an improved quality of life where you get to enjoy the fruits of your labor,” Sokunbi said. “You might also feel motivated to go out and achieve more. That said, the downsides are that you may have less savings because you are spending so much, which can lead to financial stress and cause less flexibility in your life overall due to your expanded financial obligations.”

If your spending keeps pace with your increasing salary, then you’ll have a hard time saving money and building a financial safety net.

“You could be earning more but still living paycheck to paycheck,” noted Kara Stevens, author of “Heal Your Relationship With Money” founder of The Frugal Feminista. “When we earn more, we want to enjoy it. But it can be a slippery slope if we’re not careful.”

LIfestyle creep is particularly sneaky because it can go unnoticed for a long time, Kennedy added.

“It can deplete your savings and lead to financial stress,” she said. “It can mean you are enjoying the benefits of your hard work, but at what cost? It’s important to keep this under control.”

What’s the best way to deal with lifestyle creep?

“Lifestyle creep is unavoidable for most people, but understanding and managing it plays a major role in maintaining financial stability,” Kennedy said. “Being mindful of how your spending habits change with your income can help you stay on track and avoid overspending.”

One of the best ways to keep lifestyle creep from wrecking your finances is to closely track your spending each month and pay attention to changes.

“Reviewing your credit card and bank statements can help, as can using a budgeting app,” Palmer said. “Anything that makes it easier for you to track your spending and make adjustments can be a useful tool.”

Determine what your financial objectives are and how to achieve them.

“Set clear goals for your finances,” Sokunbi advised. “Know what you want to achieve financially, whether it’s saving for a house, retirement, or an emergency fund. Create a budget to track your income and expenses.”

It’s OK to enjoy nice things, but try to stick with your budget. Sokunbi recommended aiming to live below your means.

“Just because you can afford something doesn’t mean you should buy it,” she said. “So before making a big purchase, ask yourself if it’s necessary and if it aligns with your financial goals.”

Keep long-term financial stability and security front of mind by allocating a portion of your income to savings and investments ahead of or alongside any lifestyle adjustments.

“Automate your savings,” Sokunbi advised. “Set up automatic transfers to your savings and investment accounts to ensure you’re saving consistently.”