Lifestyle Creep: How to Spot It and Stop It Before It Hurts Your Finances

Lifestyle creep.

Oh, man. I hear about so many Millennials that are battling this right now. 

Here is a very common story… Someone is making more money than they ever thought they would and feel so proud of their annual income. Over the past few years, they’ve upgraded their cars, purchased more name brand clothes, and dined out more. They don’t think anything of spending an extra $5 or $10 for having food delivered at work. The amount on their paycheck makes them feel confident they have enough to cover their expenses. However, the end of the month is a different story. They have no idea where all their hard earned money went.    

What is lifestyle creep? 

According to Experian.com, “lifestyle creep is when your spending increases along with your income” (Source). It often happens slowly over time. You get a raise or a better paying job and you spend more money on nicer or better things. You don’t think anything of spending a little bit more here or there. Everything seems fine until you realize you’re not able to pay your bills, save money, or invest. 

What does lifestyle creep look like?

Lifestyle creep can look like the following things:

• Upgrading your car or truck when your older vehicle is in working order.

• Less shopping at grocery stores and instead ordering convenience meal kits.

• No longer taking lunch to work and ordering out everyday. 

• Getting food delivered when you used to pick it up yourself.

• Upgrading to a bigger home or apartment.

• Buying more expensive clothes and not waiting for sales.

• Buying new electronics, just because. 

• Quitting regularly budgeting because you make more money.

• Buying more gifts for friends and family.

Let’s be honest… We strive to earn more money so we can afford the things that we want. To desire any of the things listed above isn’t the problem. You’ve worked hard and deserve it. However, if you're struggling to make ends meet each month, it is time to step back and analyze your spending. Reflecting on how your spending habits have changed over the recent years can be an eye-opening experience. 

How can you avoid lifestyle creep?

Here are three things to help avoid lifestyle creep:

• Creating short and long term financial goals.

• Making a plan for your money each month and sticking to it.

• Tracking your spending. 

Doing all of these steps can help keep you focused as your pay increases. It also encourages you to stay focused on long-term goals—such as paying off high-interest debt, saving for big purchases, or building your retirement—rather than just covering daily expenses.

What can you do when your income increases?

Sit down and figure out how much more you’re really making with each pay increase. 

Below is an example:

You just got a $10,000 raise. First off, congrats! 🎉

Now let’s figure out how much that is each month. 

$10,000 ÷ 12 = $833.33

Wow, over $800 more a month. Awesome, but hold on. Some of your money is going to go towards taxes. Let’s say 30% is going to go to taxes and you’ll be keeping 70%.

$833.33 × .70 = $583.33

Okay, you’ll take home just over $580. That's wonderful, but probably feels a little different once you figure out what get after taxes.

Let's take it one more step. Let's see how much more you're getting each week after your raise.

$583.33 ÷ 4 = $145.83

Yikes! I could easily spend $145.83 on a trip to Nordstrom Rack or going out to lunch every day.

Analyzing your new raise can be surprising. While you're earning more, the actual increase may not be as significant as you first thought. Being realistic about your pay increase will help keep you grounded.

Bottom Line for Lifestyle Creep 

We slowly wander into lifestyle creep, but need to be intentional about correcting it. Goal setting, planning your spending, and tracking your expenses are incredible tools to help you achieve your financial dreams. Years from now, you'll be proud that you made decisions today to change the shape of your future. 💚

Hi! I'm Jeannette Fennel. As a certified financial coach, I encourage and empower Millennials to take control of their finances. I focus on financial goal setting, budgeting, and debt payoff strategies. I love seeing clients make changes in their lives and crush their goals. Along with coaching clients one-on-one, I also run an Etsy shop with instant downloads called FennelBudgetingShop.

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