Everyone likes to have their creature comforts and fun experiences. But living your best life can bring on lifestyle creep – when your standard of living increases as your salary does. Making necessary upgrades isn’t bad (like fixing your dishwasher) – but normalizing increased discretionary spending can lead to spending above your means. If you end up in debt, and you have to join a debt management program, it’ll feel tougher to cut back. But hard situations or smaller budgets aren’t the only times you should evaluate your finances. Avoid lifestyle creep with these four tips.
Reconsider Much You Really Need
Variety is the spice of life, as they say. If you’re able to, why not subscribe to Hulu, Amazon Prime, Netflix, HBO, and Disney Plus? When you’re shopping for summer clothes, two adorable sundresses catch your eye. Nobody wants to feel deprived, but doesn’t hurt to take a step back to think.
For example, while hopping from one subscription service to another, do you usually end up using one more than others? Which service has most of your favorite shows? If you watch most of your shows on just one or two services, consider canceling the ones you haven’t watched for a while. Variety is wasted money if you don’t use it. Plus, it’s not permanent – you could always add it back if you want.
Back to the two cute dresses. They’re both pretty, but is there one you gravitate more towards? Variety in your closet is fun, but if you see yourself wearing one often and the other not so much, it might be better just to buy that first one. That’s a good way to avoid lifestyle creep. If you absolutely love both styles though, consider whether or not you could buy similar dresses for less. Basic designs (like stripes or a common solid color) can be found almost anywhere for less. Which brings us to our next point of how to avoid lifestyle creep.
Don’t Make the Pricey Option Your Only One
Granted, you shouldn’t cheap out on things such as household appliances or a good winter coat. Still, it’s easy to fall into the trap of lifestyle creep. Perhaps you fell in love with a gorgeous clothing store or line, and have become loyal to it. Maybe since your raise, you’re now able to buy that expensive wine or beer – that you used to only buy for special occasions – on a daily basis.
Everyone loves their brands, but with lifestyle creep, they become your default. You might not think to buy clothing from the cheaper (but still cute and good quality) brands or outlets, or you might not be inclined to try the cheaper wines. The best things don’t always have to be the most expensive. A less-pricey counterpart could be exactly what you need. Doing your research can save you a little or a lot, and it’ll be easier to avoid lifestyle creep. You can feel happy and fulfilled without spending every last dollar.
Have Fun at Different Price Points
Time spent with friends and family is priceless – the bills, not so much. Drinks, sushi, and parmesan fries are great treats after a long week – but hitting the town every Friday racks up a huge balance. Part of lifestyle creep is getting used to this. Your lifestyle gets so inflated, expensive weekly dinners become your new normal. Or if you’re a sports fan, you buy tickets for every game. Spending for the here and now might make you forget other crucial areas of your finances, such as your retirement or emergency fund.
A mix of low-priced to free activities (i.e. chilling in the park with snacks), mid-priced activities (i.e. mini-golfing with ice cream), and big ticket activities (i.e. your favorite artist’s concert) is key to having fun without lifestyle creep taking over. It’s fun to switch things up!
For example, you go to your favorite restaurant every Friday. If you’re comfortable spending, say, $30, each week (or paying the cumulative $120 balance each month if you charge your meals) you’ll get used to that lifestyle. But have you tried making creative meals that cost as little as $10 to prepare? Mastering a new recipe in your own kitchen is a gratifying feeling, and sharing with your friends in the comfort of your home is fun too! If you alternate between the restaurant meal one week and home cooking the next week, it’s cheaper than going to the restaurant every time. Those savings will serve you well – invest in your retirement (use that compounded interest!), or put them aside for emergencies.
Unique experiences are fun once in a while, but other activities are great too! The simpler things aren’t just for lean times. It’s about being rich in different types of experiences.
Don’t Forget About Budgeting
Outlining your expenses and seeing what you’re spending is vital no matter what your income is. Evaluating your bills helps you pinpoint the things you truly value and are willing to spend money on (i.e. that daily coffee), realize where you could’ve saved money (like waiting to buy that bestseller novel used instead of paying full-price), and helps you plan for your future (like calculating contributions to your retirement fund).
Remembering your big goals is another effective way to avoid lifestyle creep. Such goals could be paying off debt, buying a car, or saving for your child’s education. Besides saving your money in the present, you’re creating a holistic financial plan for your life. Again, having more money makes it easier to upgrade or buy more things – but regardless of income, expenses still add up. Even six-figure earners are prone to debt, or have troubles making ends meet. Lifestyle creep – not just a lower salary or lack of funds – can lead to the challenge and struggles of trying to maintain your expenses.
Avoiding lifestyle creep isn’t about not enjoying what you worked for, or always having to be cheap. It’s about living within your means so you can be comfortable, have the occasional splurge, and be prepared for important goals and emergencies. Properly managing your finances will help you feel more secure now and in the future. Credit counseling can also help with finance management.
If you need help today, call one of ACCC’s certified credit counselors at 800-769-3571.