5 Tips to avoid Lifestyle Creep

Sep 13, 2022 | Money management, Financial Wellbeing

Lifestyle creep is becoming a more common term as people wake up to the idea that you don’t have to keep up with the Joneses. Lifestyle creep is really how your spending increases at the same level as your income meaning you end up buying things you previously couldn’t afford but probably don’t need.

When we receive pay rises and bonuses instead of viewing this as a great opportunity to save many see it as a chance to buy more expensive branded products or a higher priced car. The excitement of having more money leads to an excitement to spend more of it. This is continually the case as income rises so even as a very high earner many continue not to save as the holidays become more expensive. If you allow lifestyle creep to set in you are continually chasing the next level without actually building any real wealth 

Don’t fall for Lifestyle Creep

1. Don’t lose sight of your goals

Having a plan and goals to work towards is setting yourself up for success. If you focus on re-directing your excess income to what truly matters to you and your goals for the future then you will sleep easy knowing that you are keeping focus and working towards something you truly value.

If you are finding it tough to stick to a spending plan then maybe you need to look again at where your income is being spent and ask yourself whether some of these items are adding real value to your life. A holiday for example will add real value to your life but if you are taking 5 holidays a year is that really adding value if it’s disrupting your long term values of having a nice home or opening your own business?  

2. Keep the same friends

They always say if you want to hang about with 5 idiots then you will be the 6th and the same is true of lifestyle creep. If you continue to hang out with the same friends you always had then they are comfortable with you having nothing.

If you continue making new friends as you climb some pre-conceived social ladder eventually the music stops and you will find yourself out of your depth and unable to compete any further. That will further add to your feelings of discomfort at letting yourself down.

It’s important that you make decisions that serve your circumstances and good friends won’t encourage you to fall into lifestyle creep. A great friend wants to see you be successful and fulfil your financial goals and won’t judge you for missing a night out. 

3. Give yourself the odd treat

Please reward yourslef for your heard work and congratulate yourelf on saving in the same way you can go out for a nice meal when you having been living healthily for a few weeks.

Life is not all about saving and investing so reward yourself at times in the here and now with smaller ticket items that bring you joy and add value to your life. A good exercise I like to work with clients on is writing down everything in your life in the last 6 months that you bought for £100 or over and ask whether or not it still adds value or not. The results are often surprising

4.Don’t be swayed by social media

People only put the best of their lives on social media but they don’t attach their bank balance or credit card statements to the pictures remember that!

You may be in awe of someone’s new kitchen or looking at their fancy new car but if it’s debt that has funded it then these people are just making themselves worse off long term to appear rich in the short term.

Business may well be booming but spending the profits on flash cars and holidays will result in assets having to be sold to provide the same lifestyle when the economy turns and disposable income reduces.

I remember a story of a successful fund manager who had always been moderately successful living on a street with newly found millionaires as the market boomed and his neighbours often taunted him about the new cars they could afford and boats they had.

Of course, when times changed the market fell and they had no savings to protect them so they had to sell their homes. Stay disciplined and remember where you are now is probably once what you always wanted. Lifestyle creep will never end if you let it consume you next year there will be a new Tesla or a new Rolex so stay grounded and in the moment. Warren Buffet one of the richest men in the world still lives in the same house he bought 40 years ago drives a similar car to many of you.

5.Save more as your pay increases

Reward your future self with more wealth and earlier financial freedom by using the extra available funds each month to fund savings and investments.

If you prefer to pay more to your mortgage then again that will be a great benefit to you in the future especially if interest rate rises continue to combat inflation. Remember to check with your mortgage provider if there are any penalties attached to paying extra in a lump sum or each month.

Contact me to discuss your financial future

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