Are you a Victim of the Lifestyle Creep?

By Kate Vaillancourt, Certified Credit Union Financial Counselor (CCUFC)

If you’ve been following this blog, you saw the July edition of Make Friends with your Finances, challenging you to take a better look at your spending — and yes, I took the challenge. There is a good amount of self-reflection that goes on when I’m trying to figure out what to write about and that one resonated with me more deeply than I expected, because for the most part, I’m doing ok…right?

When I did the math for the article, it made my heart skip a beat. Was I really spending that much on lunch each week? Sadly, yes, and more often than I wanted to admit to anyone, especially myself. But, the numbers were staring me in the face. Ugh! Yes, I could afford it, but is that behavior in my best interest? That would be a resounding NO, so a change needed to happen.

Since then, I’ve cut my dining out to once a week (twice at the most) and on the other days, if I can’t manage to bring leftovers or something else from home, I eat a frozen dinner from the grocery store. Even the pricier frozen meals are about half the cost of many take-out meals. Somewhere along the way, the luxury of take-out had become normal and comfortable. I had fallen into the Lifestyle Creep.

The lifestyle creep is a real term and refers to the tendency to increase spending as income increases. It’s also known as lifestyle inflation. For me, it’s spending that happens when I’m comfortable, not necessarily because I have a lot to spend, but because I have some to spend, which is where I feel I am in life. It’s not necessarily a bad thing; spending money because you have money is OK. It’s only a problem if it gets in the way of your goals or puts you in a position where you can’t afford the more important things, like housing or food.

Going out to eat during the week wasn’t prohibiting me from paying the bills, but when I realized just how much I was spending each week, I had to give myself the talk. Is there something better I could be doing with that money? Yes, there is. Have I made the change? Yes, I have. Will I fall off the wagon? Probably, but hopefully not for long, especially now that I know what a difference it can make to my overall financial situation.

What are some signs that you may be experiencing the lifestyle creep?

1. An obvious one is increased credit card debt. You are swiping that card more because you can make the monthly payment. Credit card debt can be difficult to overcome, so be careful with this one. If you have a large purchase that you want to pay over time, a personal loan might be a better option. The interest rates might be lower and there is a definite end date to your payments.
2. You find yourself becoming nonchalant to the prices of goods and services you really want. Things that used to be luxuries have become the norm. Dinner out, an upgraded car, the latest cell phone, or going to the spa are things that once were wants and are now within your reach, so why not have them? (PS: It’s ok to have them as long as you can afford them.)
3. Your closet is full and you have a lot of subscriptions — you are enjoying the fruits of your labor, A LOT! There is nothing inherently wrong with that, but are these things getting in the way of your goals, such as buying a home, having an emergency savings, or paying off that credit card?

While avoiding the lifestyle creep may not entirely possible, there are some things that you can do to avoid becoming a victim to it.

1. Create a budget. Sit down with your finances, figure out the things you must spend on such as housing, food, transportation, and bills, and then see what you have left. Make a plan and stick to it as best possible.
2. Set up an automatic deposit to your savings account. Before you have a chance to spend it, put it somewhere safe. Experts say you should have anywhere from three to six months worth of expenses in a savings account for emergencies, but you are best at knowing what you will need.
3. Pay down debt before splurging on something else. I know this is a tough one, but if there’s anything you can do to reduce your overall debt — especially unsecured revolving debt such as a credit card — do it. When you are looking at your retirement years, you’ll be glad you did (not to mention all the interest you will have saved).
4. Stop comparing yourself to others. Unless you have insight as to what is going on with the neighbors, you have no idea how much debt they’re carrying to maintain their lifestyle. Trying to keep up with the Joneses can put you in a bad place.
5. Avoid impulse buying. Again, this is a tough one, especially if it’s a good deal. I know!
6. Set a goal. Is there a debt you’d like to pay off, something you want to buy, or places you want to travel to? If so, get that in your budget. Before you spend on something extra, remind yourself how that money could be put towards your goal. Reaching goals can be addictive and this is (usually) a good addiction to have.

If you’d like help becoming friends with your finances, please reach out to me by sending an email to kvaillancourt@acadiafcu.org or by calling 207-992-1060. Financial counseling services are free to members of Acadia Federal Credit Union.

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September 17, 2024