An Exploration of Lifestyle Creep
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Defining lifestyle creep
Lifestyle creep is what we call it when your spending increases along with your discretionary income. You get a bonus, and with it a new Louis Vuitton bag. You get a raise, and start looking for new apartments. Lifestyle creep isn’t always creepy but it’s important to understand why it happens and how to manage it. At the end of the day, lifestyle creep isn’t a big deal as long as you’re crystal clear on your money mindset.
Why it matters
Why do financial influencers get worked up about lifestyle creep? Well, it can have very real long-term financial consequences. If we’re not sure how to keep it in check, that ignorance comes at a very high cost. Literally.
For example, say you get a $10K raise when you’re 25 and only invest the first year’s increased income. By the time you retire at 65, that could be worth more like $160K (assuming ~7% annual rate of return). We can get more granular with accounting for inflation and other variables, but the main point is it’s a LOT of money.
But not everything is about retirement. After all, we have no idea how long we will be on this planet. So all we can do is make honest decisions that support us today and help us prepare for the future.
The key question is this: are you expecting that buying something will make you feel a certain way about yourself? If so, that’s where it’s a lifestyle creep red flag.
Navigating spending, saving and investing decisions
Why am I being such a downer? The answer is twofold.
First, we are subject to hedonic adaptation: the tendency to return to our baseline happiness level shortly after a positive or negative event. So you’ll feel a rush when you buy a new handbag (I definitely understand that), but it won’t make you measurably happier long-term. Truly. Same for a car, same for a house. None of us are exempt, it’s just how brains work.
Second, our circumstances don’t create our feelings, our thoughts do. This is where lifestyle creep has the biggest impact and I see it all the time with clients. If we continue with the handbag example, maybe you hope you’ll feel more fashionable, more fun. More put together. Worthy of being taken seriously. But the magic lies not in the Neverfull, but in our thoughts about what it means to have it. That “worthy” word is such a big one – there’s nothing wrong with buying a new bag, or outfit, or car, or anything else. But recognize the cost (foregone investment income) and recognize that it will not actually resolve emotional pain.
The valuable lesson lifestyle creep teaches
I love working with clients on navigating lifestyle creep and decisions about spending, saving and investing money. Because money touches everything and relates so directly to power, control, respect, worth, trust, all of the fun things coaches love to guide clients through.
There’s a valuable lesson here. When you recognize lifestyle creep in your own life, it’s an opportunity to dig in to what thoughts and feelings are driving the behavior. Chances are it’s like that whack-a-mole arcade game. We’re trying to knock out one painful thought of unworthiness, ineptitude, whatever – and maybe the new apartment distracts us for a bit but after a while those thoughts will pop up in other areas of life. So the problem manifests in multiple areas, but that means truly resolving it (not bandaging it with emotional spending) also takes care of it in all those other areas.
Anytime you’re making a new purchasing decision, ask yourself: What am I thinking, what am I feeling, what am I doing.
If you find yourself rationalizing with emotional drivers for a purchase, it’s going to save a lot of money and heartache in the long run to actually address the emotion first. You can always buy the thing later, for the right reasons, if you still actually want it.
Additional resources on lifestyle creep and money mindset
No time to read actual physical books? Try Audible instead!
1. The Soul of Money: Transforming Your Relationship with Money and Life by Lynne Twist
2. Clever Girl Finance: Ditch debt, save money and build real wealth by Bola Sokunbi
3. Smart Women Finish Rich by David Bach
4. Rich As F*ck: More Money Than You Know What to Do With by Amanda Frances (you may recognize Amanda’s bachelorette pad on Selling Sunset Season 4! And briefly on Season 5!)
6. Your Money or Your Life by Vicki Robin
7. I Will Teach You To Be Rich by Ramit Sethi
8. You’re So Money: Live Rich Even When You’re Not by Farnoosh Torabi
9. Think And Grow Rich by Napoleon Hill (also on my 2022 Recommended Reading List!)
10. The Millionaire Next Door by Thomas J. Stanley and William D. Danko
A money mindset coach can help
Talking about money is hard. I get it. People would rather talk about sex than money in most cases! With money mindset coaching, you can work with an ICF-accredited, highly experienced coach to help you navigate lifestyle creep and other financial quandaries. No judgment, just support and authenticity. If you’re wondering if working with a coach would help you, you owe it to yourself to find out.
Emily is a mindset coach and writer specializing in the habits of Millennial and Gen Z high achievers in the areas of money, relationships, lifestyle and travel.
She holds the PCC designation with the International Coach Federation and has been featured in multiple media outlets.
