THE STEALTHY PHENOMENON OF ‘LIFESTYLE CREEP’ AND HOW TO AVOID IT
Have you managed to avoid or fix the issue of “lifestyle creep”? We’d like to hear how you did it – email [email protected].
Are you earning a pretty respectable salary, but still find yourself strapped for cash at the end of the month? Or do you not feel “rich”, in spite of six-figure earnings?
You might be a victim of “lifestyle creep” – and, often, you won’t even have realised it was happening.
Here, Telegraph Money explains what lifestyle creep is and explains what you need to do to avoid it.
- What is lifestyle creep?
- The signs of lifestyle creep
- What are the risks of lifestyle creep?
- How to avoid lifestyle creep
- What should you do when your income increases?
What is lifestyle creep?
Lifestyle creep is the stealthier sibling of “Keeping up with the Joneses”. It’s not the shameless acquisition of certain status symbols in attempt to tell the world that you’re as well-off as the neighbours, but rather the more subtle loosening of our financial restraint as our income starts to rise.
So, instead of using increased income to improve our long-term financial security by saving or investing, we start relaxing our budgets and enjoying a bit more financial freedom. It can be a series of little things – that occasional “fancy” bottle of wine that becomes a regular habit, or dinners out happening every week rather than every month – all of which quickly add up.
Lifestyle creep can set in after you’ve had a promotion or pay rise, started a new job, or paid off a big debt like a mortgage.
You might also hear it referred to as “lifestyle inflation”.
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The signs of lifestyle creep
The most obvious sign of lifestyle creep is a gradual change in your spending habits:
- You’re spending much more than you used to on holidays, eating out and so on.
- You upgrade your car more frequently.
- You’ve always got a home project on the go – whether that’s buying new furniture, installing smart devices or redecorating.
- You’ve started paying for more help at home, such as employing cleaners, gardeners or decorators.
However, it may also show up in other ways:
- You run out money at the end of the month.
- Your income has gone up, but your savings haven’t.
- You always have big credit card bills.
- You don’t feel in control of your finances and don’t understand where all your money goes.
- You feel anxious and worry about money, despite earning more than you used to.
What are the risks of lifestyle creep?
To a certain extent, lifestyle creep is what naturally happens as we become more well-off; few people will budget as strictly when they don’t have to – and there’s an argument that you should certainly be able to enjoy the fruits of your labour with a well-earned treat.
The key is sticking to what you can afford, and making sure you aren’t needlessly frittering money away. At its worst, if lifestyle inflation is left unchecked, you could end up borrowing more to pay for non-essential expenses and end up with debts that become difficult to repay.
What’s more, when increased spending isn’t matched by increased saving, we run the risk of jeopardising our future financial security and leave ourselves at risk should we suffer a financial disaster.
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How to avoid lifestyle creep
Be mindful: Simply being aware of lifestyle creep is the first step in avoiding it. In recognising the risk of overspending when your income goes up, you’re in a better position to curb it.
Write a budget: “A budget is the best way to protect yourself,” said Sarah Coles, of Hargreaves Lansdown. “It lets you lay out a reasonable sum to be spending in each area of your life. Then, if you bust your limit, you know you’re overspending and how much you need to cut back.”
There are several ways you could go about this – some popular budgeting techniques include the 50/30/20 method, zero-based budgeting and cash stuffing.
Keep a spending diary: Seeing your spending in black and white could be a useful way of keeping a lid on it. “Even if you don’t see the need for a spending diary, just making a note of each thing you spend will make you think a bit harder about it and whether it’s worth it,” said Ms Cole.
“You might also set aside time to go through the diary with someone else, who you can ask to help keep you on track. Spending that bit extra becomes harder if you know you need to sit down and justify it to someone else later.”
Limit your use of social media: Georgina Sturmer, a counsellor and member of the British Association for Counselling and Psychotherapy (BACP), advised to limit your use of social media if you’re prone to being “influenced” to buy things.
“Our use of social media – in terms of what we are sharing and what we are watching – has an impact on what we spend. So it can be helpful to try to set some boundaries around our social media use, and notice whether that helps us to disconnect from the urge to spend,” she said
Pause before you buy: Spontaneity can be great, but not when you’re trying to stick to a budget. Ms Sturmer said: “It can be useful to implement a ‘time out’ when tempted to spend. A 12-hour or even a 24-hour freeze can help us to distinguish between what we really need to spend, and when our spending is being driven by a subconscious drive for the addictive hit of other people’s approval.”
Always keep one eye on the future: “It’s a good idea to ‘pay yourself’ first, and set up a direct debit to come out of your account at the start of the month to go towards your key priorities,” suggested Ms Coles. “This might be debt repayment, savings, pensions, investments or a combination of one or more of these things.”
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What should you do when your income increases?
Whenever your income increases, it’s important to have a plan for what to do with your extra cash.
You might choose to save or invest all of the extra money, which could certainly help your finances in the long run. But if you want to feel some of the benefit while making sure you’re using the money sensible, the “percentage rule” could help.
Under this rule, you allocate a certain proportion of your new income to certain areas. For example, you could pay 50pc towards saving or investing for your future, 25pc to your holiday budget and the final 25pc to your lifestyle upgrades. That way you get to enjoy the money, without too much lifestyle creep.
How a pay rise can help you longer-term finances:
- Increase debt repayments – paying more towards your mortgage could shorten your term and save you thousands in interest.
- Your contribution to a workplace pension should automatically go up if it’s percentage based, but if you’re self-employed or you’ve got a standalone personal pension, consider topping it up. Your future self will be immensely grateful.
- Pay more into savings accounts or top up investment accounts like stocks and shares Isas.
Finally, when you are deciding how to spend your new income, it’s a good idea to think about what overall impact it will have on your life and your wellbeing.
Travel and holidays for example can give you something to look forward to and lift your spirits, while a cleaner could be a good investment, if it frees up time that you can spend doing something more enjoyable.
The hit of a Friday night takeaway or new item of clothing, meanwhile, usually evaporates pretty fast.
2025-04-24T11:39:58Z