Lifestyle creep is this annoying butĀ fascinating phenomenon that actually happensĀ Ā
to a lot of people. And by a lot of people,Ā I mean me included. This is something thatĀ Ā
I used to deal with in the past. I've stopped itĀ and now I want to help you guys do the same. I'mĀ Ā
saying that to let you know don't feel too bad ifĀ you have also fallen victim to lifestyle creep.
What is lifestyle creep?
In a nutshell, lifestyle creep is when yourĀ lifestyle expenses like your discretionaryĀ Ā
income increase at the same rate thatĀ your income increases. Sometimes itĀ Ā
might be when your lifestyle costsĀ increase faster than your income,Ā Ā
and that can obviously lead to debt and definitelyĀ halt your progress towards building wealth.
So lifestyle creep sometimes referredĀ to as lifestyle inflation is definitelyĀ Ā
something you want to avoid. At least, that'sĀ because the creep part of lifestyle creepĀ Ā
implies that you're doing it subconsciously,Ā that you're not actively doing it, that it'sĀ Ā
something that's just happening to you. So thatĀ leads me to the big takeaway of this video,Ā Ā
The importance of being proactive
which is that the most effective way to avoidĀ lifestyle creep is this very, very simple thing.
Being proactive about your finances, beingĀ intentional. This means having a legit planĀ Ā
for your money, not just trying to figure it outĀ as you go. It's very, very easy to be reactiveĀ Ā
when it comes to your finances, right? AnĀ unexpected expense comes about. All right,Ā Ā
I got to figure it out. Let me take onĀ some debt or let me pull it from here.
Let me take out of my emergency fund orĀ Ooh, I got a raise. I got a bonus. Ooh,Ā Ā
I could spend more. I can afford more. Let meĀ go ahead and buy these things that I've beenĀ Ā
wanting to buy for a long time. So being reactiveĀ in situations of spending, or even in situationsĀ Ā
when you have more money, like a raise or a bonusĀ or an unexpected windfall of money, being reactiveĀ Ā
can sometimes lead to decisions that are notĀ aligned with your bigger financial goals.
So if building wealth is a goal of yours, thenĀ this video is for you. In this video, I'm goingĀ Ā
to dig a little bit deeper into lifestyle creep.Ā And I also want to run through six ways that youĀ Ā
can be proactive, that you can be intentionalĀ about your finances. And at the end of the video,Ā Ā
if you can stick through the end, I'm going toĀ give you a challenge that I think you should doĀ Ā
if and when you get your next increase in income,Ā you're going to eventually increase your income.
So this is something you're going to want to doĀ for those new here. Hello and welcome. My nameĀ Ā
is Lissa Prudencio. I'm a personal financeĀ expert and accredited financial counselor.Ā Ā
And I'm the co host of net net podcast, aĀ podcast where we talk about hidden costs,Ā Ā
And help you navigate everyĀ financial decision in life.
Go check it out and let me know whatĀ you guys think. So why does lifestyleĀ Ā
Why lifestyle creep happens
creep even happen? You get a raiseĀ and suddenly that car you've beenĀ Ā
driving for years seems outdated. You'reĀ just due for a new one all of a sudden,Ā Ā
even though the old one is running justĀ fine, or maybe you all of a sudden.
realize that your wardrobe needs an upgrade.Ā You weren't thinking about that before,Ā Ā
but now new money is in your hands and all ofĀ a sudden it becomes top priority. And here'sĀ Ā
the big one for a lot of people. Dining out andĀ going out all of a sudden become more frequentĀ Ā
occurrences. So look, I get it. I told youĀ at the beginning that I've fallen victimĀ Ā
to lifestyle creep, and I'm going to tellĀ you right now that it happens for a reason.
For lots of reasons, but we're going toĀ get into it. What I think about it is IĀ Ā
think lifestyle creep happens becauseĀ there is this natural urge to want toĀ Ā
progress in life. So for people whoĀ start with very little or nothing,Ā Ā
to move up in society is the ability to haveĀ more, to get more, to live a nicer lifestyle.
That on its own, I don't think there's anythingĀ wrong with that view of the world and progress.Ā Ā
Why it's not really your fault
But unfortunately, We live in a capitalisticĀ society and we are taught at a very young age,Ā Ā
we are taught behaviors that are grounded inĀ consumerism and wanting more and even worseĀ Ā
Some people are taught behaviors of wanting moreĀ for the sake of comparing themselves to others.
So these are things that tend to happenĀ automatically. We are fed messages allĀ Ā
around to buy more things, to get more things,Ā that if we have this thing, it's going to makeĀ Ā
us feel this way. And it's going to give us thisĀ status. It's kind of how a lot of social thingsĀ Ā
in life work. And unfortunately, A lot of thoseĀ things the acquiring of more requires money So itĀ Ā
makes complete sense to me that lifestyle creepĀ tends to happen to people Because when we end upĀ Ā
getting more financial resources We've alreadyĀ been brainwashed, we've already been taught thatĀ Ā
the natural thing to do is to use those resourcesĀ to acquire other things, to want more things.
Now again, I'm not saying that wanting thingsĀ is bad. That is life. I, I like things. Like,Ā Ā
I'll tell you that right now. Ultimately, weĀ get to craft our lives in a way that brings usĀ Ā
joy. The problem is we have to do that with whatĀ resources we have, right? Right? Time, energy,Ā Ā
money. However you utilize those resources isĀ what ends up being your life and your lifestyle.
So I can go on a tangent about this forĀ days, but the reason I wanted to pointĀ Ā
this out is because lifestyle creeps CreepĀ sucks, it's not great for your finances,Ā Ā
but I don't want you to think it's just aĀ behavior that happens because you are badĀ Ā
with money or you are just someone whoĀ overspends and wants a luxurious life.
Like cool, that might be a part of it andĀ for some people that's the reason behind it,Ā Ā
but more often than not, it's moreĀ complicated than that. Honestly,Ā Ā
if there's anyone or anything to blame forĀ lifestyle creep. It's not you. It's not yourĀ Ā
friends. It's not your family. It's not yourĀ parents. It is the system that we live in.
So all of that said, not to be negativeĀ Nancy here, but that is kind of why aĀ Ā
lot of us fall victim to lifestyle creepĀ without even noticing it. All we know isĀ Ā
that it's getting harder and harder toĀ pay bills. We know that we want to buildĀ Ā
wealth. We want to have a secureĀ future. Maybe we don't want to.
Work for the next 40 years of our life.Ā We just don't know how, and it's goingĀ Ā
to be hard to do that if the more yourĀ income increases. So do your expenses,Ā Ā
right? You wanna find that way to liveĀ the lifestyle you want today while alsoĀ Ā
thinking about your future. So let's talkĀ about how you can avoid lifestyle creep.
How can you be intentional and proactive aboutĀ your finances so you don't get caught up withĀ Ā
lifestyle creep? The more money you startĀ making the key to avoiding lifestyle creep,Ā Ā
like I mentioned earlier. is to beĀ proactive. It is to live intentionally,Ā Ā
to have a clear focus of your financialĀ goals and your financial life.
Setting clear financial goals
So that first example I have on theĀ list of how to be intentional is toĀ Ā
set clear financial goals. You shouldĀ think about and define what you wantĀ Ā
to achieve financially. So what do you wantĀ to achieve in life that requires money thatĀ Ā
is somehow tied to money. That couldĀ be buying a home, buying investments,Ā Ā
buying real estate, paying off debt,Ā saving for retirement, traveling the world.
It is whatever you want it to be,Ā but you want to have clear goals andĀ Ā
also some estimated timeline for thoseĀ goals. Knowing those goals is going toĀ Ā
keep you focused when it comes to day to dayĀ financial decisions. All right, number two,Ā Ā
another way to be proactive about your financesĀ is to create. a budget and to stick to it.
Creating and sticking to a budget
If you don't like budgets, ifĀ you don't want to call it that,Ā Ā
then call it your spending plan orĀ your financial plan. What you need isĀ Ā
a plan of how you're going to allocate yourĀ resources. It's as simple as that. So howĀ Ā
are you going to use your regular incomeĀ towards all of your essential expenses,Ā Ā
towards all of your savings, your investments,Ā and for some of your discretionary spending?
If you can create this plan and stick as closeĀ to it as possible, you'll be able to controlĀ Ā
what kind of spending happens. And that includesĀ when you get an increase in income. Number three,Ā Ā
Automating your savings
another way to be intentional and proactive withĀ your finances is to automate your savings. So inĀ Ā
a way, you're being proactive, but you actuallyĀ don't have to do much after you set this up.
So I call this paying yourselfĀ first. And what this is,Ā Ā
is a method of making sure thatĀ no matter what, you are alwaysĀ Ā
putting money towards saving and investing inĀ your Anytime you get paid. So if you get paidĀ Ā
on a regular basis, like from a job that paysĀ you consistently, it's the easiest way to do it.
That every time you get paid, you have a setĀ amount going straight to savings or straightĀ Ā
to investing. You can think of it like anĀ additional deduction of your paycheck. Yes,Ā Ā
your net pay, the remainder money is goingĀ to be lower and you're going to have to liveĀ Ā
off of that. But this builds the habit ofĀ you prioritizing your future as well as.
Paying for all of your day to day expenses.Ā People are more successful when theyĀ Ā
prioritize saving in this way, as opposed toĀ getting paid and then paying everyone else,Ā Ā
paying all their bills, you know, buying theirĀ necessities, buying their discretionary stuff,Ā Ā
and then realizing, Oh, I don'tĀ have anything left to save.
Or maybe if they do have something to save,Ā it's just not consistent. It doesn't happenĀ Ā
every two weeks or every monthĀ or whatever. So the additionalĀ Ā
trick here to avoid a lifestyleĀ creep is when your income. increases,Ā Ā
you should also increase this amount thatĀ you are paying yourself automatically, right?
You're not going to notice that you'veĀ increased that amount because overallĀ Ā
your check will increase, your income isĀ going to increase, but you want to dedicateĀ Ā
some of that towards saving and investing.Ā And that's just going to accelerate yourĀ Ā
process towards building wealth. All right,Ā number four. I think we're on number four.
Improving spending habits
Number four is to improve your spendingĀ habits. So lifestyle creep often happensĀ Ā
to people because of impulse purchases or needingĀ immediate gratification. Or like I said earlier,Ā Ā
why you need to track your budget becauseĀ people just don't track. So tracking is aĀ Ā
means of accountability. So one thing you canĀ do to improve your spending behaviors is whenĀ Ā
you want something and there's not really aĀ rational reason for needing it right here,Ā Ā
right now, immediately, you can practiceĀ the art of delayed gratification.
You can give yourself a cooling off period,Ā and that can be two days or a week or twoĀ Ā
weeks. You want to test yourself so thatĀ you can decide during this time if that'sĀ Ā
something that you really, really want, or if itĀ was just kind of an impulsive thought of gettingĀ Ā
that thing. It gives you time to decide,Ā what is that thing going to do for my life?
What value is it going to bring toĀ me? Now, don't worry, this is notĀ Ā
something you're going to have to consciouslyĀ do and actively do for the rest of your life,Ā Ā
unless you want to. It is a habit that you want toĀ build now while you are at the beginning stages ofĀ Ā
trying to build wealth. And especially if youĀ tend to have not so great spending behaviors.
All right. Number five. Celebrate yourĀ milestones. So this is something that'sĀ Ā
Celebrate wins
important to do proactively when itĀ comes to avoiding lifestyle creep,Ā Ā
because what tends to happen is when peopleĀ are super, super frugal or they're cheap andĀ Ā
they do it to the point where they don't get toĀ enjoy any of their money, what happens when theyĀ Ā
do make more money is That becomes the time toĀ splurge or to enjoy that money for themselves.
Now, I'm not saying you have to pickĀ one or the other. You can do both,Ā Ā
but you want to do a balance. You don'tĀ want to just have all this pent up,Ā Ā
not pent up aggression, but you don't wantĀ to have all this like pent up need and wantĀ Ā
to spend. And then once you finallyĀ get more money, you spend like crazy.
You want to make sure that you reward yourself onĀ a regular basis. You use your money to celebrateĀ Ā
yourself on a more regular basis. And sure, ifĀ you get paid more, you can do that again whenĀ Ā
that happens, but you just don't want it to beĀ this excessive amount that basically puts youĀ Ā
in a worse financial situation than before you gotĀ that raise or bonus or windfall or whatever it is.
All right, the sixth way and the last one onĀ this list of how you can be proactive aboutĀ Ā
your finances and avoid lifestyle creep is to GetĀ yourself some accountability buddies. You want toĀ Ā
Accountability buddies
surround yourself with like minded people,Ā like minded friends who are kind of in theĀ Ā
same boat. If you spend time with people, you areĀ going to end up influencing each other's habits.
So if you're really trying toĀ be good about your finances,Ā Ā
build your foundations, you know, saveĀ for an emergency fund, pay off debt,Ā Ā
if you're in that boat and you're with peopleĀ who are taking lavish vacations all the time,Ā Ā
and you know, maybe they have more income than youĀ do at this time, you're going to feel left out.
And you're going to feel like you haveĀ to spend to keep up with everyone. IfĀ Ā
you surround yourself with people who are likeĀ minded and who might have And especially forĀ Ā
people who just respect your goals and wantĀ to support you, then you're going to have aĀ Ā
easier time saying no when you need to sayĀ no, and then having more guidance and moreĀ Ā
support in picking and choosing the rightĀ times to say yes, when it comes to spending.
All right. So, We talked about what lifestyleĀ creep is, why I think it tends to happen a lotĀ Ā
in society, and it's a systemic issue.Ā And we also talked about six differentĀ Ā
ways you can be more proactive about yourĀ finances, not only to avoid lifestyle creep,Ā Ā
but to improve your finances inĀ general. So before we end this video,Ā Ā
I did not forget I promised at the beginningĀ that I would share with you a special tip orĀ Ā
a challenge that I want you to try the nextĀ time you get a raise or an increase in income.
The challenge
So the challenge is very simple. When youĀ get an increase in income, do not changeĀ Ā
your lifestyle for six months. This means ifĀ you get a raise and your income increases,Ā Ā
Keep your lifestyle and your expensesĀ the exact same for just six months. NowĀ Ā
you're not going to be able toĀ fight inflation on this, right?
Things might just actually cost a little bitĀ more than they used to. But for the most part,Ā Ā
if you get a raise and you keepĀ all of your expenses the same,Ā Ā
you should end up with some extra cashflowĀ at the end of the month or during the monthĀ Ā
for these first six months, whichĀ is the challenge I'm issuing you.
Now, what do you do with this extra money? ThoseĀ first six months before you change anything aboutĀ Ā
your lifestyle? Well, you want to do wealthĀ building activities. I talk about them allĀ Ā
the time on my channel, but these are thingsĀ like accelerating your debt payoff. puttingĀ Ā
aside your emergency fund that you've beenĀ meaning to do forever, but you still haven't.
Investing, putting aside other savings thatĀ you need in the next couple of years. AllĀ Ā
of these things that are going to helpĀ increase your net worth and also just setĀ Ā
your foundations for the future. All right.Ā So I hope this video helped out and I hopeĀ Ā
that all of you can prevent lifestyleĀ creep from happening unintentionallyĀ Ā
because you're going to set yourself upĀ and be proactive about your finances.
All right. Until next time, peace out.
