Lifestyle creep is this annoying but fascinating phenomenon that actually happens
to a lot of people. And by a lot of people, I mean me included. This is something that
I used to deal with in the past. I've stopped it and now I want to help you guys do the same. I'm
saying that to let you know don't feel too bad if you have also fallen victim to lifestyle creep.
What is lifestyle creep?
In a nutshell, lifestyle creep is when your lifestyle expenses like your discretionary
income increase at the same rate that your income increases. Sometimes it
might be when your lifestyle costs increase faster than your income,
and that can obviously lead to debt and definitely halt your progress towards building wealth.
So lifestyle creep sometimes referred to as lifestyle inflation is definitely
something you want to avoid. At least, that's because the creep part of lifestyle creep
implies that you're doing it subconsciously, that you're not actively doing it, that it's
something that's just happening to you. So that leads me to the big takeaway of this video,
The importance of being proactive
which is that the most effective way to avoid lifestyle creep is this very, very simple thing.
Being proactive about your finances, being intentional. This means having a legit plan
for your money, not just trying to figure it out as you go. It's very, very easy to be reactive
when it comes to your finances, right? An unexpected expense comes about. All right,
I got to figure it out. Let me take on some debt or let me pull it from here.
Let me take out of my emergency fund or Ooh, I got a raise. I got a bonus. Ooh,
I could spend more. I can afford more. Let me go ahead and buy these things that I've been
wanting to buy for a long time. So being reactive in situations of spending, or even in situations
when you have more money, like a raise or a bonus or an unexpected windfall of money, being reactive
can sometimes lead to decisions that are not aligned with your bigger financial goals.
So if building wealth is a goal of yours, then this video is for you. In this video, I'm going
to dig a little bit deeper into lifestyle creep. And I also want to run through six ways that you
can be proactive, that you can be intentional about your finances. And at the end of the video,
if you can stick through the end, I'm going to give you a challenge that I think you should do
if and when you get your next increase in income, you're going to eventually increase your income.
So this is something you're going to want to do for those new here. Hello and welcome. My name
is Lissa Prudencio. I'm a personal finance expert and accredited financial counselor.
And I'm the co host of net net podcast, a podcast where we talk about hidden costs,
And help you navigate every financial decision in life.
Go check it out and let me know what you guys think. So why does lifestyle
Why lifestyle creep happens
creep even happen? You get a raise and suddenly that car you've been
driving for years seems outdated. You're just due for a new one all of a sudden,
even though the old one is running just fine, or maybe you all of a sudden.
realize that your wardrobe needs an upgrade. You weren't thinking about that before,
but now new money is in your hands and all of a sudden it becomes top priority. And here's
the big one for a lot of people. Dining out and going out all of a sudden become more frequent
occurrences. So look, I get it. I told you at the beginning that I've fallen victim
to lifestyle creep, and I'm going to tell you right now that it happens for a reason.
For lots of reasons, but we're going to get into it. What I think about it is I
think lifestyle creep happens because there is this natural urge to want to
progress in life. So for people who start with very little or nothing,
to move up in society is the ability to have more, to get more, to live a nicer lifestyle.
That on its own, I don't think there's anything wrong with that view of the world and progress.
Why it's not really your fault
But unfortunately, We live in a capitalistic society and we are taught at a very young age,
we are taught behaviors that are grounded in consumerism and wanting more and even worse
Some people are taught behaviors of wanting more for the sake of comparing themselves to others.
So these are things that tend to happen automatically. We are fed messages all
around to buy more things, to get more things, that if we have this thing, it's going to make
us feel this way. And it's going to give us this status. It's kind of how a lot of social things
in life work. And unfortunately, A lot of those things the acquiring of more requires money So it
makes complete sense to me that lifestyle creep tends to happen to people Because when we end up
getting more financial resources We've already been brainwashed, we've already been taught that
the natural thing to do is to use those resources to acquire other things, to want more things.
Now again, I'm not saying that wanting things is bad. That is life. I, I like things. Like,
I'll tell you that right now. Ultimately, we get to craft our lives in a way that brings us
joy. The problem is we have to do that with what resources we have, right? Right? Time, energy,
money. However you utilize those resources is what ends up being your life and your lifestyle.
So I can go on a tangent about this for days, but the reason I wanted to point
this out is because lifestyle creeps Creep sucks, it's not great for your finances,
but I don't want you to think it's just a behavior that happens because you are bad
with money or you are just someone who overspends and wants a luxurious life.
Like cool, that might be a part of it and for some people that's the reason behind it,
but more often than not, it's more complicated than that. Honestly,
if there's anyone or anything to blame for lifestyle creep. It's not you. It's not your
friends. It's not your family. It's not your parents. It is the system that we live in.
So all of that said, not to be negative Nancy here, but that is kind of why a
lot of us fall victim to lifestyle creep without even noticing it. All we know is
that it's getting harder and harder to pay bills. We know that we want to build
wealth. We want to have a secure future. Maybe we don't want to.
Work for the next 40 years of our life. We just don't know how, and it's going
to be hard to do that if the more your income increases. So do your expenses,
right? You wanna find that way to live the lifestyle you want today while also
thinking about your future. So let's talk about how you can avoid lifestyle creep.
How can you be intentional and proactive about your finances so you don't get caught up with
lifestyle creep? The more money you start making the key to avoiding lifestyle creep,
like I mentioned earlier. is to be proactive. It is to live intentionally,
to have a clear focus of your financial goals and your financial life.
Setting clear financial goals
So that first example I have on the list of how to be intentional is to
set clear financial goals. You should think about and define what you want
to achieve financially. So what do you want to achieve in life that requires money that
is somehow tied to money. That could be buying a home, buying investments,
buying real estate, paying off debt, saving for retirement, traveling the world.
It is whatever you want it to be, but you want to have clear goals and
also some estimated timeline for those goals. Knowing those goals is going to
keep you focused when it comes to day to day financial decisions. All right, number two,
another way to be proactive about your finances is to create. a budget and to stick to it.
Creating and sticking to a budget
If you don't like budgets, if you don't want to call it that,
then call it your spending plan or your financial plan. What you need is
a plan of how you're going to allocate your resources. It's as simple as that. So how
are you going to use your regular income towards all of your essential expenses,
towards all of your savings, your investments, and for some of your discretionary spending?
If you can create this plan and stick as close to it as possible, you'll be able to control
what kind of spending happens. And that includes when you get an increase in income. Number three,
Automating your savings
another way to be intentional and proactive with your finances is to automate your savings. So in
a way, you're being proactive, but you actually don't have to do much after you set this up.
So I call this paying yourself first. And what this is,
is a method of making sure that no matter what, you are always
putting money towards saving and investing in your Anytime you get paid. So if you get paid
on a regular basis, like from a job that pays you consistently, it's the easiest way to do it.
That every time you get paid, you have a set amount going straight to savings or straight
to investing. You can think of it like an additional deduction of your paycheck. Yes,
your net pay, the remainder money is going to be lower and you're going to have to live
off of that. But this builds the habit of you prioritizing your future as well as.
Paying for all of your day to day expenses. People are more successful when they
prioritize saving in this way, as opposed to getting paid and then paying everyone else,
paying all their bills, you know, buying their necessities, buying their discretionary stuff,
and then realizing, Oh, I don't have anything left to save.
Or maybe if they do have something to save, it's just not consistent. It doesn't happen
every two weeks or every month or whatever. So the additional
trick here to avoid a lifestyle creep is when your income. increases,
you should also increase this amount that you are paying yourself automatically, right?
You're not going to notice that you've increased that amount because overall
your check will increase, your income is going to increase, but you want to dedicate
some of that towards saving and investing. And that's just going to accelerate your
process towards building wealth. All right, number four. I think we're on number four.
Improving spending habits
Number four is to improve your spending habits. So lifestyle creep often happens
to people because of impulse purchases or needing immediate gratification. Or like I said earlier,
why you need to track your budget because people just don't track. So tracking is a
means of accountability. So one thing you can do to improve your spending behaviors is when
you want something and there's not really a rational reason for needing it right here,
right now, immediately, you can practice the art of delayed gratification.
You can give yourself a cooling off period, and that can be two days or a week or two
weeks. You want to test yourself so that you can decide during this time if that's
something that you really, really want, or if it was just kind of an impulsive thought of getting
that thing. It gives you time to decide, what is that thing going to do for my life?
What value is it going to bring to me? Now, don't worry, this is not
something you're going to have to consciously do and actively do for the rest of your life,
unless you want to. It is a habit that you want to build now while you are at the beginning stages of
trying to build wealth. And especially if you tend to have not so great spending behaviors.
All right. Number five. Celebrate your milestones. So this is something that's
Celebrate wins
important to do proactively when it comes to avoiding lifestyle creep,
because what tends to happen is when people are super, super frugal or they're cheap and
they do it to the point where they don't get to enjoy any of their money, what happens when they
do make more money is That becomes the time to splurge or to enjoy that money for themselves.
Now, I'm not saying you have to pick one or the other. You can do both,
but you want to do a balance. You don't want to just have all this pent up,
not pent up aggression, but you don't want to have all this like pent up need and want
to spend. And then once you finally get more money, you spend like crazy.
You want to make sure that you reward yourself on a regular basis. You use your money to celebrate
yourself on a more regular basis. And sure, if you get paid more, you can do that again when
that happens, but you just don't want it to be this excessive amount that basically puts you
in a worse financial situation than before you got that raise or bonus or windfall or whatever it is.
All right, the sixth way and the last one on this list of how you can be proactive about
your finances and avoid lifestyle creep is to Get yourself some accountability buddies. You want to
Accountability buddies
surround yourself with like minded people, like minded friends who are kind of in the
same boat. If you spend time with people, you are going to end up influencing each other's habits.
So if you're really trying to be good about your finances,
build your foundations, you know, save for an emergency fund, pay off debt,
if you're in that boat and you're with people who are taking lavish vacations all the time,
and you know, maybe they have more income than you do at this time, you're going to feel left out.
And you're going to feel like you have to spend to keep up with everyone. If
you surround yourself with people who are like minded and who might have And especially for
people who just respect your goals and want to support you, then you're going to have a
easier time saying no when you need to say no, and then having more guidance and more
support in picking and choosing the right times to say yes, when it comes to spending.
All right. So, We talked about what lifestyle creep is, why I think it tends to happen a lot
in society, and it's a systemic issue. And we also talked about six different
ways you can be more proactive about your finances, not only to avoid lifestyle creep,
but to improve your finances in general. So before we end this video,
I did not forget I promised at the beginning that I would share with you a special tip or
a challenge that I want you to try the next time you get a raise or an increase in income.
The challenge
So the challenge is very simple. When you get an increase in income, do not change
your lifestyle for six months. This means if you get a raise and your income increases,
Keep your lifestyle and your expenses the exact same for just six months. Now
you're not going to be able to fight inflation on this, right?
Things might just actually cost a little bit more than they used to. But for the most part,
if you get a raise and you keep all of your expenses the same,
you should end up with some extra cashflow at the end of the month or during the month
for these first six months, which is the challenge I'm issuing you.
Now, what do you do with this extra money? Those first six months before you change anything about
your lifestyle? Well, you want to do wealth building activities. I talk about them all
the time on my channel, but these are things like accelerating your debt payoff. putting
aside your emergency fund that you've been meaning to do forever, but you still haven't.
Investing, putting aside other savings that you need in the next couple of years. All
of these things that are going to help increase your net worth and also just set
your foundations for the future. All right. So I hope this video helped out and I hope
that all of you can prevent lifestyle creep from happening unintentionally
because you're going to set yourself up and be proactive about your finances.
All right. Until next time, peace out.
