What Is Lifestyle Creep and How Can You Prevent It

Lifestyle creep, also known as lifestyle inflation, is a phenomenon where people tend to increase their spending as their income increases. It's a gradual and often unconscious process where people spend more money on non-essential items, such as eating out, traveling, and upgrading their homes and cars, without realizing the impact on their budget. Investopedia put it best - lifestyle creep is when your former luxuries become new necessities.

Think of getting nicer and nicer apartments because you "can afford" higher rent, subscriptions, membership, and hobbies that consume your money because you got extra cash, fancy food, new and improved electronics appropriate for our new social status, splurging on entertainment - and so on.

Lifestyle creep can be a challenging issue to manage. It comes from the natural desire to improve our quality of life as we become more financially secure. However, if left unchecked, it can lead to a situation where we find ourselves living beyond our means and struggling to maintain our standard of living.

Related: Signs You're Living Beyond Your Means, Even If You Don't Think So

How Can You Prevent It?

One way to prevent lifestyle creep is to create and stick to a budget. A budget can help manage your spending and ensure you are not overspending. By tracking your expenses and income, you can identify areas where you can cut back on spending and redirect your resources towards more important financial goals, such as saving for retirement, paying off debt, or investing in education.

Setting concrete financial goals is an effective way to stay focused on your financial priorities and make better spending decisions. When you set clear and specific financial goals, such as saving for a down payment on a house or paying off a credit card debt, you create a sense of purpose and motivation that can help you resist the temptation of spending money on unnecessary things.

Another way to prevent lifestyle creep is to avoid comparing yourself to others. Remember that everyone's financial situation is unique, and what may be affordable for one person may not be feasible for another. Instead of trying to keep up with the Joneses, people should focus on their own financial goals and priorities.

You can also prevent lifestyle creep by being mindful of your purchases. Before making a purchase, ask yourself if you really need the item or if it is just a want. Consider the long-term costs and benefits of the purchase, such as the cost of maintaining or replacing the purchased item and how it will affect your overall budget.

Related: How to Stop Wasting Money: Ways to Trick Yourself into Spending Less