Lifestyle creep refers to the notion that as our income increases, so too does our spending. Effectively leaving us in the exact same financial position as before, despite earning more. The key to building lasting wealth is to avoid lifestyle creep and be intentional about where our money goes, rather than solely focusing on accumulating nicer, shinier things.
I get it! You’ve worked your tail off for that raise, or you’ve received an unexpected financial windfall, and you’re feeling oh-so-fancy. Suddenly, what was once a “nice to have” becomes a “need to have,” living rent-free in your head.
But as you continue to increase your income over the course of your life, this reality will become true for even more and more things. And the fact remains that these purchases might not make sense given your long-term financial goals and the life you’re wanting to build for yourself and your loved ones.
Making more money won’t automatically build wealth if your spending isn’t in check.
Earning more is great, but what really matters is how you use that income—making sure it aligns with your values and supports both your financial future and the life you truly want
Status? It’s complicated. But here’s the good news—you’re in control. It is absolutely possible to find a balance between spending freely on things that bring you joy and achieving wealth growth, security, and a legacy you can be proud of.
Here are my top five strategies to avoid lifestyle creep and stay focused on building the financial future you want—on your terms.
How to Avoid Lifestyle Creep and Grow Your Wealth with Confidence
1. Practice Intentional Spending
Just because you start to earn more does NOT mean that there is no longer value in tracking where your money is going. In fact, I would argue that you need to be mindful of your spending patterns now more than ever!
You have more cash flow coming in — meaning that, yes, you have more to pay those pesky bills, but you also have more cash burning a hole in your pocket. And I think we can all agree — it’s not difficult to spend money!
The purpose of budgeting or tracking expenses is to ensure that your spending is aligned with your values and long-term goals. With more income, you have an even bigger opportunity to simplify your finances, build wealth faster, hit your goals with confidence, and make a real impact. So, keep applying a high level of thoughtfulness and intentionality to your financial planning efforts and cash flow. It’s never too late to break free from bad habits and take control of your financial future.
2.Automate Your Savings
Continue to allocate a certain percentage of your income to both your short-term savings goals along with your retirement accounts.
Typically, there is a percentage tied to our retirement contributions. For example, we contribute 5% of our income to our 401K. Luckily, when our income goes up, our retirement contributions will automatically go up as well. Ensure that you have this process automated as a certain percentage of your income and increase where and when you can.
3. Make Informed Lifestyle Shifts
When we finally get served up that big raise or promotion, it almost always comes with a side of like-it-love-it-want-some-more-of-it.
We daydream about moving to a bigger house or luxury apartment in the city, leasing a new car, or splurging on a tropical vacation. And, perhaps on paper, all of this looks, and very well may be, possible. However, you would be spending money at the same rate at which your income has increased.
It’s all about balance. Take some time to adjust to your new cash flow. Reassess savings to your retirement, paying off debt, and a few treats for yourself. Eventually, evaluate if a lifestyle shift is both necessary and affordable going forward. Run the numbers and identify the true monthly impact of the change.
Then, adjust your financial goals and plans to match your growing income and evolving dreams—giving your money a clear purpose and direction.
4. Embrace Self-Worth as Separate from Money
It’s a tale as old as time. Someone receives a promotion at work and starts dishing out funds to friends and family — picking up the bar tab, grabbing the check after a group lunch, or buying over-the-top birthday gifts. And that’s all well and good. Being generous is an incredible trait and one that should not be frowned upon.
But let this serve as a gentle reminder that your higher salary or extra income does NOT mean that you are now a walking ATM for friends and family.
If treating your loved ones brings you immense joy and is integrated into your holistic spending plan, then fantastic! Spoil them rotten and reap those intangible rewards. But don’t start throwing your card around “just because.”
Remember that you are so much more than the amount of money in your bank account.
5.Have a Plan for How to Spend Your Bonus
Bonuses are often discussed prior to you receiving them, either in your annual or end-of-year review. In most circumstances, there is an understanding of what the amount will be or at least a range which you can estimate. It’s critical that you pre-determine where you want that money to go.
Do not allow even $1 to hit your account without a plan for those funds. You can allocate a percentage of your bonus to one or all of the below:
- Boosting your savings/investment accounts
- Funding a vacation
- Treating yourself
- Giving back to others you care about or your community
- Paying down debt
If you want your money to work for you and go further, having a clear plan is key.
Life is Good When You’re in Financial Control
By following these tips, you can build awareness around your finances and spending habits to avoid lifestyle creep. Making more money is certainly never a bad thing, but make sure that you continue to align your spending with the things that will add value to your life today, and for years to come.
Feeling crafty? Let me help you paint an even fuller, more vibrant picture of what your financial life can look like. Learn more about how to work with me to make a plan for your money and start confidently building wealth.
