How to Avoid the Ultra-Scary Lifestyle Creep And Make the Most of New Money

Last year the entire world reevaluated their life. As a result, we’ve entered a period known as the Great Resignation. In 2021, 4 million people per month are quitting their jobs to find more suitable work.

Anthony Klotz, who coined the term, says that employers will have to adjust to the expectations of workers. Often these shifts have brought on pay increases. Yay! That brings us to today’s topic: Lifestyle Creep.

Now, let me tell you, when I first heard the term ‘Creep’ I had 2 reactions. One, I immediately started humming TLC’s #1 hit (sorry Waterfalls and No Scrubs). Two, I started belting out classic Radiohead (look it up). Musical puns aside, Investopedia defines Lifestyle Creep as:

The phenomenon where discretionary consumption increases on non-essential items as the standard of living improves.

Scary, right?! 

Remember when you told yourself: Gee, when I make X amount, I’ll have everything I need? Then when you finally started earning X amount, it all seemed to evaporate into thin air? The crazy thing about Lifestyle Creep is that it haunts everyone. It doesn’t matter if your salary is $50,000 or $500,000… no one is immune.

Our household has had a 70% pay increase in under 2 years, and this creep is still hanging around! So, if you’ve recently received a pay raise and don’t want to blow it — the rest of this blog is for you!

2 Pay Raises in 2 Years- The Background Story

First, I want to mention that a lot of privilege has gone into our recent pay raises. I work in financial services and my boyfriend works in medical research. We both have over a decade of experience in our fields. We’re college grads, and I have an MBA and a few investing licenses.

The 1st set of pay raises came from new jobs. My office closed which prompted me to look for something new. After 6 months of searching I found a new gig and received a 20% pay increase. A friend approached my boyfriend to jump companies received a 25% pay increase. Networking does pay off- lesson learned!

Round 2 of pay increases came a year later. I realized post-pandemic-ish that I didn’t want to go back to my old travel schedule. I enjoyed being at home with my dogs and working from my sunny entry room. I craved mid-day walks, home yoga sessions and breakfast with my boyfriend. On the job search I went. It took 6 months, 20+ applications and 10 interviews but I found something! I now get the flexibility of working from home and the challenge of doing something new. And, the lagniappe (New Orleans for a little extra) was a 15% pay increase. Meanwhile, my boyfriend’s company gave him a 30% pay raise because they were over losing good talent!

We have money, now what?

Sounds weird but I get this question all the time from clients and friends. It’s a nice problem to have! But, the minute this question pops up, the almighty dangerous Lifestyle Creep pops in.

Before you have a chance to identify your goals & make a plan-you’re upgrading to first class, eating out 7 days a week, splurging on a new ride, buying luxury items and moving into a bigger home. Ouch.

Like that, you’re back to living paycheck to paycheck and saving and investing the bare minimum. This is what we managed to avoid.

Lifestyle Creep should be easy to avoid, but it isn’t. If you’ve never been a person who has cash left over each month, then you’ll have to learn how to be this type of person ! With the constant pressure of ‘keeping up,’ it’s tough.

All this to say, if you’ve been a victim of Lifestyle Creep — don’t beat yourself up.

What we achieved by avoiding lifestyle creep

The biggest take-a-way from avoiding lifestyle creep was the ability to have options and chose to try new things. Here’s what we decided to do with our new found cashflow:

• Started a new business (hello Holistic Personal Finance!)
• Bought our first rental house (hi $600 extra income every month)
• Renovated said rental house… twice (Thanks Hurricane Season)
• Built a healthy emergency savings (oh the peace of mind!)
• Paid off debt (bye-bye fees & interest payments)
• Fully funded our 401ks & Roth IRAs. We also started individual investment accounts (early retirement, we’re a comin’ for ya!)
• #Goals — more about this next.

Here’s what we’ve also done with the extra income.

• Our house is slightly larger, in a more walkable location and we no longer live with a roomie.
• Got a new gym membership (that we actually use).
• Hired a cleaning service (saves me 4 hours per week).
• Did one shopping spree (to slowly build my capsule wardrobe).

Wait, how did you do all that again?

These results didn’t happen overnight. Remember, we’re talking about a 2 year time frame here! Looking back, here’s what I would recommend:

1. Find your balance
2. Keep your eyes on the prize(s)
3. Get intentional
4. Communicate

Find your balance

Let’s address some of the spending above. Look, its OK to enjoy your money. Let me say that again….

It’s OK to enjoy your money!

What’s the point of earning more money if you feel like you can’t enjoy it. I get annoyed by the ‘shoulds’ a lot of personal finance exports put out there. With that said, you can have some things, just not all the things- so focus on what’s important to you. In our case, we didn’t get a new car, we don’t upgrade to first class and we don’t buy each other extravagant gifts.

Keep your eyes on the prize(s)

Set SMART goals, make a plan, and block out the noise. On any financial wellness journey you’ll receive some judgement. “Can’t you afford that? Why don’t you buy this? Why are you buying that? Why don’t you just put it on your credit card? I don’t get it.”

Don’t worry about the Jones’s, Kardashian’s or what your neighbors are doing. The average American has over $5,000 in high interest credit card debt alone- so being average isn’t as fun as it looks! Figure out your values, set goals according to them and track it. In our case, we’re excited about buying rental home #2 and going to Greece next year! We talk about this stuff a lot, stay excited and keep track of the progress we’re making.

Get Intentional

Get mindful with your money. Each dollar you make should have a purpose. I’m not into logging every transaction — but I have an app that puts my transactions into buckets. Before every significant purchase, I try to ask how the item or service will impact my life. When in doubt, the ‘wait 72 hours’ trick works wonders.

If you’re looking for a better way to track your spending, I recommend downloading the Copilot App. Try it out free for 2 months free with my code 2FREEHPF.

Communicate

If you’re in a relationship and managing finances together, this is super important. You MUST talk about money. It’s uncomfortable at first, but I promise it gets easier.

If you’re not in a relationship and managing on your own… guess what? You still have to communicate. Talk about money with your friends, family, co-workers. Sharing money goals and financial strategies helps us all learn more. Some other benefits of communication? Well, you could be inspiring others! I mean, how cool is that? As a bonus- you’ll have someone there to help you celebrate the milestones in your financial journey!

Surprising benefits

Before we wrap up, I want to take a moment to mention some of the other unexpected things that happened…

• My stress levels decreased and I have less anxiety about money.
• We’re a stronger couple, and improved our communication skills.
• Because we’ve hit some small accomplishments, we’re empowered to tackle bigger goals.
• I have more confidence to take a bit of chance like learning more about Crypto and NFT’s.

Avoid Lifestyle Creep at all costs.

I hope that I’ve opened your eyes to Lifestyle Creep, how to avoid it and the ultimate benefits you’ll receive.

Avoiding the Creep is kinda like navigating life itself. It’s all about balance. 

Find a balance that you feel good about. Enjoy your money today — because damn, you work for it! But, don’t forget about future you. She NEEDS you to invest because she doesn’t want to work forever.

The more you can ‘widen the gap’ between your income & expenses, the more you can make your money work for future you.