If you grew up in the '90s like most millennials, a staple besides scented markers, Bugles, and daily episodes of Fresh Prince of Bel-Air was the 90s music.
From Britney Spears to Hanson and Backstreet Boys to Spice Girls, the music of the 1990s was nothing short of glorious (and even a bit bizarre).
All this to say, let's never forget the 1992 hit “Creep” by TLC that is routinely played at just about every 90's themed party and every high school reunion.
While it's certainly a toss-up between Creep and Waterfalls as to which is TLC's best hit of all time, the premise of Creep centers around a flawed relationship with an ex-boyfriend, thus creeping on the side (make what you want of it).
Needless to say, while creeping in the sense of a relationship is heavily frowned upon, one form of creep – Lifestyle Creep – might be a form of creep you have never heard of.
Instead of creeping on your partner, you're instead letting lifestyle creep up on you and impact your spending, saving, and financial future! And today we will help explain the unique phenomenon and how to avoid it!
Before we dig into why lifestyle creep exists and some effective ways you can leverage to avoid “The Creep,” here is a little reading music for you to enjoy:
Lifestyle Creep Definition:
Lifestyle creep refers to the increased standard of living and spending most adults see as their disposable income rises.
A unique, but all too common phenomena, lifestyle creep is evident when spending becomes more based on wants, instead of essential needs. Case in point, things such as:
- Luxury goods like handbags, designer shoes
- The newest technology and smartphone
- Luxury automobiles
- Standard counters vs granite countertops
- Buying coffee instead of making it at home
- Ordering meal preps instead of doing it at home
- Too much house
- Eating out more
- Shopping for things that are wants
- Flying first class
- Frivolous overspending
The list above is just a shortlist of examples of lifestyle creep, commonly referred to as lifestyle inflation.
And while we will tackle how to avoid the slippery slope called lifestyle creep in a few, it's important to first know why it exists in the first place!
The Psychological Reason for Lifestyle Creep
Not to make excuses, but by in large, humans are wired to lean more towards lifestyle inflation and letting lifestyle creep move in.
While avoiding lifestyle creep is possible, it is a thin thread between letting it get on you and avoiding it. This has a lot to do with our biological makeup.
Before iPhone's, Mac Books, Chipotle, and Instagram – our ancestors were hunter and gatherers. This meant instead of visiting Starbucks and the gym daily, they instead would go out in search of food.
To increase this behavior of searching for food, human brains are wired to release dopamine as we approach something that gives us pleasure. The feel good chemical makes us do it again, and again, and again.
For ancestors, this was a good thing – they would hunt and gather, hunt and gather. However, in the modern world with the likes of Whole Foods and Target, dopamine is now released when we receive pleasure from our cellphones, social media, eating, and even shopping.
Humans still have instant gratification brains in a world when it is no longer necessary for survival.
The Diderot Effect
When it comes to breaking our bad habits, it can be really hard.
By in large this has a lot to do with our chemical makeup and our reward-seeking human behavior. This causes the overspending phenomenon and lifestyle creep, that believe it or not, there is an actual term for:
The Diderot Effect.
In a nutshell, the Diderot Effect is a term used to describe why we want things we don't really need!
Back in 1765 when Denis Diderot could not afford a wedding for his daughter, known for his work, Diderot sold is personal library to then Empress of Russia, Catherine the Great.
With his newly acquired wealth, Diderot funded his daughter's wedding.
For himself he purchased a fancy scarlet robe. However, the robe was out of place with his other furnishings in his home, so he replaced his rug which lead to replacing his couch.
A leather couch looked better next to a nicer kitchen table, and a kitchen table needed sculptures around it with a painting of Diderot above the fireplace.
Diderot was buying things he didn't need with the increase in income, in other words, he suffered from lifestyle creep!
See my recent Instagram post below about the Diderot Effect:
View this post on Instagram
Let’s talk human behavior real quick. Have you ever wondered why we spend money on things we don’t really need? . There is a human behavior pattern that we are sometimes not even aware of. It’s called the 🔥 The Diderot Effect = . When One Purchase Leads to Another! . 👗 ➡️ 👠➡️💼 . Think of your living room. You get new couch and before you know it you’re looking for a matching rug. The rug looks weird with the coffee table so you get a new coffee table. Now the Tv stand doesn’t match so you get a new stand. Oh wait, now you need to paint the walls bc those don’t match either. The new $1,400 sectional just led to $3,000 in purchases! . Recognize these patterns in human behavior when it comes to your spending!!! . These can also work FOR you when you build awareness around them! . Got any patterns you recognize that make you spend more?? Share below!
Common Causes of Lifestyle Creep:
The Diderot Effect explains why we feel the urge to replace out counters with granite when we get a tax return.
Or why just recently after painting just one wall, my wife and I ended up painting our living room, followed by getting new wall art. We almost splurged on a new couch and TV, but luckily we avoided doing so!
All this to say, common causes of lifestyle creep include some of the following:
You're close to retiring.
Approaching retirement age can be scary with regards to lifestyle creep for the simple fact that most are at their peak income-earning years – right before retirement.
This coupled with less financial responsibility such as kids and debts owed can make it easy to go full lifestyle creep Diderot mode!
The fancy bottle of wine, the way too lavish trip, eating out more and desire for luxury goods because of all life's hard work can make it easy to fall into the trap of overspending.
Simply put – the surplus cash flow makes it easy to lifestyle creep… creep in!
You're a millennial.
Why is lifestyle creep more prominent in millennials?
For starters, millennials are in debt not because of student loans, but because of their social lives in most cases.
Instead of focusing on getting out of debt, many millennials are going into debt to keep up with their friends! Or put another way, instead of saving their gross annual salary by 30, they are spending just about all of their net income salaries annually!
- Boujee bachelor and bachelorette parties
- Fancy weddings
- Frequent nights out
- Newest fashion & tech
- Keeping up with friends and what they buy
And so on is exactly why millennials might be the most prone to lifestyle creep.
In other words, like we will discuss in the next section – trying to keep up is something millennials struggle with, so they can easily have an inflated lifestyle!
You're trying to keep up.
We buy things to impress people we don't really even care that much about.
Ever heard that statement?
It's true. And it is also a contributing factor as to why many high-income earners – or even those who just get a cash windfall – can be subject to lifestyle creep.
The neighbor gets a new couch, so you get a new couch. A friend goes to Greece, you go to Italy. Your mom talks about her new car, you think about what it would be like to drive a new car.
Keeping up financially is very dangerous to not only your wallet but your mental health. Financial stress can be elevated by simply not comparing yourself to others!
That being said, it can be hard so say “No” to ourselves, especially when we think we deserve something. The final point in lifestyle creep causes…
You got the ‘I Deserve” mentality.
The minute I got my first big promotion – teacher to administrator, paired with an extra $4,000 a year – it only took me three months to upgrade my vehicle!
I went from a paid off Honda Civic to brand new GMC Sierra that increased my transportation costs 72% per month ($205 to $737) all because I thought I deserved a new truck.
The “I Deseve” mentality might be the biggest cause of lifestyle creep, as we tend to justify our spendings.
Because we make more, we tell ourselves we work harder, and thus, the rewards should be greater. Instead of going after financial goals, we go after shiny objects, bigger houses, and new cars.
This is vital for avoiding lifestyle creep due to the fact that a key to wealth is managing your income responsibly, regardless of what you make. Assessing needs and wants appropriately and not always giving in to what we want immediately is a big part of that (remember Denis Diderot).
6 Effective Ways to Avoid Lifestyle Creep
Now that you know where lifestyle creep can “Creep” up on you, let's look at a few effective techniques to help you identify and prevent it!
1. Become Aware (or Woke).
Just reading all of the above and up until this point has made you aware, more aware than at least 3 in 4 people.
You're now aware of what lifestyle creep is and how it can quickly get on you! That being said, it's important to remain vigilant! Often times, we are to lax when it comes to spending and we think everything will simply work itself out.
However, if we are being honest – that is never how it works. Be sure to keep in mind where your money goes (try budgeting or free financial planning of sorts) in order to keep an eye on your finances.
One tip is to track your net worth. By using an app like Personal Capital or Mint you can track your net worth which not only creates awareness, you will likely be more worried about your net worth creeping up, instead of down!
2. Always Pay Yourself First
The concept is very simple:
- Get paid
- Set aside money for all bills
- Save money or pay off debt
- Spend last
However, just because the pay yourself first strategy is very simple, doesn't mean many leverage it, but it's key to avoiding lifestyle inflation.
In 2020, in addition to becoming debt free, my wife and I wanted to save more money. We decided to automatically save $400 from each of my checks every two weeks.
Five months later, we had an additional $4,000 in savings! It's a simple concept that is easy to use. In fact, with automation, once you know how much you need for bills you can automatically invest or save!
Also, with financial apps such as Acorns and Robinhood, it's really easy to invest with spare change or dollar-cost averaging too! But whatever you decide – just pay yourself first to shut down any lifestyle inflation!
3. Make sure you save up for fun & rewards.
Just because you're a lifestyle creep expert now – don't think you can't ever buy a car or nice things. That isn't the point of this article.
However, there is a responsible way to buy nice things – that means saving up and rewarding yourself.
Whether it is a new couch, a new car, or a trip to your favorite European city, saving up for fun and rewarding yourself is the responsible thing to do!
Setting goals and establishing rewards for yourself when you hit the goals is vital to not only preventing lifestyle creep, but keeping you honest with yourself.
By not giving in to peer pressures and keeping up, you will be amazed at what you can accomplish when you pay yourself first and save for your rewards!
4. Check your circle
Speaking of peer pressure, if you're serious about avoiding lifestyle creep, it might be time to check your friend group.
This pertains more to younger adults, but the older you get, the less time you have to save/earn/pay off debt. This means you might need to be honest and truly assess which friends are holding you back financially.
While this doesn't mean you can't be friends anymore, but it's appropriate to set boundaries with people in general, especially if they're going to influence you negatively.
If you have a few friends who are perfectly OK with lifestyle creep, be mindful that it's a slippery slope and you may want to consider that before hanging out!
5. Pay off debt instead
The scary thing about lifestyle creep is that many will take out debt (just at a higher level) as their income increases.
Instead of financing a Honda Accord, the functional Honda is replaced with a brand new Lexus or BMW, but still financed.
While being able to “afford” something is one thing, most people who suffer from lifestyle creep typically carry higher levels of debt. Case in point, in one study, higher-income earners were more likely to carry consumer debt.
Thus, instead of spending more money with the increase of discretionary income, perhaps it's time to pay off some debt.
Simply start by using the pay yourself method from above and set a predetermined amount to throw at one specific debt every month. Do this until it's gone, then go to the next.
Additionally, you could also accelerate your mortgage payoff by paying extra each month towards the principal. With the increase in income – let it go to work for you!
6. Ask the happiness question
The happiness question is a litmus test for spending money in all situations, but especially when you're trying to curb lifestyle creep.
Anytime you go to buy something, ask yourself if it will make you happier.
Sure it might feel good at the moment, but to dive deeper and really analyze your purchasing is vital to avoiding lifestyle creep from occurring. A perfect example of this is purchasing new cars.
Consumers often report that within 60 days, the intrigue and joy of purchasing a new car wears off and there is even some buyer's remorse for locking in 5,6, and sometimes even 7 year loan terms.
So from now on, no matter what the purchase is – big or small – always ask yourself these three things:
- Will I be happy with his purchase this time next year?
- Does this align with my core values (time, family, health, etc)?
- Is this going to cause stress long term instead of happiness?
Final Thoughts on Lifestyle Creep:
Ultimately, it's your money and you can choose to do what you want with it.
However, when you ask yourself the happiness question, what most people often determine is that things like time with friends/family, more options, travel, and quality time make them happier… not granite counters and boujee coffee drinks.
I once had a co-worker complain about having to get a part-time job to afford her lifestyle. When I explained to her that it wasn't the AMOUNT of money she made, but instead the amount she spent – she didn't get it.
I went on to show her that there is no difference between someone who makes $100,000 and spends $90,000 and someone who makes $50,000 and spends $40,000.
In the end, they both only have $10,000 left over each year.
And while maybe the higher earner has some nicer counters, in the end, it boils down more to where the money goes, more than sometimes how much we make.
All of which, can be attributed to lifestyle creep! So here is to avoiding the creeps in life!
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎