The Quiet Rise Of Lifestyle Creep
Research from 2023 concluded that 36% of Americans earning $200k or more and 48% earning $100k or more are living paycheck to paycheck. This begs the question of why the supposed “rich” are experiencing this level of financial strain as well as the general population? A paycheck-to-paycheck lifestyle means that you only have enough income to cover your essential costs, such as housing, utilities, groceries, insurance, healthcare, taxes, and clothing. This lifestyle makes it impossible for a family to save or invest, leaving many feeling a constant strain on their finances and ultimately on their livelihoods.
Lifestyle inflation, also known as lifestyle creep, is a phenomenon explaining that as your income increases over time, so does your spending. When you get a raise, instead of putting that money into a savings account or emergency fund, you spend it on a vacation or a high-end wardrobe. Lifestyle inflation seems to happen unconsciously based on the assumption that increased income always translates to a higher standard of living. This experience is natural, but if not managed can lead you far away from where you want to be and what your financial goals are. A sign that lifestyle creep may be present in your life is a stagnant savings account, due to limited ability to save. You may notice decreased financial flexibility when emergency expenses, such as auto maintenance or medical expenses, inevitably arise. When you are constantly funneling your finances towards maintaining a higher lifestyle, you lose vision of your financial goals, because you are trapped trying to make ends meet. If lifestyle creep is prevalent, you probably do not keep a budget and you have a general sense that you are out of control of your finances. The majority believe that the reasons for living paycheck to paycheck include high monthly bills, lack of budgeting and planning, unexpected emergencies, and increased cost of living. Genuine growth is possible if we begin to see these factors as not something that is happening to us, but as something we can change.
What could it look like to combat and prevent lifestyle inflation? I think a great first step is creating a simple budget. Visualizing your financial situation through a budget can be very powerful in seeing what needs to change, what you value, and how you can move forward to financial stability. Budgeting is effective in managing debt accumulation, saving for future goals, and building a cushion for unexpected events of life. Another step towards living within your means is automating savings. Technology allows you to set up automatic transfers into your savings or investment accounts. This is a proactive step you can take that makes your life easier. Another step you can take is living below your means. We must actively choose to not upgrade our lifestyle with every pay increase. Setting financial goals is another proactive step to take, helping you to align your long-term dreams with your current spending and saving patterns. These goals will serve as a reminder for why you are living within your means, saving money, and integrating financial disciplines into your life. Lastly, mindful spending is a great practice to learn for financial peace. Mindful spending consists of intentionally considering every purchase and comparing them to your financial goals.
Lifestyle creep does not only happen to those making six figures, but it can happen to anyone. Financial health requires sacrifice, whether that looks like cutting back on your coffee budget or moving to a less expensive neighborhood. But no matter who you are or what you do, it is not about how much money you make that deems you successful, but how you manage what you are entrusted with.
Matt’s Corner
