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It's always been relatively easy to overspend, but it's become even easier these days. You might blame this reality on terms like “fanflation” and “money obsession,” but don't overlook another insidious trend: lifestyle changes.
While lifestyle changes may be natural and expected, they're not without their downsides. To help prevent such issues, HuffPost asked personal finance experts to explain the concept and offer their tips for resisting temptation.
What is lifestyle creep?
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“A lifestyle change means that as your income increases, your expenses tend to increase,” says Kimberly Palmer, personal finance expert at NerdWallet. “Lifestyle changes can come as a result of a desire to 'keep up with the Joneses,' such as seeing others increasing their spending and so you do the same.”
This phenomenon may result in people spending extra money on experiences and things they don't need, like designer clothes, luxury cars, real estate, etc. There are many less extreme examples, too.
“When you get a raise, all of a sudden you start buying a new phone, eating out more, or overspending on holidays,” says Bola Sokunbi, founder of Clever Girl Finance. “You feel like you have more to spend, or that you deserve to treat yourself, so you're tempted to spend more, which ends up increasing your spending.”
It's natural to want to improve the quality of your life by buying nicer things, or to be drawn to the perfect lifestyle you see on social media. Lifestyle changes are often gradual and often with bad intentions.
“It's a slow expense increase that often goes unnoticed until it impacts your lifestyle and savings,” says Dasha Kennedy, founder of the blog The Broke Black Girl and financial activist at Chime. “As your income increases, so do your spending, and often you end up spending it on things that don't add value.”
What are the pros and cons?
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“The benefits of a lifestyle change include a better quality of life where you can enjoy the fruits of your labor,” says Sokunbi, “and you may be motivated to go out and achieve more. However, the downside is that you may end up spending too much and dwindling savings, which can lead to financial stress, expanding financial obligations and less flexibility in your life overall.”
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When your expenses keep up with salary increases, it becomes difficult to save money and build a financial safety net.
“Even if you're making more, you could run out of money before payday,” points out Kara Stevens, founder of The Frugal Feminista and author of Heal Your Relationship With Money. “When you earn more money, you want to enjoy it, but it could also lead you down a dangerous path if you're not careful.”
Lifestyle changes are particularly tricky because they can go unnoticed for a long time, Kennedy added.
“It can deplete your savings and lead to financial stress,” she says. “You may be enjoying the fruits of your hard work, but at what cost? It's important to take control of this.”
What's the best way to deal with lifestyle changes?
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“Lifestyle changes are inevitable for most people, but understanding and managing them plays a big role in maintaining financial security,” Kennedy says. “Being aware of how your spending habits change based on your income can help you stay on track and avoid overspending.”
One of the best ways to ensure that lifestyle changes don't wreck your finances is to closely track your monthly expenses and pay attention to any changes.
“Looking at your credit card and bank statements can help, as can using a budgeting app,” Palmer said. “Anything that helps you track and reconcile your spending can be a useful tool.”
Determine what your financial goals are and how you are going to achieve them.
“Set clear goals for your finances,” advises Sokunbi. “Know what you want to achieve financially, whether that be saving for a house, retirement, or an emergency fund. Create a budget to track your income and expenses.”
It's ok to enjoy nice things, but make sure you stick to a budget. Sokunbi recommends aiming to live within your means.
“Just because you can afford something doesn't mean it's OK to buy it,” she says, “so before making any big purchases, ask yourself if you really need it and if it aligns with your financial goals.”
Prior to or alongside any lifestyle adjustments, keep long-term financial stability and security in mind by setting aside a portion of your income for savings and investments.
“Automate your savings,” advises Sokunbi. “Set up automatic transfers into your savings and investment accounts to ensure you're saving consistently.” This article originally appeared on HuffPost.
