226-378-7748 joe@budgetboss.ca

Friday, July 6, 2018

10 Ways to Avoid “Lifestyle Creep”

It is hard to control living above your means at times. For some much harder than others. Along those lines is a term called “Lifestyle Creep.” Investopedia describes “Lifestyle Creep” as:

“A situation where people’s lifestyle or standard of living improves as their discretionary income rises either through an increase in income or decrease in costs. As lifestyle creep occurs, and more money is spent on lifestyle, former luxuries are now considered necessities.”

Sound familiar? It is very, very common. When you were growing up your parents provided everything for you. When you go out on your own it is not unusual to live the “poor student” lifestyle. Kraft Dinner, dollar beers, and Axe Deodorant spray are keeping you going. The natural urge is to up that lifestyle when you get out and get a job. It becomes even more natural as your career progresses. You wouldn’t believe how dangerous it can become when you actually start making some real money. Today I am going to discuss how you can fight this urge to raise your lifestyle every time you earn more money. Doing so could lead you on a path to financial freedom.


1) Track Spending

I recommend to all my clients that they have a written budget. I also recommend that they have within that budget a reasonable amount of spending cash. I give myself $100 a week to spend as “walking around money.” My goal every week is to spend as little of that $100 as possible. This is separate from groceries, bills, housing, and transportation. Why is this important? You will never pay more for your rent than it costs, or your hydro bill, or your car. What you may overspend on is the day to day stuff. If you find you meet bills easily, yet are always broke, it is the day to day that is killing you. Tracking your spending will be an eye-opener to your daily spending habits.

What Kind of Budgeter are You? – Budget Boss


2) The College Mentality

It’s funny how we can survive on Ramen Noodles during 4 years of university and now we don’t even know how to cook. Now that you have a real job and have a bit of money in your pocket, I suggest you upgrade your diet a bit. The problem lies when you decide that eating out 2-3 times a week is prudent. You got used to buying things on sale, looking for deals and hustling to make a buck. Your priorities shifted from beer and books to cocktails and cars. Stop it! Keep that college mentality when you are out of college. The opposite sex might not care you are broke in university, believe me, they do when you are 30.


3) Think value

Do you remember the show “MTV Cribs?” It was where they took you into a celebrity’s house and showed you how they live. One stop was always the fridge. Wasn’t it amazing how they eat all the normal brands you do? Gourmet Ketchup? Nope. Endangered Rhino milk? Nope. $50 toilet paper? Nope. We must understand that just because we have more money than we did before, it doesn’t mean that value changes. I buy toilet paper on sale. Why? Because it is essential and we all know where it goes when you are done with it. Why would I pay more for something then I need to? You must think value over convenience.  Necessities should be bought for as cheap as possible, without sacrificing quality of course.

Financial Advisor


4) Avoid “I’ve earned this” spending

Have you ever indulged in something and told yourself I have earned this? You know who never says, “I have earned this?” Wealthy people! Why don’t they say that? Wealthy people don’t say “I have earned this” when they do something for themselves because they understand that the life they have is due to the work they have put in. Working 2 weeks straight isn’t an “I have earned this moment.” You have to think about what you are rewarding yourself with, and what for. Here is an example. You work 10 days straight without a day off so now you go to the mall and buy a $200 handbag. So to reward yourself for working 10 straight days you spend as much as you made in 1 or 2 of them. Here are some “I have earned this moments” for you. Maxing out your retirement fund at years end. Getting out of debt. Fully funding a child’s education. Paying off your mortgage. Working a normal job, a normal amount of time isn’t one of those moments. Celebrate the end of 10 days straight by going out for ice cream, not a fancy dinner. Celebrate the full funding of your retirement account by going on vacation every year. See the difference?

9 Signs You’re Suffering From Lifestyle Inflation – Wise Bread


5) Focus on “wealth production”

I mentioned a fully funded retirement and a child’s education fund. If we all focused on wealth production our lives would be better off. Do you know what $100,000 compounded over 30 years is? $811,649.75!!! (7% interest, no further contributions). Why do I bring that up? Because by saving money, you are making money. Imagine you could provide yourself a passive income just from the money you have saved up? Imagine you had a fully paid off home worth 500K that you could sell at any time and do what you want with. If lifestyle creep is affecting you, then you probably aren’t focused on wealth production. Ever wonder why the rich get richer? It’s cause their money works for them, not them working for their money.


6) F*** everyone else

If it was socially acceptable I would wear jeans and a t-shirt every day. Sadly, I cannot show up to the office like that. It is important for us to understand that other people’s opinions of our lives are essentially meaningless. No one knows what you have in the bank. No one knows your personal financial plan. If they are the type of person to judge you based on the car you drive, then they aren’t worth your time. You know what is sexier than talking about shopping sprees? Talking about dividends and tax-sheltered growth! The Joneses are broke, so don’t let your neighbors cause your lifestyle creep.


7) Ignore the “Jingle”

I would like to think advertising has no effect on me. I don’t run out and get something when I see it in a commercial. I don’t care what Britney Spears drinks or wears. To avoid “Lifestyle Creep” it is important to become cognizant of advertising. Ever wonder why companies spend so much money on advertising? A Super Bowl commercial costs 3 Million Dollars for 30 seconds. They spend so much money on it because it works. Are we helpless to this? No. All we must do is be more aware of advertising when it is trying to influence us. Think of advertising like the Instagram Bots. There is no one on the other end, so ignore it.  We shun multi-millionaires, yet we keep them rich by buying their crap. Who’s playing who now?

Financial Advisor


8) Understand sacrifice and priorities

It should be known what sacrifice is needed to get what we truly want in life. It should be known what our true priorities are. If I told you that you could have one fancy night out every month for the next 30 years, or you could live comfortably in retirement for 30 years, which would you choose? Of course, you would choose the retirement goal. What if I told you could have a $5-dollar coffee every day or you could give the gift of a fully funded education for your children? The difference between the rich and us is that they don’t have to make those choices, they can have both. The rest of us must sacrifice things in order to get other things. I use dinners out and expensive coffee’s as a metaphor, but the concept is the same. No one in the history of the world said they want to have the goal of expensive coffees and dinners on the regular. Many have the goal of a comfortable retirement. Crunch the numbers and make the decisions. When you look at it this way, the choices are simple. When you don’t think about it, your choice has been made for you.

Prioritizing Your Spending – Budget Boss


9) Forget Payday

Over 30% of people in our country live paycheque to paycheque. What that means is that if they missed even one payday, it would have a drastic effect on their financial situation. We have to get to a point where payday is just another day. I see people lined up to get their cheques on payday, literally right when their work opens. The next stop is the bank. There are a few people I see that don’t even know it is payday. While I think it is important to know when you get paid, it is even more important to not depend on that one single paycheque. This can only be done with savings and the avoidance of lifestyle creep. Getting to a point where each paycheque is just added to the pile is a good place to be. When you are fully dependant on each cheque, you are officially owned by your employer. That’s a gross feeling.


10) The battle never ends

Lifestyle Creep is everlasting. The goal is to continually make more money year after year. The temptation is to grow your lifestyle as the money grows. The growth of lifestyle should be relative to the growth of wealth. For instance, you could not afford a decent car before because the budget was too tight. When you take a job that pays more, upgrade your Junker to an affordable car that doesn’t break down every 2 weeks. You could not afford a vacation ever when you were younger. Reward your annual hard work with a trip with the family every year, of course after obligations have been met such as savings. Do not think that you can let your guard down when it comes to Lifestyle Creep. It only ends when you stop making money. When that day comes you will either be comfortable or you won’t. How you live on your way there will determine the outcome.

While this list may seem like a downer, it a conversation that must be had. Imagine you could get what you want when you want. That can only occur if you avoid lifestyle creep. Money is scarce unless you make it abundant. If it runs out of your hands like water, abundance is out of the question.

“Poor people are those who only work to try to keep an expensive lifestyle and always want more and more.” – Jose Mujica

Financial Advisor

Why Giving up My Life, Saved My Life

Email – joe@budgetboss.ca 

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