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Lifestyle Creep and How to Avoid or Reverse It

avoid lifestyle creep

Whether you have heard the phrase lifestyle creep or not, the odds are good that you have experienced it either first-hand or indirectly. Another word for it is lifestyle inflation. As you make more money, your apartment or house gets a little bigger, your furniture gets nicer, and dining out becomes more frequent. Then you meet someone special and your family grows from one person to two and then comes baby and…another baby and so on and so forth. The house needs to accommodate more people, the cars need to be safer and nicer and larger.

These life expenses are unavoidable and, just as the title indicates, they creep up on you. As more luxuries are afforded though, like a nicer car, a house cleaning service, family vacations, etc. it is easy to lose control of and perspective on how much is going out and where. Lifestyle creep can quickly become wasted income that could be going someplace more worthwhile, like into your retirement account or toward outstanding debt.

If you’re spending more than you are earning, your inflated lifestyle can also become the source of getting into debt and that’s where you may spend years trying to get out of a hole you have dug rather than building a nest egg for the future.

In this article, we will go over some tips to get on top of your finances and plug any of the money holes that are draining your wallet.

Tip One: Identify Lifestyle Creep

The first step has to be going over your expenditures with a fine-tooth comb.

Why? Because a financial creep is well-named. This money is slowly leaking out of your bank account in a way that you don’t necessarily feel or notice on a day-to-day basis. Creeps come in the form of annual fees to credit cards, gyms you seldom visit or digital subscriptions you forgot you even had.

Creepy Lifestyle Creep Facts

67% of Americans pay for a gym membership they do not use.[i]

34% of Americans spend more on coffee than they do on investments.[ii]

Americans throw out a third of the groceries they buy.[iii]

84% of people underestimate how much they spend on digital subscriptions and by about 40%.[iv]

Lifestyle creeps are the little ways we nickel and dime ourselves without realizing it. So, to get started you need to get a good look at your expenses. You may even want to take advantage of a budgeting software tool, like Mint, to help you track your spending habits. There are many tools to choose from based on your needs and goals, so if you want to save more for retirement or pay off debt, there are particular programs that cater to those objectives. The closer you look, the better you can see how much you spend on essentials, and how much you spend on everything else.

Click here for more tools that can help you avoid lifestyle creep and track your progress,

Tip Two: Eliminate or Cut Down Lifestyle Creep

Once you have a good idea of how your money is coming in and out of your wallet, the next step is to lean out the non-essential and often wasteful expenditures. The goal here is not to hack and slash until you feel deprived, it’s to be more aware of how and why you spend.

The goal is to find the sweet spot where you are able to live the way you want without it coming at the expense of your retirement or long-term life goals. Be neither the ant who saves and saves and never has any fun, or the grasshopper who spends and lives in the moment without thinking of his future. The goal is to find a moderate space where there is money budgeted for a few frivolous items, experiences or creature comforts while also saving or paying off as needed. You may be overpaying for cable or satellite radio in your car that you seldom use, it may be worth it to cancel those services, saving hundreds to thousands of dollars per year. Or you could try calling and renegotiating your package for a smaller number of channels you actually listen to or watch, for a smaller annual bill. This kind of thing–weighing the usefulness of your creeps, will help to get on top of them and either eliminate them or reduce them to a responsible level.

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Creep Hacks

Dropping the temp on your house down a few degrees can save 10% on your bills.[v]

Canceling a gym membership that’s seldom used.

Inventorying your online subscriptions and eliminating ones you don’t use.

Going to the gas station that takes points from your grocery shopping.

Dining at your favorite fancy restaurant on nights when they offer a prix fixe menu.

There is also the option of calling credit card companies and cable/internet/cell phone providers and negotiating contracts, fees, and the like, which may be worth it to save a few bucks. The goal of culling the creeps is to streamline your finances and give you more control over where your money is going.

Trim is a tool that actually negotiates with utilities, banks and internet providers (among other institutions) on your behalf. But keep in mind, this is another subscription so only get it if you’re going to use it.

Tip Three: Be in Charge of Your Creeps

Some creeps happen organically, for example, kids are expensive. Adding one child to a household means more money toward food, clothes, diapers, toys, babysitters, childcare, etc. Other creeps happen because we get busy and have enough disposable income to not notice the little leak that is dripping. Stopping up the leak prevents waste and also gives you more control over where you want your money to go.

This article is not about taking things from you or asking you to live a more austere lifestyle as much as it’s encouraging you to be more observant of how you spend and where you spend. A few hundred dollars a year doesn’t necessarily feel like a big deal, but if that money was being invested with compound interest yearly, in just a few years’ time it can grow substantially. Being frugal now can allow you to retain more of your wealth to use now, or save, it can be the difference between retiring sooner or later, and have a lot to do with how much you’ll have to live off. So, take control of your lifestyle creeps, it’s just a sensible thing to do for yourself.

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Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.