Personally, I love new experiences. And one benefit of earning more is the ability to try new things. Whether it’s going to different restaurants, the theater, or traveling, I always preach experiences over things.
But even though I feel this way, lifestyle inflation can also creep into your life this way. So be careful and monitor how you spend in these areas.
Maybe you used to only eat out two or three times a month, but now you’re eating out ten times a month. And not only are you eating out more, you’re going to much nicer restaurants and spending an extra $10 or $15 per visit.
Instead of eating out so frequently, cap it somewhere in the middle and limit restaurant trips to a few times a month and use the extra money to boost your savings and hit other goals.
3. You’re spending more on self-care
I also believe that self-care is important…and sometimes this involves money.
When you didn’t earn as much, maybe you weren’t in a position to schedule salon appointments, nail appointments, or massages. So once your income increases you might have the urge to make up for the past.
Understand, it’s not so much the act of spending on self-care that’s dangerous – it’s how much more you’re spending and the frequency of these appointments that gets you into trouble.
To illustrate, let’s say you’re living paycheck to paycheck and you get a $5,000 a year raise. That’s an extra $400 a month before taxes (about $300 after taxes). However, it only takes spending an extra $75 a week on “wants” to eat through the money.
Keep in mind that spending more on self-care isn’t only about mind and body. It also includes spending an excessive amount on hobbies.
4. Spending more than peers with a similar income
Granted, we don’t always have inside information about another person’s bank account or bills, and so much plays into what a person can afford.
Even so, you might have a general idea of where your friends stand financially (sometimes you can gauge this through conversations). So if you earn roughly the same as your friends and you have very similar financial circumstances – yet you’re spending WAY MORE compared to them – you might be a victim of lifestyle creep.
You might travel considerably more, eat out more, and buy new clothes more often. If so, it doesn’t hurt to take an honest look at your situation to see whether lifestyle creep is an issue, especially if you’re not saving money and you’re increasing your debt.
Your friends might spend less because they’re spending within or below their means, whereas your spending outpaces your income.
5. You’re paying more for conveniences
There’s nothing wrong with occasionally paying for something that makes your life easier, and it’s even okay to enjoy regular conveniences. But you have to consider how much you’re paying for these and add up the cost because convenience aren’t cheap.
One tell-tale sign of lifestyle creep is spending way more in this area. So instead of going to the grocery store to pick up a few items (because it’s cheaper), you’ll now go to the corner pharmacy because it’s closer (even though you’ll probably spend more).
Or, instead of picking up your takeout order, you’re suddenly okay with paying an extra $5 in delivery fees.
And yes, time can be more valuable than money. However, you have to strike a balance. The truth is, throwing money at every single inconvenience comes with a hefty price tag.
6. You stop budgeting
I feel this is one of the biggest signs of lifestyle creep, and I’ve had people admit that they stopped paying attention to their budget after their income increased. Once they no longer had an income problem budgeting no longer seemed necessary.
But in a lot of cases, these people unknowingly traded an income problem for a spending problem. Once they stopped tracking their purchases, they started overspending in just about every category.
I’ve said this before: Budgets aren’t only for specific people because everyone has the potential to overspend. And honestly, I think the potential is greater the more you earn. So it doesn’t matter if your income increases by $5,000, $10,000, or $20,000, always know where your money goes and create a spending plan to ensure that you’re spending a reasonable amount on wants.
