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Combating Lifestyle Creep & Inflation: Key Tips

Combating Lifestyle Creep & Inflation: Key Tips

Did you know the global inflation rate for 2023 is projected to be 6.9%? With only half of the year gone, there’s a chance this rate might either increase or decrease by the end of the year. Despite a slowdown in recent inflation rates, it’s critical not to become overly comfortable. Such a mindset might lead us to unintentionally fall prey to lifestyle inflation, which can negatively impact our financial health.

In the largest economies, a reduction in economic growth and demand has led to a slowdown in inflation, preventing a significant rise in prices. The inflation outlook in both the US and the Eurozone has remained relatively stable compared to the last quarter, as the costs of commodities and manufactured goods have started to fall, aiding in the control of inflation. Meanwhile, projections for inflation in emerging markets have been lowered due to improvements in the supply chain and a decrease in commodity prices, mitigating inflationary pressures.

When faced with hardships, our natural response is often to seek an improvement in our financial status by increasing our work effort and income.

It might seem obvious that a higher salary would mean more savings, but that isn’t always true. In fact, lifestyle creep can reduce the advantages of a pay raise, resulting in less money available for spending.

Lifestyle creep happens when our spending increases as our earnings do. For example, if you get a job that pays an extra $20,000 a year but then buy a car that costs $30,000, you might find yourself in more debt than before the raise. This gradual increase in spending can be hard to spot without careful budgeting.

It’s important to be aware of lifestyle creep, understand its effects, and know how to prevent it to keep your finances stable.

What Does Lifestyle Creep Mean?

What Does Lifestyle Creep Mean

Lifestyle creep is when people start spending more as their income goes up, rather than saving that extra money. This can also happen when someone finishes paying off a loan and uses the money they would have saved for more spending instead of saving it.

As lifestyle inflation sets in, items and activities once seen as luxuries, like subscriptions for entertainment and eating out, start to feel necessary with an increased income. Lifestyle creep isn’t just about buying things; it’s also about spending on new experiences.

Take the example of a couple who just paid off their home loan. Rather than saving the money they were spending on their mortgage, they choose to use it all for travel. Robin Aiken, a lead at Homrich Berg Wealth Management, uses this scenario to show how lifestyle creep can lead to prioritizing immediate pleasures over future savings.

Signs of Lifestyle Creep

Signs of Lifestyle Creep

Unchanging Savings

 If your savings don’t grow despite getting raises and bonuses, it means you’re likely spending all the additional income. Failing to save could seriously affect your financial health.

Spending More

You may be experiencing lifestyle creep if you’re increasing your spending in different areas, thinking you can afford it. This can include eating out more often, buying costlier gifts, taking more expensive vacations, or signing up for more services.

No Budgeting

Without a clear budget, it’s easy to spend too much without realizing it. A budget helps control your spending by tracking where your money goes each month.

Financial Stress

Feeling stressed when looking at your bank account or worrying about dwindling savings and rising credit card debt may indicate that your spending exceeds your earnings. It’s important to heed these signs and act to rectify the situation.

Dependence on Credit

Relying more on credit cards or loans for your lifestyle can be a sign of lifestyle creep and may lead to financial instability.

Neglecting Long-term Savings

If you’re not saving for the future because you’re spending more now, it’s time to review your spending patterns.

Overlooking Financial Goals

If you’re not making progress towards your financial goals due to increased spending, it’s critical to realign your spending with your goals.

Addressing these lifestyle creep indicators can help safeguard your financial future by improving your financial health.

Lifestyle Creep in the Workplace In the Workplace

Lifestyle creep often happens when people’s incomes increase, whether from getting a higher-paying job, receiving a raise, or paying off debt, which frees up money that was once used for monthly payments. Once lifestyle inflation begins, the extra money is usually spent as quickly as it is earned, if not faster.

The main issue with lifestyle creep is that it can prevent individuals from saving sufficiently for retirement or unexpected emergencies. Around half of the workers in the US say their debts stop them from saving enough for their retirement years. Although not all debt results from lifestyle creep, spending unnecessarily often leads to lifestyle inflation.

It’s common for people to spend more on their lifestyle as their income goes up, rewarding themselves for their hard work. The problem, however, occurs when the increase in spending surpasses the rise in income, making it difficult to save for retirement, deplete emergency funds, or lead to more debt.

Lifestyle creep can impact anyone, regardless of how much they earn. It’s not just a problem for high earners or those who avoid buying luxury items. The temptation to dine out often because of a busy schedule or to buy new clothes for a job can make lifestyle inflation appealing to anyone.

Effects of Lifestyle Inflation on Financial Goals

Effects of Lifestyle Inflation on Financial Goals


Lifestyle inflation can greatly affect someone’s financial future. The habit of spending on small luxuries or making spontaneous buys might look harmless but can add up, threatening the ability to save for later life, clear debts, or pursue other financial plans.

Falling into the trap of lifestyle inflation could also lead to relying too much on a high income, which becomes problematic if earnings drop unexpectedly due to job loss or economic troubles.

It’s important to stay aware of the risks of lifestyle inflation. A good strategy to manage it includes creating a budget and sticking to it. By setting spending limits and focusing on financial goals, one can avoid unnecessary expenses and keep a lifestyle that’s financially sustainable in the long run.

Imagine being in your mid-30s, receiving a promotion with a big pay rise. Excited about your increased earnings, you upgrade your lifestyle. You swap your car for a more luxurious one, move to a bigger house in a better area, dine out more at upscale places, buy costly gadgets, and go on more vacations.

Let’s look at the costs involved:

Luxury Car: A high-end car could cost $600 to $700 monthly, totaling about $36,000 over five years.

Bigger House: Moving to a more spacious and elegant home can increase your living costs by an additional $700 to $1,000 monthly, or $36,000 to $40,000 in five years.

Dining and Gadgets: Regular meals out, fancy electronics, and vacations can quickly lead to spending thousands more each month, amounting to a large sum over five years.

These long-term expenses show how lifestyle inflation can deplete your wealth. Instead of saving or investing extra income, it goes towards maintaining an upgraded lifestyle, potentially leaving you with little savings or financial security for the future.

Alternatively, by avoiding lifestyle inflation and living within your means, you could use extra income to save and invest, potentially increasing your wealth over time through compound interest and investment returns.

Navigate Financial Stability

Tackle Lifestyle Creep and Inflation! Explore essential strategies to manage lifestyle inflation and its impact on your financial health, amidst a projected global inflation rate of 6.9% in 2023. Interested in more articles like this? 

Partner with SEO Philippines for quality content that enhances understanding. Contact us for collaboration and make financial education straightforward and compelling.

Final Thoughts 

Managing lifestyle creep and inflation is essential for financial well-being, especially with the global inflation rate expected to be 6.9% in 2023. It’s vital to learn about managing money wisely as our income increases. 

Avoiding the temptation to spend more and focusing instead on saving can protect our financial future from the negative effects of lifestyle inflation. Practical steps like saving more, creating a budget, and avoiding unnecessary spending are key to maintaining financial health. 


What is financial creep?

Financial creep, often referred to as lifestyle creep, is the gradual increase in one’s spending as their income rises, which can erode savings and investments over time. It typically happens when individuals use their increased earnings to adopt a more expensive lifestyle instead of saving or investing the extra money.

What is a luxury creep?

Luxury creep is a form of lifestyle creep where individuals start purchasing more luxury items and indulging in high-end experiences as their disposable income increases. It’s characterized by spending on goods and services considered beyond one’s basic needs, elevating their standard of living to a more luxurious level.

How do you fight lifestyle creep?

To combat lifestyle creep, it’s important to set and adhere to a budget, save and invest a portion of any income increases, and be mindful of your spending habits. Regularly reviewing and adjusting your financial plans can help ensure that increases in income translate to greater savings, not just higher expenses.

What is the 50 30 20 rule?

The 50/30/20 rule is a simple budgeting guideline that suggests spending 50% of your after-tax income on necessities, 30% on wants, and allocating 20% to savings and debt repayment. This rule helps individuals manage their finances by providing a clear framework for distributing their income in a balanced way.

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