Your salary is going up - but somehow, you still don’t feel rich. At the end of the month, there’s barely anything left in your account. Sound familiar? That’s lifestyle creep - the silent killer of your savings. It quietly turns yesterday’s luxuries into today’s “essentials.” Let’s explore how to tame this mechanism and enjoy financial success without falling into the trap of overconsumption.
Often, as our salaries increase and we start earning more, we're tempted to spend more and more. We want to improve our quality of life, we want to live more comfortably, and that's understandable. But sometimes, this desire to improve our lives goes a step too far, and we start overspending, forgetting that it should work for you now and in the future. It should also increase our security and peace of mind about what lies ahead.
Lifestyle creep slowly grows, often lulling us into a state of alertness. We feel like, okay, we're allowing ourselves a little more than before, but it's nothing major, but it's a small thing, after all, it's just that one extra coffee. Or that one extra jacket. But the truth is, it's these little things that most often make up the bulk of our money. Because these small expenses often simply escape our notice. They're easy to overlook, easy to fail to include in the budget. Because when we know that, for example, we have a mortgage payment or rent to pay every month, or when we're planning a larger expense, perhaps getting some expensive health tests, perhaps planning to buy a bike, we sense all of this and see it reflected in our budget. We can plan, but it's these little pleasures that start to slip away.
That's why lifestyle creep, the creeping of our lifestyle toward ever-higher quality, can escape our notice, but it can also involve many expenses that are thoughtless or unnecessary. Sometimes we spend money a bit thoughtlessly, partly because an opportunity arises, or a social occasion arises, or something catches our eye, and we don't really enjoy these things, these expenses. And it's precisely in these moments that we need to be most careful.
Because the most important thing is that if we're going to spend money, we should spend it on things we need, or on genuine pleasures, on something that will make us happy. And remember, there's also something in psychology called hedonic adaptation. This largely reflects how we begin to think about the money that comes to us in the form of a higher salary. We simply start spending money on increasingly more expensive things, but in reality, each of these expensive things only brings us joy for a while. We adapt to these larger expenses. We become accustomed to being able to afford more, and these expenses cease to please us. So the mere awareness of how easy it is for us to forget about that more expensive thing we spend money on should also provoke such reflection and make us look at the money we spend a little differently.
And finally, one more thing, another psychological mechanism, which often appears when we start earning more. We get promoted at work, we have significant professional successes. It's a feeling that we deserve to spend this money, meaning we actually deserve to finally afford more. But just because you deserve it doesn't mean the expense is worthwhile. And just because you deserve it doesn't mean that when you spend it, you'll be happy or that it will be a source of satisfaction for yourself. So it's worth paying attention to that, too.
How can we wisely approach increasing our quality of life while still avoiding lifestyle creep? The first thing is dividing expenses that increase the convenience or comfort of our lives into those that genuinely buy you time and those that merely buy you status. Some expenses actually make sense. For example, if you live in a place with very poor transportation and have a large project that's important but tiring, requiring your focus and rest, taking an Uber or simply a taxi from your work instead of public transport might make sense because it will save you time, give you more time to relax, and it could be an expense that improves your quality of life because you feel like, okay, you're working. But you also have the opportunity to buy yourself some time. Or if, for example, you can hire someone to clean your house, or to take care of your garden if you live in a house but don't enjoy gardening. These are examples of buying yourself time - meaning you're actually spending money on something, but you're also saving time. It's the same with catering. It's more expensive, but in some cases, it can make sense.
For example, if you're short on time, or at some point in your life you have more to do, or you have a challenging project at work, or a lot going on in your business, then that's also an expense that saves you time, because you don't have to cook, and you can use that time to relax or simply work. And these are benefits, these are things that improve your quality of life, but above all, these things buy you time. But also, to be clear, it's not about spending all the time on catering or driving Ubers all the time. It's about sometimes moments in our lives when we want to buy ourselves more time, and then that money is there to buy you that time.
The second thing is spending that only buys you status. For example, you want to always be dressed in the latest trends, so you buy more of those clothes. This is clearly part of building a certain image, a certain status. The point is that sometimes we spend money to build a certain image in the eyes of others. And this is a big trap, because then these expenses can multiply. It's very difficult to slow down with these expenses, especially when we also accustom others to a certain image of us. So it's worth being careful here about expenses that buy us nothing but status. Of course, a better car sometimes brings comfort, sometimes means greater safety, sometimes it means we can get to different places faster, whether it's visiting family outside the city or going to work. But sometimes the expense of a new car is strictly related to increasing our status and feeling better about finally being able to afford it. So, periodically, conduct a convenience audit and check which of the things you buy save time, which buy you comfort that's important to you, which actually makes your life better, and which expenses are purely status-seeking, meaning building a certain image, which doesn't always make sense. The truth is that a cohesive image isn't just about the things we own; it's about who we are, what knowledge we possess.
There is another thing that also very often leads to lifestyle creep, the Diderot effect. It's a chain of buying new things that match the previous things. For example, you're having a party, going to someone's wedding in the summer, and you buy yourself a great dress. Then you come home and discover you don't have shoes or a handbag to match it, and you have to buy two more things to feel comfortable and to have a cohesive look, a cohesive outfit. So suddenly, by buying one thing, you're effectively buying three things.But to be clear, it's not just about clothes. You might buy a bike, and to go with that bike, you might also buy some special sports shoes because yours are old. Then you'll buy some more clothes, a helmet, and maybe some gloves. And maybe you'll also buy a basket for it, if it's a city bike, for example, or maybe a water bottle to make it all look good, or a bike backpack, because you go on these long trips, and suddenly you realize you have a ton of expenses just because you bought that bike. This is also very common in apartments. For example, we renovate our bedroom, we simply buy a new bed because we decide that we'll buy a new bed, maybe in a different color, we'll paint the walls, and suddenly it turns out that the bed doesn't match the nightstands anymore. So we bought three more nightstands, and actually, the lamps that were on those old nightstands no longer match the new ones. So we buy lamps too. And then it would be nice to throw some decorative pillows on top. Or maybe buy some flowers to add to your savings, or maybe a rug? And suddenly it turns out that because we needed to change the bed and paint the wall, we also bought various accessories for twice as much.
Housing and clothes are probably the most common things. But how to deal with this Diderot effect? The first thing is planning. Whenever you make any purchases, consider whether it fits with what you already have, but also whether it fits your budget. For example, you assume you have a specific budget for this wedding outfit and you spend all of it on a dress, then those shoes and bag will really hit you in the wallet. But if you already have a larger budget, then you can consider, okay, is this going to be something, this outfit that I'll use a few more times later? Does this purchase actually make sense and does it suit my style? And the same goes for housing expenses. Calculate how much you really want to spend on this renovation and let that be your starting point. And I know many of you are probably smiling right now, because how much we want to spend on an apartment versus how much we actually spend often differs significantly. If, for example, you're already planning this renovation, then plan it from start to finish. And if you really like a different wall color or a particular bed, then consider whether you're ready for a higher expense because all the other furniture and accessories don't match, or perhaps you should look for something else that will match the things you already have. Because sometimes throwing things away or giving things away is an additional hassle you might not want to take on. So this is another thing that potentially takes up your time and will make all these expenses ineffective.
And another very important thing in the context of lifestyle creep is the automation of saving and investing versus spending money, and thinking not only about the here and now but also about the future. In other words, using your rising salary to take better care of yourself here and now and in the future. And paradoxically, such automation can give you more freedom when it comes to spending money. This is a really great way to deal with lifestyle creep. So how does it work? If you've been listening to me for a while, the timing of paying yourself first will probably come as no surprise. And that's precisely the point: if you receive a $1,000 raise, you can adopt the 50/50 rule, meaning $500 goes towards increasing your spending, current pleasures and joys, and, of course, your needs. And the other $500 goes to you in the future, meaning it's saved and invested for your retirement, your future in general, and perhaps your pursuit of financial freedom. This is money that works for you. So dividing this money is a really great way to spend more comfortably now, but also to build your financial comfort in the long term.
