Financial Impact with Holly Morphew, AFC® Financial Coach

Financial Impact Logo

5 Ways to Stop Lifestyle Creep: Manage Your Finances Better

5 Ways to Stop Lifestyle Creep: Manage Your Finances Better

Lifestyle creep, also known as lifestyle inflation, occurs when an individual's discretionary spending increases in proportion to their income. As you earn more, spending more on upgraded lifestyles often seems justifiable—after all, you've worked hard for it. However, this incremental increase in spending can quietly erode your financial freedom, preventing you from achieving long-term savings goals or investing in your future.

The Role of Emotional Spending

One of the main catalysts for lifestyle creep is emotional spending. This occurs when purchases are made not out of necessity, but as an emotional reaction—to celebrate a success, to compensate for a bad day, or simply as a form of self-soothing. While treating yourself occasionally is perfectly normal, regularly using spending as a way to manage emotions can lead to unsustainable financial habits. It's essential to recognize when your spending is emotionally driven and to develop healthier coping mechanisms that don't impact your wallet.

5 Ways to Stop Lifestyle Creep: Manage Your Finances Better

Signs of Lifestyle Creep

Identifying lifestyle creep can be challenging because it often blends into your day-to-day life. Here are a few signs that may indicate it's taking hold:

  • Increased Fixed Costs: Gradually, your once-luxury purchases (like expensive cars or high-end apartments) become your new normal, and are seen as essential.
  • Decreased Savings Rate: If your income increases but your savings don’t proportionately, or they even decrease, lifestyle creep could be at play.
  • Justifying Expensive Purchases: When higher expenses are rationalized as ‘deserved', it might be time to reassess.

Strategies to Combat Lifestyle Creep

Set Clear Financial Goals

Define what financial freedom means to you, whether it's retiring by a certain age, owning your home outright, or having a substantial emergency fund. Clear goals can help motivate you to prioritize savings over spending.

5 Ways to Stop Lifestyle Creep: Manage Your Finances Better

Spend with Intent

Use a spending plan to dictate where your money should go, rather than letting your impulses guide your spending. Include categories for savings, investments, and even for fun or emotional spending, but keep them within limits that support your broader financial goals.

Need support with your planning efforts? Schedule a consultation with an Accredited Financial Counselor® (AFC) like me.

Increase Financial Literacy

Understanding the basics of investing, the impact of compound interest, and the importance of diversifying your assets can provide a strong incentive to save and invest rather than spend. Educate yourself about financial principles that can help you build wealth over time.

Automate Savings and Investments

Make saving and investing non-negotiable parts of your budget by automating them. Set up automatic transfers to your savings account and investment portfolios right after you receive your paycheck. This “pay yourself first” strategy ensures that you save before you have the chance to spend.

5 Ways to Stop Lifestyle Creep: Manage Your Finances Better

Regular Financial Check-Ins

Schedule regular reviews of your financial plan. This could be monthly or quarterly. Use these check-ins to adjust your budget, review your financial goals, and ensure that you're not veering off track due to unchecked spending.

Embracing Financial Discipline

While it's great to enjoy the fruits of your hard work, maintaining a balance is key. Lifestyle creep can subtly undermine your financial independence, turning short-term pleasures into long-term setbacks. By staying vigilant about your spending habits and focusing on your financial goals, you can enjoy your present while also securing your future. Remember, every dollar you don't spend today is a step closer to the financial freedom you dream of.

If you are ready to get control of your finances, schedule a consultation with me today! As an AFC®, I can assist you in every step of your financial planning process.

author avatar
Holly Morphew AFC®, Award–winning financial coach, author, global speaker, and multi-generational entrepreneur
Holly’s own journey to eliminating $67k in debt in her twenties, reaching financial independence in her thirties, and creating 11 streams of income are what inspire her to help others live their wealthy life.
Scroll to Top