Lifestyle Creep: Eroding Your Savings, One Raise at a Time


The idea of anything creeping in unnoticed is enough to unnerve the bravest among us. In the world of personal finance, it’s the subtle, sneaking changes in spending habits that may be most chilling. The phenomenon is known as lifestyle creep, and it’s one of the biggest — and most overlooked — barriers to building long-termwealth. However, once you knowwhat to look for, there are strategies for keeping lifestyle creep far, far away. “Folks agonize over negotiating pay or maximizing their returns by just a couple percentage points, but it's lifestyle creep that kills a lot of folks,” says Ami Shah, a certified financial planner in Washington, D.C., and CEO of Steward, a financial planning software tool. WHAT IS LIFESTYLE CREEP? As income rises throughout your career, often expenses will, too. More disposable income might mean signing up for another streaming service or eating out more frequently. Or, it could mean buying a second home or a new car. And it’s here, “when your expenses continuously increase in lockstep with your income,” that lifestyle creep can set in, Nilay Gandhi, a CFP and senior wealth advisor with Vanguard, said in an email interview. On the one hand, it’s only natural to increase your spending as your income rises. After all, we work hard to buy and do the things we love in life. It’s when that higher spending happens mindlessly, rather than intentionally, that it becomes problematic, says Mary Lyons, an investment advisor and founder of the Benchmark Income Group in Dallas. Perhaps you’re spending more so your lifestyle can match that of your friends and family, or because you feel it’s expected of you. You may even feel that by working so hard for it, you’ve earned the right to spend more.



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