Metis AM
As your income rises, it’s only natural to want to enjoy the fruits of your labour. This could mean a nicer car, more regular meals out, or even a larger home.
While some lifestyle upgrades might be important to you, other gradual, often unnoticed increases in spending could be silently sabotaging your financial wellbeing.
This is lifestyle creep in action, and it could leave less room in your budget for saving and investing.
Keep reading to learn how to spot the signs of lifestyle creep and discover six useful strategies to regain control of your finances.
Lifestyle creep is a subtle phenomenon that often happens without you realising
The damaging nature of lifestyle creep lies in its subtlety. It’s not typically characterised by a sudden, extravagant splurge. Rather, lifestyle creep is a series of small, incremental upgrades to your daily life.
That £4 coffee every morning, the slightly more expensive grocery shop, and even a few extra subscriptions can add up quickly. Individually, these expenses may seem small. Over time, however, they can quickly erode any financial gains you may be making from your increased earnings.
For example, if your income increases by £500 a month, but you gradually increase your spending to £400 on “nice-to-haves”, then you’re only truly £100 better off.
This can leave you vulnerable to unexpected expenses and make it more challenging to achieve your long-term financial goals, whether that’s saving for a house deposit, boosting your retirement savings, or even building and maintaining a robust emergency fund.
Fortunately, there are several ways you can combat lifestyle creep, even once it’s already taken hold.
1. Practise mindful spending and become more aware of your purchases
One of the first and most important steps to take when tackling lifestyle creep is to become more aware of where your money is going each month.
First, before making a purchase, especially a small “non-essential” one, take a moment and ask yourself if what you’re buying is a “need” or a “want”.
Spending your money on what’s valuable to you is important, so don’t immediately dismiss a want as superficial. After all, life is often made richer through hobbies and experiences. Mindful spending aims to highlight what is worth the money and identify where purchases are not adding significant value to your life.
This form of active reflection could help to curb impulsive spending.
It can also help to review your budget, but it’s important to be brutally honest with yourself and note areas where you believe you spent money unnecessarily.
Be sure to regularly assess your spending by checking your bank statements, particularly for seemingly innocuous amounts. This can highlight patterns you might not have noticed and make it easier to identify when you’re spending money because you want to, not because you need to.
2. Implement a budget and stick to it
While budgeting may feel restrictive, it’s an important and powerful tool for financial control and stability.
A budget can help you allocate your income to different categories, ensuring that your essential needs are met, you’re saving for the future, and you still have room for discretionary spending.
Tools such as spreadsheets and budgeting apps can make this process straightforward, and many of them are free.
To help you stay on track, at the end of each month, take some time to review your bank statements alongside your budget. This can make it easier to see when your spending is becoming unaligned with your goals and make necessary adjustments.
3. Automate your savings and pay yourself first
This could be a very effective strategy to help you fight lifestyle creep. It means that you’re saving, or “paying yourself”, before you have a chance to spend the money elsewhere.
Set up an automatic payment that transfers a portion of your surplus income directly into a savings or investment account.
It can help to treat this as a non-negotiable expense and ensures that your savings grow alongside your income, rather than becoming an afterthought.
4. Distinguish between needs and wants
Working out the difference between needs and wants can be a personal experience. After all, a priority for one person may not be for you.
For example, if something is contributing to your happiness, personal growth, or sense of purpose, then it may be worth including in your financial plan.
Whether it’s a dream holiday, pursuing a new skill, or improving your quality of life, the “right” wants can make your day-to-day enjoyable and comfortable.
In contrast, frivolous spending, such as spending money to keep up with others rather than focusing on what you want, can eat into your disposable income and leave less room in your budget for the things that bring you genuine joy.
So, when making a purchase, try to categorise its purpose.
Prioritise your needs first and then allocate a clear portion of your budget to wants. This can help ensure that paying for your wants doesn’t encroach on your ability to live and save comfortably.
5. Embrace frugal wins to see long-term growth
Remember that mindful spending isn’t about deprivation, but rather about making appropriate choices for you and your money and eliminating non-essential expenses where possible. There are a few ways you can do this, including:
- Packing your work lunch twice a week instead of buying it every day
- Choosing to walk or cycle for shorter journeys
- Exploring free or low-cost entertainment options.
These small but frugal wins can build up over time and could free up a surprising portion of your funds for other financial goals.
While each person’s definition of “non-essential” will vary, even a modest reduction in this area of your finances could lead to greater long-term savings.
6. Seek professional financial advice for an objective perspective
When battling lifestyle creep, don’t underestimate the value of an impartial eye. Seeking support from a financial planner could help, as they can:
- Help you create a personalised budget
- Develop a comprehensive savings and investment plan
- Provide strategies for spending money on what is meaningful to you.
Financial planners can also offer an objective perspective on your spending habits and help you identify areas where lifestyle creep could be occurring. You may not even be aware that it’s happening.
We can help with this.
Get in touch and let us help you take control of your financial wellbeing.
Email enquiries@metiswealth.co.uk or call 0345 450 5670 today to find out what we can do for you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.