Combating Lifestyle Creep

Combating Lifestyle Creep

What is Lifestyle Creep

Lifestyle creep happens when income goes up. Things that once were classified as “luxuries” become “necessities.” While this may be okay to a certain extent, it’s also important to make saving for the future a priority. Otherwise, it may derail debt reduction and retirement plans.

Examples of Lifestyle Creep

Lifestyle creep can take on many forms. The following are some common examples. Think about your own life. What else might you be able to add to this list?

  • Spending several dollars a day on coffee
  • Flying higher class fares such as premium
  • Eating out often and at higher-class places
  • Expensive clothing (and more of it) when less expensive garments would be fine
  • Paying for a housekeeper
  • Buying or renting more home than you need (or a second home)
  • Additional vehicles, a boat, or replacing a vehicle sooner than needed

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How It Impacts Near Retirees

People within five to 10 years of retirement are usually at their peak earnings, which can make lifestyle changes very tempting. But it’s also important to keep in mind how those spending habits will (or will not) be supported in their retirement years. For example, it can be tempting to purchase a luxury vehicle or second home, but it may not be a wise long-term choice.

How It Impacts Young Workers

Getting that first well-paying job is exciting! It can be tempting to spend some of the extra cash on dining out or other amenities that were once considered luxuries. Doing so, however, can make it much more challenging to pay off student debt, save for a first home, or put away enough for retirement.

The Best Solution for Lifestyle Creep

The best way to prevent lifestyle creep and ensure you’re always living within your means is to work with a financial advisor. If you don’t already have one you trust, ask for recommendations.

Still need help getting your financial documents in order? Let us know! We’re here to help.

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