Getting Lifestyle Creep Under Control

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Have you ever wondered why you are still short at the end of the month, in spite of that raise or promotion at work?  You may be suffering from lifestyle creep – that silent condition that instantly devours any disposable income you think you have.

Moving up in the world is commendable.  You start out in adult life with less – less than you were used to at your parent’s house, less income than you expected to have and bigger expenses.  Over the years, though, you notch yourself up on the pay-scale, perhaps celebrating with a new car, or more amenities.  After all, you deserve that for working hard and making good, right?

Yet, contrary to expectations, you are not meeting your goals towards saving up for the down payment on that dream home, trip-of-a-lifetime, or college expenses for your kids.  That’s lifestyle creep.

Once you realize this might be the case, here are some suggestions for dealing with it.

 

Identify where the creep is occurring.

Make a list of all expenses.

First, look through and list last year’s expenses – checks written, withdrawals (including debits), things bought with cash, credit card bills, interest and payments on all loans.  Include it all – utilities, subscriptions, rentals, trips, medical, dental, insurance, gifting, everything.

This is no fun and will take awhile, but it is absolutely essential to being able to see where the creep happens so you can deal with it.

Next, make a list of future goals and what you now do towards them.  How much do you contribute to savings for retirement, for college expenses, for that new car or house or other big purchase?

Analyze the information you gathered.

Categorize your expenses.  Note, if you are working from a budget, you probably already have them categorized.  If not, this categorization could be the foundation for a budget.  (I  know, the B-word elicits horror and anxiety, but budgets of some sort are desirable).

Then evaluate whether you need each of the things causing the expense.  If so, think through how you might be able to (relatively painlessly) reduce that expense.

Do you use multiple TV/Movies subscription services (for example Netflix AND cable TV AND HULU AND Amazon Prime)?  Do you really need all of them?  Which do you use most often?

Finally, review how you got started with those expenses, was it conscious or spontaneous?  Knowing this will give you insight into how to better control future lifestyle creep.

Take action.

You spent all that time listing your expenses, then evaluating them, now is the time to decide what to act on.  Look for things that will give you the most savings with the least disruption to your lifestyle.

Sometimes, that may even mean spending a bit more money.  For example, if you have determined that your heating or cooling bills are too expensive, you may decide to buy a programmable thermostat to automate setting temperatures in the house up or down when you are not there.

With other items, you may decide to try to alter your (and your family’s) habits.  One example might be to institute a cooling-off period prior to buying anything with disposable income.  For instance, if you are wanting that new TV, forcing you to wait until they go on sale can a) make you realize you don’t really want or need it all that much or b) give you time to do more research as to what kind you want and the best place to get it or c) help the kids learn delayed gratification or d) let you save up for it instead of putting it on the credit card and paying high-interest rates until you pay it off.

Once you’ve trimmed off the fat on your expenses, use that fat to go towards your goals. Set up auto options to take part of your paycheck and put it to work in a savings account or investment.

Then, start doing a better job of tracking expenses as you go.  I know that when I charge something on your card it is harder for me to remember that it is there than it is when I write a check.  Likewise, when I get a bunch of cash out and spend it, it is difficult to remember exactly where that money went.  Set up a system that works for you and your family so that all know where the money is going.

Plan to avoid future lifestyle creep.

This plan should include methods to alter habits creating needless expenses: techniques to contain spontaneous purchases and a schedule to review your lifestyle creep situation at least once a year or so.

The plan could specify dates to review and negotiate ongoing bill creep (like those ever increasing cable TV bills).

It could include time once every couple of years to go through the entire above process again, or to do so whenever the family income increases.

It could even extend to taking that ‘B’ word seriously and create and stick to a budget.

How about you all? How have you handled lifestyle creep?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/ian-arlett/34233379390/sizes/l

The Dangers of Lifestyle Inflation

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The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.

Have you ever wondered why, no matter what you manage to accomplish financially, you can never seem to “get ahead”?



You could get a raise, pay down a debt, receive a sudden windfall, but it never seems to make a difference in the grand scheme of things. No matter how much better off you are than you were a few years ago, it never feels like you’re better off. You keep finding yourself waiting for that hazy time in the future when you finally feel like you’ve “made it.”



Well, I’ve got some unfortunate news for you: you’re never going to “make it,” at least not as long as you define “making it” as reaching some perfect point when you have more—more money, more luxury, more stuff that will finally make you perfectly satisfied.



Because it’s that “more” mentality that will keep you from ever reaching that point. It’s a mentality leads to a phenomenon known as lifestyle inflation, and many of your friends and neighbors have succumbed to it.



Have you?



Forget Keeping Up with the Joneses

Lifestyle inflation is more like keeping up with yourself—with the idea in your head of a future self who will be wealthier, savvier, cooler, than the you of today is. You always feel like there’s more out there, and you know that if you can just get it, then you’ll be happy. So as soon as you find yourself with a little extra money in hand, you’re off like a shot chasing that goal.



The thing is, like the proverbial carrot on a string, that goal will always be one step ahead of you. Because no matter how much your standard of living improves, it can always be better. And constantly using all your resources to chase that never-ending goal will only make you less happy in the long run.



When you were in college, scraping by on Raman noodles and stale cafeteria coffee, getting together a few extra bucks to see a concert feels like a real treat, even if you have to cram into a junker car with six of your friends to get there. Then you become a member of the full-time working class, and suddenly a shoestring concert seems like nothing. Now you can afford concerts, concert merchandise, occasional road trips to out-of-town concerts, etc…You’re bringing in real money now, and you can start living a little. So you do.



Except the thrill of a snazzier concert experience fades after a while, and then you’re left envying your friends who are starting to go on week long vacations to sandy, sun-dipped locales. Some day, you think, when I get that promotion, I’m booking my own Caribbean vacation! And why not? You’ll have worked hard to get to that point, so why shouldn’t you enjoy the fruits of your labor?



The problem is that, as your standard of living increases with each pay increase, your sense of enjoyment fails to increase along with it. You might feel momentarily happier as you adjust to your new, cushier lifestyle, but it won’t last. New things and new experiences get tired quickly, and eventually you’re back to barely getting the bills paid, staring at your sad savings account, and wondering how anyone ever manages to put aside for retirement.



Because that’s the other problem with lifestyle inflation: not only does it ultimately fail to make you happy; it also keeps you from ever reaching a place of financial security and freedom. Because when every spare dollar is being put towards chasing that end of the rainbow, none of it is being put aside for the future.




What’s a Dreamer to Do?

The temptation to live larger as your paycheck grows is only natural. Our culture is saturated with images of celebrities and strangers on TV commercials living the high life and loving the heck out of it, so we can’t help but feel like if we can only get to where they are, we’ll be truly happy, too.



But if you really want to achieve happiness with your money, the secret is in finding a sense of balance.



By all means, enjoy an extra dinner out or take that sunny vacation if you can afford it now. You have worked hard for your money, and you certainly deserve to enjoy it. But at the same time, make sure you’re also putting aside a healthy amount towards an emergency fund, your kids’ education, and whatever other savings goals you have.



By using your money smartly, you can still enjoy the occasional live-it-up splurge without sacrificing your future financial happiness and security. Plus, if you treat yourself strategically instead of maxing out your lifestyle every time you get a raise, those treats are more likely to leave you feeling satisfied, pampered, and truly “rich.”



How about you all? Have you been tempted by lifestyle inflation? 

How have you dealt with it?


Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/94328679@N03/8585451509/