Are you familiar with the concept of ‘lifestyle creep?’.
It sounds pretty ominous doesn’t it? 😱 (we are nearing Halloween after all…)
If not, then perhaps the phrase ‘keeping up with Joneses’ will resonate with you more.
I’m talking here about the human tendency that as we advance through life and typically tend to make more money, we tend to resultantly… spend more money.
And as a result, you’re never really much better off, despite the fact that on paper you should be.
That annual salary increase? ➡️ Upgrading from a 4⭐️ to a 5⭐️ hotel on this year’s family holiday, when last year’s hotel was perfectly fine.
Christmas bonus? ➡️ Straight into the bank of treat-myself-to-a-new-watch-this-festive-period.
Mortgage cleared? ➡️ Hey-hey, we’re suddenly £745 a month better off. Time to swap the relic-mobile 🚗 for a BMW.
The list goes on.
And we’re all guilty of it.
It can be exceptionally hard to instil the discipline that when your financial situation improves you should care less about what The Joneses are splashing their cash on and instead park your sudden flushness in longer term investment vehicles.
Let’s be honest, who thinks about pensions when you’ve suddenly got an extra £4,000 bonus in your December payslip 🕺?!
There are Christmas sales to be had after all…
But ask yourself this.
Is this short term enjoyment truly worth the cost of my long term financial security, freedom and flexibility?
As with all things when it comes to your personal finances, making small changes today can materialise into significant changes in the long-term.
What if you instead used your sudden increased utility to plan a 6 month sabbatical from work before the children fly the nest and you’re no longer cool enough to take on holiday?
What if it meant the difference between affordability to cut your working hours down to part time?
What if instead of splashing out on material things that are doused in buyer’s remorse and inevitably soon go out fashion you started focusing more on making your increased cash position truly work to your advantage.
So what’s getting in the way?
The concept is termed ‘lifestyle creep’.
And it’s a behaviour we’ll all recognise in ourselves.
You used to be on a salary of £48,000 and despite now being on £58,000 you find you’ve no extra income left over each month.
You continue to live from payslip to payslip with no net improvement being made to either your short term financial independence or your long-term planning.
It truly is a lose-lose.
Okay so you’ve worked hard for that promotion at work and you rightly deserve some reward.
Of course you do.
I’m not saying you should park your entire bonus in your pension, no matter how sensible that may be. We’re all irrational human beings, give us a break!
What I’m advocating for is a little bit more balance than you’re perhaps used to.
And that you leverage your sudden cash utility in a sensible and disciplined way.
That’s what good financial planning is all about.
Helping you to enjoy life today (guilt free), safe in the comfort and peace of mind that you’re securing flexibility and opportunity in the longer term.
So the question is… how guilty are you of lifestyle creep?
Here are the classic tell-tale signs.
1️⃣ A sudden increase in regular spending patterns. Take a look at your regular outgoing and identify some of the recent changes you’ve made. A new gym membership, more frequent trips to your favourite neighbourhood cafe… the signs will be there.
2️⃣ Your savings & investments are stagnant. If you landed a big new role at work with the intention of saving for a house down payment, but don’t see your savings rising, that’s a sure sign of lifestyle creep having kicked in. Similarly, if you’re withdrawing money from your savings account to pay off monthly bills, that’s equally a red flag to reassess and control your spending habits.
3️⃣ You’re increasingly eager for ‘pay-day’ to arrive. Despite earning more and being the most financially comfortable you’ve ever been, you’re desperate to reach the end of the month to let the inflated spending patterns recommence.
So now you’re aware of the creep, the key is to do something about it.
Ask yourself what you truly value in life.
Is it a flashier car, a designer suit or a handbag without a price tag?
Or is it using your new found affluence to truly change you and your family’s futures?
I’m lucky to work in a profession that can really help with that cause.
So stop keeping up with The Joneses.
In my experience they aren’t that happy.
And they’re not flush either.
Behind the facade of wealth lie indebted store cards, cars on finance and precisely… zilch in long term savings and investments.
That’s certainly not something I would idolise. Not sure about you.
Want to learn more about this? Here’s a link to episode 17 of my podcast.
Wishing you all a happy (& creepy) Halloween 🎃