What is ‘lifestyle creep’ and how can I avoid it?

Your salary is hard-earned. Your pay rise well-deserved. Your friends want to do more, see more, spend more, and why not? 

When you have the means, it’s difficult to deliberately put the brakes on your spending. But if you don’t? Well, I don’t want to scare you but if you’re not careful, you may find yourself falling into the trap of ‘lifestyle creep’.

What’s lifestyle creep?

Lifestyle creep is a form of gradual increased spending. It happens as your income increases and you decide to spend more, as you earn more.

As your income increases, you have a choice. You can increase your spending and indulge in things that you couldn’t afford before and always wanted – that’s lifestyle creep – or you can channel that money towards financial objectives that are longer-term, such as buying a flat.

Some people want to ‘keep up with the Joneses’ and maintain a certain status that they see displayed by people around them. This feeds into ‘competitive consumerism,’ in which we keep spending more and more, even beyond our means, and end up in a worse situation, compared to before, when we actually earned less.

This is exactly what Starling found in their research: Almost 30% of people earning £100k haven't got enough money for essential things (such as bills and groceries). Why? Overspending in social settings. 

How does lifestyle creep happen?

When I spoke to the financial advisor Timi Merriman-Johnson, he explained that: “The more money you earn, the less each pound is worth to you as a proportion of your disposable income.

“When you earn less, you have to be a lot more careful – £10, £20, £50 will be a valuable amount in your overall disposable income. But when you earn a lot, you have more leeway to make mistakes with your money.”

This really resonated with me, especially when it comes to spending in social settings, where emotions often play a heightened role in how we choose to spend our money.

Is it lifestyle creep or is it self-sabotage?

Lifestyle creep can easily turn into overspending or even a complete financial self-sabotage if we take it too far. This is why, when I work with my clients, I try to distinguish between what may be lifestyle creep resulting from entering a world of greater expenses (one with more expensive parties, higher expectations around gifts and social pressures to buy status items) and what may be self-sabotage – financial behaviour driven by deeper, more destructive feelings. 

Admitting to self-sabotage is difficult. It often involves getting in touch with painful parts of ourselves that don’t feel deserving of good things. This low self-esteem can drive someone to overspend, gamble their money away, or even just give it away by being too generous. This is especially worrying if you end up impacting your ability to cover your own essential expenses, for example because you’re paying for every meal out with friends. That’s not being generous, that’s being self-destructive – spending to the extent that it harms yourself.

My advice for someone with self-sabotaging tendencies is to: 

• Be curious about why you are compelled to rid yourself of the money – ask yourself questions: Do you feel deserving of wealth? Do you feel ashamed of the money you have? What were you told about having money (or people who had money) when you were young? Are you afraid that people will envy you? Does someone you care about rescue you every time you end up in a financial mess – a pattern that makes you feel looked after and loved?

• Try and catch yourself in the moment when you want to overspend or gamble and simply ask: Why? What is the emotion I’m feeling that is driving this behaviour?

• Face the cost of your behaviour. How much did you spend last month? Did it tip into overspending? How much money have you given away in gifts in the past six months? Being concrete about the cost can sometimes mobilise us into changing our actions.

What can I do about overspending in social settings?

People often overspend in social settings because they don’t say ‘no’ when they receive the invitation – even when they know that saying ‘yes’ could be expensive. 

But saying ‘no’ is also saying ‘yes’ to something else. When we say ‘no’ to an event, we might be saying ‘yes’ to a better holiday or to getting closer to a deposit for a flat.

It’s important to keep that in mind, because if you only frame it as a loss, then of course it will be difficult to see your ‘no’ as a good thing. By seeing it as a ‘yes’ for something you want, you can feel pride in that process – in establishing a boundary.

Another thing to remember: being the first person that says, “Actually, I can’t really afford that restaurant,” might not only feel liberating for you, but might also feel liberating for your friends. You may find that their response is, “Me too”, and that instead of being critical of you, which might be what you feared, they’re actually grateful for your honesty (often known as loud budgeting).

How to avoid lifestyle creep

When it comes to lifestyle creep, awareness is everything. How much disposable income do you really have after your bills have been paid and you’ve factored in food shops? Can you afford to say ‘yes’ as much as you do? Have the things that used to be ‘treats’ become ‘essentials’? When you think about saying ‘no’ to an event or invitation, what are the feelings that come up? 

Whatever they are – fear, shame, anxiety, relief – reality check them. If you’re afraid of saying ‘no’ because you think people will like you less or no longer include you, step back and rationalise. Will your friends really like you less if you don’t go to every event? 

Remember: If you pair your ‘no’ with honesty, that honesty should build the relationship with whoever has invited you – not ruin it.