The cost of lifestyle creep
The Cost of Lifestyle Creep
We’ve all been there. You receive a pay bump or a promotion, and for a week, you feel incredibly wealthy. But within six months, that extra money has disappeared. Your "standard" of living has simply adjusted upwards to match your new income. This is lifestyle creep.
It is a silent condition that is difficult to reverse once it starts. While it’s natural to want to enjoy the fruits of your labor, lifestyle inflation can be debilitating to long-term wealth creation.
Mindless Spending vs. Conscious Goals
Lifestyle creep isn't the same as the "cost of living." It’s the choice to swap the home brand for the premium brand, the pub meal for the bistro, or the modest car for the luxury model. These aren't bad things in isolation, but they are "mindless" when they happen without a plan.
Consider this: If you get a 5% raise and absorb it into your lifestyle, it's gone. If you invest just that 5% for 20 years, it could grow into hundreds of thousands of dollars. That is the true "technical cost" of lifestyle creep.
How to Measure and Manage It
Track Your Savings Rate: High earners often focus on what they earn, but wealth is built on what you keep. If your income goes up 10%, but your savings stay flat, your wealth is actually standing still in real terms.
The 50% Rule: For every pay rise you get, commit to saving/investing 50% of the increase and allow yourself to spend the other 50%. This way, you enjoy your success today while still respecting your future self.
Define Your Goals: If you have a clear financial goal—like paying off your Adelaide home early or reaching financial independence—it becomes much easier to say "no" to temporary luxuries.
Wealth building is a marathon, not a sprint. Managing your lifestyle creep ensures you have the stamina to reach the finish line.
Source: https://www.morningstar.com.au/personal-finance/cost-lifestyle-creep
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