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Regrets, I have a few, but then again, too few to mention (record screeches to a halt). Oh yes, I’ve got more than a few regrets I can mention. Even as someone who keeps a close eye on her funds, my lifestyle has become more high-maintenance as my income has grown. So much so, that now I couldn’t ever imagine going back to the way things used to be, only a few years ago. The diva in me has expanded.
The idea of lifestyle creep is that as your income grows, so does your penchant for nicer cars, holidays, homes and wardrobes. The concept is extremely common in practice (although not often considered). Your tastes have probably refined dramatically since your broke college days, and you’d probably much rather eat at a fancy restaurant than Taco Bell, but the amount of creep you let into your life, can be detrimental. Not only does it influence your appetite for finer things and creature comforts, it also drives up your burn rate (the rate at which you burn cash) while deteriorating your capacity to save. Both of these variables have a huge impact on your perceived and actual quality of life.
I find that most people start experiencing the creep when they hit their 40’s, which is generally their highest earning years. You’ve probably also got a couple of kids at this point, so the need for a bigger house, car and vacation allowance is typical. But how much do you let these expenses increase? For example, now that you’re a family of 4, do you just 4x your budget for an annual trip to Hawaii, or do you opt for less expensive vacations like camping? Do you need a BMW X6 to drive your kids around in or would a Toyota Minivan work just as well?
I’m not trying to shame anyone here and the reality is that you’ve earned the privilege of having more choices in your 40’s than you did when you were 21, but the key is to know where creep is harmless or even good, and where it’s just derailing your efforts to live the life you want to. And let’s be honest… that typically happens when we compare ourselves with our peers (if my neighbor Joe can afford a BMW, I can too).
If I haven’t quite convinced you of how prevalent lifestyle creep is, then consider these stats about people in the US:
- 78% of people live paycheck to paycheck (and many make at or above $100K per year)
- 24% have no emergency savings (over 57 million Americans in total).
- The average household has $8,158 in credit card debt.
- The average monthly new car payment is around $479.
If this sounds like you, clearly you’re in good company, but how do people get here? By inching up their lifestyle expenditures as their salary increases. The process starts as soon as we begin bringing in an income. When you go from making $20 a week delivering papers at the age of 12 to making $9 an hour in retail at the age of 16, you can start to afford your own clothes and go to the movies, so that’s exactly what you do. When you’re out of college and in your first job, you can afford a car or an apartment without roommates, so you do that, too. By the time you’re 40, you’re earning enough to get a new car every 3 years, take at least 1 fancy vacation a year, and maybe even own a 2nd home at the lake. Creep, creep, creep….
Beware of the 40-something lifestyle creeps
There’s no scientific evidence to the following, but between my own behaviors, those of my peers, and the crazy stats I shared above, I see these things as typical creepers to be aware of:
- Business class airline tickets – there was a time in my life where I was just so happy to get away that I’d travel in the cargo hold if they’d let me. These days, if I can’t travel business class, I try not to do it at all. I know that may seem excessive to some, but having a wealth of bad travel experiences behind me, I’m at a point where if can’t go in comfort, I’d really just rather not go. This also probably has to do with the fact that I no longer live in Canada where the winters are long and hellacious, so I’m no longer desperate for warmth.
- Fancier Cars – personally, I am NOT a car snob, and if you saw the junkers I drove in college, you’d get how not snobby I am about my wheels. When I first moved to Silicon Valley, I had my car shipped from Toronto, a slightly banged up, salt-crusted (I moved here in January) Chevy Cavalier. To say that I stuck out with that car was an understatement. Before too long, I had upgraded to a 3 series BMW, just to “blend in” a little better. Now I’ve graduated to the SUV class, but I’m hell bent that my next car will go back to economy class, if only because it’s less of an insult to the environment. This is one area where I can literally stop the lifestyle creep dead in its tracks and not feel too deprived because of it. PS. In case you’re not already aware, nobody gives a shit what you drive, so hopefully, you’re not paying a premium to make an impression.
- Donations – this may not seem like a lifestyle enhancement, but it is something I’ve increased as my salary has grown. I love sending money to my favorite charities, like The Bill Foundation, Muttville and Animal Sanctuary. I do a monthly contrition and then I typically top it up at the end of the year. The feeling of contributing to something near and dear to my heart brings me a lot of joy. Zero regrets on this one.
- Housing – This is where I think a lot of adults suffer some serious creep. Sure, it’s hard to live in a 1 bdrm apartment if you’re a family of 4, but do you have to live in a McMansion with a master bedroom that’s as big as an apartment? I live in a modest 2-bedroom townhouse that costs well over a million dollars. While that may sound extravagant, it’s pretty normal for this area and it was cheaper than the rent I was paying at our last place. The Bay Area is incredibly expensive (and worth every penny). I used to balk at the prices here, but salaries are also a lot higher than anywhere else in the US, and frankly, anything under 2 million now seems like a good deal for a 50-year old standard 3 bedroom house. One thing I’ll never do while I’m living in this area making the mistake of buying too much house. There’s just too much margin for error in this area (in the millions).
Lifestyle Creeps that are mine all mine
- Yoga pants – I love me some Lululemon. I have a ton of the cheap stuff, too, but nothing beats the quality of their leggings and they make my lower extremities so happy. When you average out the cost per wear, they’re probably the least expensive item I own. So while the upfront cost of $100 a pair, is steep, it’s clearly not steep enough that I won’t pay for it.
- Fancy wine – I blame this one on my husband. Truthfully, I don’t have a good appreciation for good wine, but I no longer wince at the cost of paying for the good stuff, either. When you live a stone’s throw from Napa/Sonoma, it’s easy to acclimate to winery prices (which are generally more expensive than the brands you buy in the grocery store). The upside is that along with the higher wine cost, you also get to appreciate being in the best wine region on earth, IMHO.
- My Hair – my head is a complicated story that I won’t get into. Suffice to say, between the accouterments I need to keep it looking as full and healthy as it is, and the regular trips to the stylist for maintenance, I’m spending well over $2,000 a year on my locks.
To distract you from the judgy thoughts you’re probably entertaining right now, let me share with you, a “vase?” someone recently spent $6,500 for at a local museum auction.
I digress.
3 Ways to Avoid Lifestyle Creep
- Avoid trying fancier products and services when less expensive options can suffice. To that end, I strongly urge you NOT to try business class as you will forever hate the idea of flying in coach again. This is also the difference between buying Mac lipstick for $26 when you can get some really great drugstore brands for under $10. It’s the choice of buying your clothes from H&M or even a second-hand retailer rather than heading straight to Nordstrom or J Crew (is it just me, or is J Crew not insanely expensive).
- Take stock of the luxuries you’ve already acclimated to. This is trickier as it’s harder to deprive yourself of an experience you’ve already come to enjoy (like flying business class). But it’s important to look at everything from the car you drive to the shoes on your feet to the last place you ate dinner at. Are they excessive? More importantly, do they add to your intrinsic happiness (for me, yoga pants is a hard yes). Try to make a game out of finding less extravagant replacements to the creep you’ve already inherited.
- Every time you get a bump in salary, immediately give those extra dollars a job. From the moment you get your raise, have more money taken off your paycheck put directly into an investment account, ESPP option or even an HSA if you’re eligible. Do this before it ever shows up on your paycheck. This way, you never feel the freedom of those extra funds to pad your latest lifestyle improvement.
Overall, by staying aware of this concept you’re halfway there in terms of managing it.
Now let’s talk about your creepers. Common now, I shared mine! 🙂
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