*Disclosure: This page may contain affiliate links. We receive a small commission if you purchase something we recommend (at no cost to you). All opinions remain our own.

What is lifestyle creep, and how can you avoid it?!?

Lifestyle creep is increasing your spending or standard of living whenever your income increases. It can happen after a new job or a pay increase. And since it’s subtle, you might not notice the change.

But it’s important to recognize (and avoid) this because lifestyle creep keeps a lot of people living paycheck to paycheck. Here’s what you can do…

1. Increase your investments

The main issue with lifestyle creep is that people spend more on unnecessary things, or things that don’t add any real value to their life. They essentially accumulate stuff…just because they can.

However, instead of upgrading your lifestyle – upgrade your investments or invest in yourself. In other words, increase your retirement contribution or opening a retirement account (if you haven’t yet). You can even start a side hustle or take a class or workshop.

2. Pretend a raise “didn’t” happen

If your old income meets your needs, you can also avoid lifestyle creep by pretending a raise didn’t happen and keeping your spending and expenses the same.

And yes, this is challenging. So it might help “not” to keep extra money in your checking account. Instead, split your direct deposits. Keep only what you need for expenses in checking, and send the extra money to savings.

Or set up automatic transfers so that money automatically moves from your checking to savings on certain days.

3. Set money goals

Goals can provide direction and keep you focused. They also help you take control of your money.

Some people won’t save “just because.” They need a reason to save, and without one, there’s nothing stopping them from overspending.

So if your income increases, sit down and come up with a plan for funds – whether it’s building an emergency fund, a sinking funds, or a college fund. It doesn’t matter, put extra money toward something.

4. Don’t make quick money decisions

Depending on your circumstances earning more can be a godsend. If your family legitimately needs more space, better accommodations, or reliable transportation, by all means use the extra money to take care of these needs. And to be clear, this is not lifestyle creep.

Lifestyle creep is having a car or house that’s perfectly fine and suitable, and then upgrading for the sake of upgrading. So before jumping into a big purchase, count the cost and consider the financial repercussions of the decision. 

Increasing one’s income is often a much-needed opportunity to get ahead, but this won’t happen when new expenses eat at the money.

5. Pay credit cards in full *every month*

Some people don’t recognize lifestyle creep because they’re using a credit card. Actual cash isn’t leaving their hand or bank account, so they don’t always notice extra spending.

However, one clue that you “might” be a victim of lifestyle creep is using a credit card without any type of boundaries, and then carrying a balance from month to month.

To keep spending in check, set a reasonable limit each month, and then pay off your balances in full every single month.

6. Don’t buy what you can rent

Sometimes, people use extra income to buy a few fun toys – boats, jet skis, kayaks, or maybe an RV.

Before spending money on these items, seriously consider how often you’re likely to use them – and don’t forget to count the costs. Along with the payment you’re also responsible for maintenance and storage of these items, which can take a chunk of your extra money. It might be more economical to rent these.

7. Be an intentional spender

This involves being more mindful with regard to how you spend your dollars. Some people spend on auto pilot, especially with lower cost items. They see something they like, and they buy it without giving the purchase much thought. 

The idea behind intentional spending is pinpointing what makes you the happiest, and then planning your buys around this. This helps you distinguish between needs and wants, so that you spend less on things that don’t matter.

8. Don’t ditch your budget

When some people earn more, their budget is sometimes the first thing to go out the window.

There’s a misconception that budgets are for people who don’t have a lot of money. But that is not true – everyone needs a budget or spending plan. The same way a person without a lot of money can overspend, a person with money can overspend too. In fact, no budget is a classic recipe for lifestyle creep.

So regardless of whether you make $30,000 a year or $80,000 a year, create a plan to control spending.

9. Give yourself a fun/splurge budget

It doesn’t have to be all work and no play. One benefit of earning more is the ability to enjoy experiences and satisfy desires. So splurging is okay. But again, the key is to be mindful or deliberate.

If you didn’t have much money before, naturally you’re ready to try new things. Moderation is important, though. I recently read that an okay amount to spend on fun is about 5% to 10% of your after-tax income. If you set a personal limit and stick to this number, you should be okay.