What is Lifestyle Creep and How to Avoid Falling into it's Trap

Lifestyle Creep, otherwise known as Lifestyle Inflation, can quickly lead to a sea of troubles, but what the heck is it?

I have experienced lifestyle creep first hand. When I started working I was earning £600pcm and had no expenses as I was living at home (nice!) so that £600 was all mine.. and believe me, I spent it.. and I spent it fast! Fast forward to 2016, I'm earning £1,200pcm, enjoying nights out, the occasional takeaway and getting used to life in London. That £600 I used to have all to myself? Now was my rent alone (for a tiny single bedroom in Elephant and Castle). Cut to 2019, I'm earning £850 a week. I eat out almost every day, take taxis everywhere, and buy whatever the heck I want. And still putting end of the month groceries on my credit card. In a never ending cycle of paying it off and maxing it out again.

Lifestyle creep is how, although I was earning a hell of a lot more, I was still in a debt cycle. I believed that my salary was my lifestyle. Now that I was earning 'that lifestyle' I was living that lifestyle. I still even managed to convince myself I was savvy by booking my weekly train in standard class, using ticket splitter..

Simply put, I could have survived on my £1,200 wage nicely, and afford to live in Central(ish) London. I could afford nights out (as I rarely paid for drinks.. girls, make sure the bartenders are your friends!), I took the odd taxi after a late night, and when I felt lazy I ordered takeaway. What happened is when I earned more money, I believed that I had to spend that money. It's how you show everyone around you that you're doing well. Look mum and dad, I can afford to take taxis everywhere and never cook! Were they proud? Coming from a council estate background, yes! But did I amount any savings or any form of financial stability? Nope. So when I took a massive £26,000 pay cut (you can read more about this decision here, and how it affected my finances here), I had to learn hard and fast how to live on a smaller wage again.

This is what I should have done.

When I took my new freelance contract and saw how much I would be making, I should have created a plan. Yes, I should have celebrated and enjoyed myself a few times, but then go back to my normal way of living and save the excess. There was no reason my expenses should have exceeded my wage, yet they did, every week. It's true, my expenses went up as I was now travelling for a living instead of being in one location. This meant added travel and rent costs (as I a paid rent for my London address and weekly accommodation), and the occasional eating out was necessary as cooking is not easy in hotels! (This is why the pay was so high, to cover these expenses) but had I had a budget in place, I would have been able to save, pay off debt, and have fun.

It's strange, not once did I question why I never had money. I wondered why my friends on the job where able to save for their second property and a even start building a house in France, but I just assumed it was because they earned more than me (and they did, but not by that much!). I was always taught that having more money meant spending more money. It's why rich people have nice cars and big houses. Now I know that most of those people use credit and financing methods to have those shiny things, and the truly rich people drive 5 year old cars, live in their first house and don't owe anything to anyone.

If you find yourself getting a pay increase, or come into some unexpected cash, do this:

Make a plan.

There's a strong possibility your expenses don't need to increase, so keep living your life as you were. Buy a little something to reward yourself for your hard work, and save or invest the rest. Let's build wealth, not spend it.

Struggle to manage your money? You may find The Financial Workbook useful. It teaches you the basics of personal finance with some nifty tips and tricks, as well as worksheets so you're able to apply the knowledge to your own finance! Click here to find out more.


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