Smart Money Moves to Avoid Lifestyle Creep in Uncertain Times
By Brandy Branstetter, CFP®
Being able to spend more on a better lifestyle is a natural goal for everyone. After all, it’s a prime motivator to work hard and earn a higher income. Sometimes, though, the extra “perks” that come with better income start to multiply and you wonder why your bank account isn’t fatter and you’re still struggling to meet your higher bills each month.
This silent disease of financial wellness is called “lifestyle creep” (also known as lifestyle inflation). We wrote about this phenomenon several years ago, and the issue is just as relevant today as it was then. In fact, recent statistics indicate that 62% of Americans are still living paycheck to paycheck, including 36% of those earning $200,000 or more. After a few years of economic and stock market growth, recent signs of the economy slowing and consumer confidence slipping may spell trouble for those who are flying over their lifestyle ski tips.
What Exactly Is Lifestyle Creep?
Lifestyle creep may occur when your standard of living rises with increases to your discretionary income, because you earn more or your fixed expenses (rent, mortgage, utilities, food, etc.) decrease. As your income increases or loans are paid off, there is more money for luxuries—an expensive car, a larger house, or that golf club membership you’ve coveted. Other lifestyle expenses, such as cleaning services, gourmet dinners, and overseas vacations, may also become “normal or essentials” to sustain the lifestyle to which you’re now accustomed as opposed to luxuries.
Recognizing Lifestyle Creep
Overspending your income can occur at any age, but oftentimes, lifestyle creep occurs with significant changes to income or expenses. In our previous article, we emphasized the years prior to age 40 as ripe for creeping lifestyles, since earnings growth tends to accelerate most between the ages of 30 and 40. However, though, earnings growth may slow in your late 40s on average, those who achieve substantial financial success (the top 10% earners) after 40 may be prone to lifestyle creep as well. Signs include excessive online subscriptions and streaming, lavish vacations, frequent smartphone, auto, and clothing upgrades, and maxing credit card balances.
How does this happen? Consider that by the time a wealth-growing professional reaches their 40s, they may have achieved some career success and are starting to earn elevated income. At the same time, education and business loans are well under control or paid off, and business start-up costs are a thing of the past. The professional now would like to enjoy the fruits of their labor while they’re still young and can enjoy the spoils. This often occurs with doctors, attorneys and entrepreneurs.
There are also several influences with this age bracket that may drive them toward lifestyle creep, including:
Social media: Pressure to keep up with the lifestyles of peers and media influencers that may drive overspending
Delayed life events: A tendency to defer raising families or buying homes, allowing for free, under-disciplined spending on lifestyle
Past sociological influences: The financial collapse of 2008 and COVID-19 pandemic play a significant role in this generation’s tendency to “live for today.”
Credit card and digital banking: The tendency to overspend is amplified when transactions occur at the click of a mouse or the impulse of a finger.
As a result, 40-year-olds may develop an obsession with being (or appearing) rich and experience a version of “money dysmorphia” or a distorted view of their finances that differs from reality, causing them to make poor financial decisions.
A Balancing Act to Avoid Lifestyle Creep
Upgrading your lifestyle is not a bad thing, but doing so without carefully considering how extra spending impacts your future can lead to trouble. In other words, improving your lifestyle may only be a problem when your “wants” get mixed up with your “needs” and those new “needs” grow faster than your income.
Depriving yourself is not the solution either. Too much saving can limit the joys of living. After all, no one knows what tomorrow will bring, and allowing some indulgences and splurging (mindfully) is important to a sense of a life well lived. The key is striking a healthy balance living well today and saving responsibility for tomorrow.
Steps to Take to Stay on Track
Maximize retirement contributions: Use lower-expense or higher-income occasions to increase your retirement savings contributions. Payroll deferral is an effective “gatekeeper” to maintain your savings discipline and your progress toward nest-egg goals.
College savings plans: With higher income, set up monthly auto contributions to 529 college investment accounts from your checking account. Regular contributions can help build these accounts and take advantage of market fluctuations.
Establish a financial baseline: Take a look at your spending from a few years ago. Identify what was and now are the essentials, the nice-to-haves, and the non-essentials. Then take a look at what the actual “wants” and “needs” are. From there, you can determine what spending choices will and won’t affect your overall objectives and cut the fat from your budget.
Pay down consumer debt: Lower credit card interest rates are gone and rates have soared over the past two years, likely exceeding whatever returns you might get in the financial markets. The same goes for student loans or auto loans. Pay these down first before splurging on new purchases or increasing 401(k) deferrals.
Future Opportunity Fund: If you are spending because you are maxing out your 401(k), the kids’ 529s are in good shape, and you don’t have any other immediate goals, we recommend you contribute to a Future Opportunity Fund. This is a brokerage account you can build for use at some point a few years away toward a goal that is important at that time.
Boost your emergency fund and trim unnecessary expenses: Even with ample room on your Visa card, having cash on hand for inevitable emergencies is smart financial management. And do you really need all of the streaming services on your big-screen home monitor? Reassess what’s really needed to enjoy your life and cut down on the not-so-necessary.
Partner With Us to Guide You Toward Financial Freedom
At Beyond Wealth, we focus on the most efficient strategies to help you realize your objectives and life aspirations. Our independent advisory firm offers an array of services—focused on our clients—to help pursue a confident financial future.
Our goal is aligned with yours: Connect your wealth to your life’s objectives and empower you to choose and follow the financial road that feels right for you and your family.
Are you entering your 40s and ready to take charge of your financial future? Give us a call (913) 871-7980 or email brandy@beyond-wealth.com to schedule an introductory meeting and start this year on a better financial path toward your own vision.
About Brandy
Brandy Branstetter, CFP® is Principal & Wealth Advisor at Beyond Wealth, a fiduciary financial advisory firm based in Overland Park, Kansas. Beyond Wealth is dedicated to empowering clients to make confident and meaningful financial decisions. Specializing in helping mid-career professionals and business owners navigate their work-optional lifestyle, the firm provides personalized comprehensive wealth management services to the Kansas City metro area and beyond.
Brandy’s approach is collaborative and values-driven, helping clients pursue financial independence while aligning their plans with their unique goals and aspirations. She began her financial career in 2005 and became an advisor in 2012. Throughout her journey, she noticed a disconnect in how many firms communicated with female clients, inspiring her to establish a practice focused on genuinely engaging and supporting women in their financial journeys. In 2012, she co-founded Beyond Wealth with a mission to provide clients—especially female professionals and entrepreneurs—the guidance needed to navigate their financial complexities. Together with her business partner, Andrew, Brandy developed the “Good, Better, Best” financial planning framework to deliver tailored strategies that help clients achieve meaningful progress towards their financial aspirations.
Brandy earned a BSBA in Finance from the University of Tulsa and holds the CERTIFIED FINANCIAL PLANNER® designation. Outside of work, she enjoys spending time with her husband, Jon, and their two children, Alexa and Ethan. In their downtime, they love golfing, exploring new vacation spots, and attending live events—everything from rock concerts to Broadway musicals. A dedicated sports enthusiast, Brandy especially enjoys watching Oklahoma Sooner football and cheering on the Kansas City Chiefs. With a lifelong dream of living by the beach, she’s always planning her family’s next big adventure. To learn more about Brandy, connect with her on LinkedIn.