It’s one of the most common answers given by millionaires as to how they achieved success – they avoided lifestyle creep. So what actually is lifestyle creep? According to investopedia.com:
A situation where people’s lifestyle or standard of living improves as their discretionary income rises either through an increase in income or decrease in costs. As lifestyle creep occurs, and more money is spent on lifestyle, former luxuries are now considered necessities.
I know I’m guilty – especially going out to eat. When I was in college, Taco Bell was a staple; $.29, $.39, $.49 cent tacos. I could eat lunch for under $2 – and that usually involved 4 or 5 tacos. Dinner was frequently pizza. My two roommates and I would split a large pizza that only cost $5 – split 3 ways that was a pretty good deal – even though the pizza wasn’t really that good – more like marina sauce on cardboard – but hey, I was on a college budget. . . Fast-forward to today – I spend over $500 per month going out to eat. I lost the college lifestyle and my budget conscious mindset – guess I thought I deserved to go out to nicer restaurants. . . (wrong!)
I’ve driven 2 Honda Civics (total of 13 years combined) in the past, but today I drive a much nicer Chevy Impala. If I had chosen to live my college lifestyle even after I started my career, I would have been able to save more and accelerate my financial independence – this is one of the secrets that millionaires have figured out. It takes a tremendous amount of self-control to delay gratification and keep driving that “old” car for a few more years, but the benefits to your savings are tremendous.
Let’s say your first job out of college paid a $30,000 salary and you learned to live on that salary. When you get your first raise – try to bank your raise and maintain your current standard of living. Over time you will realize you have the ability to save a significant percentage of your salary.
This will necessarily mean holding on to your stuff longer: clothes, cars, smart-phones, houses – you name it – hang onto it as long as you can and keep your expenses low. It’s the secret sauce to getting ahead. It means you will want to research and buy quality items that will last – the cheapest clothes aren’t necessarily the best value – in fact they usually are not.
I think cars and houses are the heavy hitters that will really move the needle, so choose wisely when purchasing both – I recommend a solid used car that you can keep for at least 5 – preferably 10 years. I recommend buying an existing home close to your job – I also recommend you get a 15 year mortgage and aim for a house that costs no more than twice your salary. If you make a $75,000 salary, look for a house that costs no more than $150,000. I know this won’t be easy, but you will thank yourself later . . .
If you can save 20% of your salary (without going into debt), and live on the rest, then you are fast on your way to financial success.
I want to add one more topic to this post – vacations – this is the time of year to get away for a week or two. Just check Facebook and I’m sure you will see some amazing pictures of places your friends have gone this summer. Don’t compare your vacation to your social-media feed. That unhealthy comparison is a competition you can’t win. Don’t compare your life to their social media avatar. What you may not realize is the credit card that was maxed out for that two week stay in Saint Thomas. You only live once – don’t spend the next 10 years paying off a credit card balance. I strongly recommend that you save up and pay cash for your next vacation. And read Rachel’s book Love Your Life Not Theirs
3 thoughts on “Lifestyle creep”
Great advice Jimmy. It is easy to fall prey to lifestyle creep and definitely takes self discipline to spend within your means and save.
Thanks for the comment – I think the post really helps me stay focused on spending within my means because lifestyle creep can be subtle but over time can certainly be an obstacle to financial independence. If you have ideas about topics I should post about, please send me an email at firstname.lastname@example.org
Pingback: Do you ever get tired? | Jimmysmoneytips