Lifestyle Creep: 5 Ways to Avoid Sabotaging Your Budgeting Goals

If you have read our last article discussing the different budgeting methods to help you jump start your investing journey, then you might find yourself in a predicament: it turns out that it might just be too difficult for you to commit to any type of budgeting. You might feel discouraged, but failing the first few times does not mean that you should give up altogether. Instead, consider reading this article further to understand what are the different budgeting tips that can assist you and your budgeting endeavours. Instead, consider reading this article to learn more about one of the main reasons why your budgeting has failed: lifestyle creep.

What is lifestyle creep?

Why is it difficult for some people to adhere to a budget? It might be due to a phenomenon called: ‘lifestyle creep’. Lifestyle creep refers to increased discretionary consumption (non-essential expenses) as the standard of living improves. For example: if you have recently received a pay raise and decided that you ‘needed’ to upgrade your lifestyle: getting a better car, better phone or electronic gadgets, buying branded goods etc. for the purpose of showing off your wealth to others, then you are being influenced by lifestyle creep.

Being influenced by lifestyle creep will definitely delay or even extinguish your goal of investing, because lifestyle creep is all about showing off to others regardless of whether or not you actually have the means to sustain a high level of living. Oftentimes, people who chase after material wealth tend to be hundreds and thousands Ringgit in debt, and are not actually as rich as they seem to be.

How to detect lifestyle creep?

You might think that it is impossible for you to be affected by lifestyle creep. However, the human brain is easily influenced by the advertisements that you see and the social media posts of people with glamorous lifestyles. Learn the signs before it creeps up on you.

Tip #1: There’s always a cheaper alternative

There’s always a cheaper alternative to all types of products available on the market. Few examples come to mind: electronic gadgets like a smart watch, laptop or a new phone. Newly-released gadgets will always be better, faster and has better functionalities than the one that you currently own. However, don’t be quick to join the hype. Think about this buying decision thoroughly. Do you really need a replacement? Does your lifestyle or work require the use of more electronic gadgets? If not, then there’s no need to buy into the hype of new electronics, just be more content with what you already have.

Another example would be name brand sports clothing and shoes. Name brand products tend to be much more expensive because you are paying for the branding on the clothing or shoes. Do try to find cheaper alternatives with similar quality instead, you will be surprised to find that certain clothing doesn’t have too much of a difference between name brand and store brand products.

There are more examples, such as toiletries, home cleaning supplies, kitchen appliances and so on. Seek alternatives to the products that you use regularly and you are on your way to reduce your expenses.

Tip #2: Avoid social media

Social media may be affecting your lifestyle and your perception of wealth. Have you ever noticed the number of advertisements that you see on these platforms? Social media is a great marketing tool for businesses to reach their audiences through marketing analytics. At the same time, there are also less obvious forms of marketing, that take the form of influencers whom many admire, selling products through promotions and collaborations with businesses.

Among all the people flaunting themselves and their wealth, and businesses trying to sell you products that you don’t really need, social media is becoming less of a place to connect with friends and family.

Rather, social media is where we are most prone to falling for lifestyle creep, as we are constantly shown things that we are envious of: nice cars, brand name products (shoes, bags, cosmetics etc.), and especially the lifestyles of influencers who seem to always have something exciting to do (shopping, going on trips, meeting people etc.). Just seeing these posts will make anyone feel miserable about their plain, boring life, and how we might end up buying unnecessary things to make us feel better or feel closer to the lifestyle of these influencers.

If you can’t completely avoid social media, then it will be best if you conduct a big clean up of your social media contacts and follows, and use the platform to only keep in touch with the people you cherish.

Tip #3: Reduce Credit Card Spending

If you have a credit card, then you need to keep a close eye on how you spend your credit. Owning a credit card can make you easily influenced by lifestyle creep because it gives you access to money that you do not own. This can be advantageous if you need to make big purchases but don’t have the required amount of money at the time. However, make sure to only spend what you can afford, and make sure to pay it back in full every month to avoid high interest, which may put you into debt if you’re not careful.

If you already have credit card debt and you are being overwhelmed with how much it accumulates each month, then it is imperative that you get out and avoid the lifestyle creep. Keep watch on your behaviour and avoid all possible influences: social media, shopping apps, and avoid going to the mall without a shopping list.

Make sure to pay off all your credit card debt first, because its high interest rate will ruin all forms of budgeting and savings attempts.

Tip #4: Improve financial literacy

A low level of financial literacy is one of the reasons why you might be more prone to lifestyle creep. The whole concept of a lifestyle creep is to project a higher level of living that you can actually afford to others. A low level of financial literacy can be the reason why a person is easily influenced by material wealth seen on social media. Lifestyle creep can be avoided if you understand the concepts of inflation, the depreciation of assets, branding and marketing tactics etc.

Inflation means that the value of money diminishes over time, which is why investing is crucial to avoid this and grow the value of your money. Hence, spending money on status symbols rather than based on function is counter-intuitive to a person with high financial literacy. Assets depreciate in value as soon as it is bought, cars are particularly prone to a high rate of depreciation. Other things with resale value include brand name bags, watches, shoes etc. can only be sold at a lower rate once it is used. It is a lose-lose situation to not only buy something non-essential, but to do so when an item is out of your means and willingly go into debt to purchase the item.

Understand the branding and marketing tactics of status symbols and brand name products. The high price tags are only justified by the brand name, and do not necessarily reflect the value of the product itself. Status symbols exude a sense of exclusivity, and signals wealth and a high standard of living. However, the actual material and manufacturing costs of these products tend to be significantly less compared to its selling price and perceived value.

However, this doesn’t mean that you should avoid all brand name items, but to actually evaluate the quality against its selling price to determine whether or not the purchase is worth it.

Tip #5: Impulse Control

Remember the last time impulsive buying was actually beneficial? Me neither. Impulsive buying renders all the time and effort spent on creating a budget completely useless. How can you adhere to a budget if you jump at every sale and discounts? Think about all the clothing, shoes, electronics etc. that you have bought in the past for ‘special occasions’ but never came around to using. Perhaps it was only used once or twice before being abandoned in a corner of your house.

Control your buying impulses when you see an extremely discounted item, if you never would have considered buying the item at full price. Don’t think about buying something just because it was on sale. Despite how much of a steal you think that item is, it is still a waste of money if you don’t have a use for it. Think about how much clutter you would have at home, and how much upkeep does the item need (wiping, cleaning, storage), while not even using the thing, but at the same time, you just can’t bring yourself to get rid of it because of how cheap it was.

Here’s how you can combat impulsive buying: whenever you are tempted to buy something on sale, think about how much the upkeep will cost you. If you live in a small living space, clutter will definitely be a stressful problem to tackle. Having too many things also means that you won’t be able to properly take care of all of your belongings. For example: routine cleaning will take a longer time as you will have to move things around to clean the nook and crannies of your house. There’s also a lot of dust to clean off the surfaces of all your belongings, and that would get frustrating as more time is wasted on time-consuming chores.

Conclusion:

Anyone can be susceptible to lifestyle creep, especially those with lower financial literacy and poor impulse control. Think of lifestyle creep as a hole in a bucket. No matter how much you fill it up, the bucket will never be filled. This analogy is precisely how lifestyle creep will sabotage your financial goals if you let it take over your life. Keep in mind that changes will happen slowly over time as you make continuous effort to avoid lifestyle creep. Be patient and follow through with your budget with self-discipline you will surely be successful in your budgeting endeavours.

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