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Become Financially Independent Sooner: Avoid Lifestyle Creep

Here's a common story that you've probably heard before. Imagine a couple living a comfortable lifestyle. When one of them gets a huge promotion things started to change. They sold their house and move into a bigger house. They bought a cabin on a lake. They started buying more expensive cars and started sending their kids to private schools.


There is nothing wrong with any of their purchases, and their new lifestyle is well within their means. Even so, they are victims of lifestyle creep.


lifestyle creep

Income - Costs = Savings


We all have a lifestyle that we feel comfortable living. Once our incomes have risen above the level necessary to support our desired lifestyle, we don't need much more to support what we consider a good life. Anything over and above that is just luxuries. Our lifestyle has a cost, and whatever income we have over that can be saved, and savings help us reach financial independence as soon as possible.


When we increase our lifestyle, we increase our costs. Increasing our costs reduces our savings. And, reducing our savings pushes out the time it takes be become financial independent.


(Apology...sorry to get all mathy on you!)


Lifestyle Creep


Bonuses, raises, or other financial windfalls have a tendency to nudge us into a more expensive lifestyle. And as you saw with the math demonstration (sorry again...), any increase in costs reduces what could have been savings.


I can hear what you're thinking; you are thinking that even if you choose to spend more you can still save more, too. If you make $10,000 more per year and your lifestyle cost increases by $8,000, you are still saving $2,000 more than you otherwise were.


That's true! It's also not the point I'm trying to make. Lifestyle creep is exactly what was just described. The justification that "I can afford to spend more now." The point is that by succumbing to lifestyle creep prevents you from saving as much as you otherwise could have, and the upside is a lifestyle that isn't necessary - just luxuries.


Consequences of Lifestyle Creep