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How to avoid the slippery slope of lifestyle creep

How to avoid the slippery slope of lifestyle creep

Whether you’ve heard the terminology lifestyle creep or not, you have at some point probably experienced it.

Clients sometimes tell us that they didn’t feel in control of their finances or that they are struggling to repay debt or build savings, but how do you know when to ask for help?

With the rising cost of living, the rate of inflation and many other factors being as prominent as ever, you may be making more of a conscious effort to avoid unnecessary spending. The term lifestyle creep has recently made the media, but what is it?

Yorkshire Financial Planning’s Caroline Allen explains and shares her tips on how to spot lifestyle creep so you can aim to avoid it.

Signs of lifestyle creep

When an individual comes to us for help, our first action is to ask them to complete a budget planner so it’s clear what their income is spent on. My experience is that most budget planners show that savings should indeed be building up. That there is ‘disposable income’ in theory. The reality, however, is that this ‘disposable income’ isn’t really there.

It’s disappearing. But disappearing on what and this is exactly, where ‘lifestyle creep’ comes to the fore.

What is lifestyle creep?

Lifestyle creep is the change in mindset and behaviour which makes you believe that what once were luxury items are now actually necessities. It’s the process of improving your lifestyle as your income increases, so in turn, you’re spending that pay rise instead of putting it towards your longer-term goals.

Personally, I believe that lifestyle creep is a slippery slope. Let’s take cosmetics as an example. I spent my teenage years buying Rimmel and Collection 2000 (yes that shows my age) then when I started working, this progressed to Max Factor, before slowly changing to Clinique and Mac.

Nowadays I wouldn’t bat an eyelid on the price of a Charlotte Tilbury or Victoria Beckham item.

And that’s just makeup. I’ve had the same experience with clothes, shoes, handbags, and skin care to name just a few. Household items have followed the same path. As much as I love my Smeg kettle it boils water just as well as my previous Morphy Richards.

How I took back control

A turn of events meant that I had decided to take redundancy and set up my own business, which looking back was perhaps the point at which I recognised the scale of my ‘lifestyle creep’.  I was suddenly in a position where I didn’t have a guaranteed income and I needed to not only be conscious of my spending but also stick to a budget.

Though my husband (picture tight Yorkshire man) would tell you he was well aware of my lifestyle creep, and that it’s the reason why he complains about how many deliveries I receive, I still argued my case of course!

So, how to avoid lifestyle creep. Changes. That’s what I needed to, make some changes. Small adjustments that add up to big savings, one step at a time. First it was the supermarket shop. No more trotting round and throwing in whatever I fancied. Nope, I meal planned and went with a set list. Not only saving me money but also cutting down on food waste.

Next up was setting a budget for luxury items. If I genuinely needed to replace face cream that was fine but no more 3 for twos on products that sit in a drawer and never get used.

This approach didn’t stop me from wanting to clothes shop, I mean a bit of online browsing never hurt anyone. Or did it? The temptation and the feeling of “oh I like that” doesn’t go away just because you set a budget. This required a change of mindset and the question I had to ask was, “do I need it?” compared to, “do I want it?”.

It made me think more that’s for sure.

The last trick I employed was to leave it in my online basket for at least 48 hours, and once that 48 hours had been, I would soon know if I really wanted it. No more impulse purchases here and there!

Prevention is better than a cure

Pay rises are always a pleasure to receive but there is undoubtedly an immediate temptation to think, “what can I spend it on?”. Sometimes it’s taken out of our hands and currently, the rising energy prices make any thoughts of buying luxuries beyond reach. But sometimes, it’s just about having more self-awareness and taking control of your decisions.

Living for today is all well and good, but you still must keep an eye on tomorrow. What could you do with that pay rise that will make your future better? Knowing how to prevent lifestyle creep isn’t as straightforward as cutting out a single takeaway but is rooted much deeper than that. You must realise what your long-term financial goals are first.

You might want to repay debt, add to your savings or concentrate on your retirement. You might want to spend it on protecting yourself in the event of illness or death . Or you might want to pay for further education to develop yourself and create opportunities for the long term.

I’m a firm believer in balance, so spending some and saving some may be the way to go. I always consider that there may be a trade-off so saying yes to one thing, it probably means I’m saying no to something else.

Spending £100 on Elemis gives me immediate gratification, but that’s £100 further away from meeting my goal of early retirement. And that is one of the first steps to avoiding lifestyle creep.

So how do you avoid the slippery slope of lifestyle creep?

Well for me it’s about having a financial plan. What do you want to achieve and by when? If you’re clear on this and keep it in your mind you can focus on its importance and how good, it will feel to achieve it. That way, when you get tempted to spend an extra £100 on a Smeg kettle, consider if it’s worth it or would you rather achieve your longer-term goals. For me its all about retirement in 2040.

Doing this also allows you to budget and retain control of your spending.

How much is your future you, going to love the decisions you make today? If this blog has got you thinking about kick starting your financial plan, take a look at when to start financial planning here.

For more help and advice or to receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Yorkshire Financial Planning on 01482 275540 or complete our contact form here.

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