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Where Did All The Money Go?

If you’re earning more but don’t seem to be better off, you could be suffering from ‘lifestyle creep’, says Lynda Moore, the Money Mentalist. She explains what it is.

18 October 2021

Lifestyle creep is where you feel a little bit richer, so your living expenses slowly grow without you even noticing.

Maybe you’ve had a pay rise, maybe you’ve found out that your house is worth more money than it was last year, maybe you have some money invested, or there’s some spare cash left at the end of the month.

Just when we’re feeling comfortable, lifestyle creep can sneak up on us and catch us out in one of two ways.

Life’s little pleasures

The first is, as our income increases, so does our spending. Part of the reason is we simply have more in our back pocket and if we don’t have a plan, it’s very easy to fritter it away on life’s little pleasures.

Maybe it’s an extra dinner out, here and there. Or a few new clothes in the wardrobe. That weekend away? Or the new car that we didn’t think we could ‘afford’ but now can, because the finance company said yes.

I don’t mean to sound cynical, but that’s the reality for many people.

It’s much easier to spend on lifestyle than it is to pay off debts or save for retirement. Most of us are just wired that way.

The science of spending

There’s science behind it. We love the dopamine hit we get when we spend, and the instant gratification – that Freddie Mercury moment of wanting it all, wanting it now, and getting it!

There may be nothing wrong with this. You may be in a financial position where the debt’s gone, you’re sorted for retirement, and you don’t have to worry about lifestyle creep.

Conscious spending

Whatever your situation, try to make spending a conscious decision, rather than it just happening.

There might be other areas of life that are more important to you to spend or invest in, and that align to your values. Think about allocating the extra money to those things, rather than seeing it slip away.

If you still have debt or need to top up the retirement fund, then allocate some of the increase to that and enjoy some of it as well.

How much goes where is entirely up to you. The point here is if you haven’t had the extra cash before, you won’t miss it.

Is there a charity you’d love to support? Or maybe you want to ‘do’ that something you’ve always wanted to do.

What I don’t want to happen to you is in a year’s time, you look back and wonder where all that extra money went.

Spending creep

The second aspect of lifestyle creep is ‘spending creep’. In this scenario, your income hasn’t changed at all, but your lifestyle has.

You might be living a champagne lifestyle on a beer budget. Or you’ve met a new group of friends or started a new relationship, which changes your spending patterns, and you don’t really notice.

Spending creep can also show up when we think we’re doing a good job of keeping spending under control. Things just creep up on us without us really noticing.

Let’s say the car insurance comes up for renewal and it’s just a little bit higher than last year. Or the price of a coffee at your favourite cafe goes up a few cents and you barely notice it.

It’s like a diet!

I had an interesting talk with my personal trainer a while ago that really got me thinking about how easy it is for creep to happen, not only with money, but in other areas as well.

I’m pretty careful how I eat. I know potato chips go straight to my hips, so I watch how many of them I have.

If I indulge in a delicious piece of chocolate cake, I know that I need to do some extra physical activity and ease back a bit on the treats to work it off.

But when my trainer asked for a food diary and we looked over it, I was horrified to see how I’d let portion creep slip into my diet.

I was still eating healthily, but I was eating a little bit more without realising it. No wonder I’d hit a plateau and wasn’t making progress.

It’s the same with your finances.

Taking your eye off the ball

You have a plan, everything seems to be going well, so you stop watching.

You grind to a halt and you just aren’t getting any closer to your goals. We can easily identify (and blame) one-off unexpected expenses like a car repair bill or a trip to the dentist, but unless we stop and take check, we can miss the spending creep in other areas.

Whichever type of lifestyle creep is affecting you right now, the way to fix it is the same.

  • Go back and look at your numbers.
  • Keep a money diary for a couple of weeks. Write everything down and see exactly what you’re spending, and what little habits have crept up on you that you can easily nip in the bud.
  • Look again at your goals for the year: are you on track? Do you need to tweak them, or change them completely?

Lifestyle creep is telling you it’s time to take a step back, monitor your spending, review your money plan, revise it, and get back on track.

To assess your spending personality, find out more on www.moneymentalist.com

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