Hot Take: Lifestyle Creep Isn’t Always Bad

When savings are handled, spending more isn't always an issue.

Before anyone gets too mad at me, I want to reassure everyone that when I say lifestyle creep isn’t that bad, I mean this in a very specific way.

To be clear, lifestyle creep can be a massive issue when spending is out of control, there are no forced savings, and no financial plan in place.

Most of the time, people will tell you to avoid lifestyle creep at all costs. It directly impacts your ability to save and invest. Arguably, it can make it even harder to retire because we become accustomed to a more lavish lifestyle. Cutting back expenses can be really tough for most of us, especially when we have a newfound understanding of what “comfortable” is.

So, why is lifestyle creep not the worst thing ever? Because we’re all growing. Do you really think that your 40 year old self is going to spend less money than your 25 year old self?

That seems unreasonable and just straight up not feasible. Our lives gain complexity and that usually comes with added expenses.

Before I get to a few reasons lifestyle creep doesn’t phase me, I’d like to remind everyone that when savings are happening in the background, and we’re putting 15%-20+% of our income away automatically, expenses are usually of little worry to me for young professionals. I’m worried about how we’re going to get that next raise, find a new job with better compensation, or hit those bonus targets to bring our income to the next level.

Essentially, lifestyle creep is really only an issue when it occurs before the plan for savings. Once savings are in order, lifestyle creep becomes much more acceptable.

The first reason: Awareness

If we are aware that spending is increasing, or we are purposefully beginning to feel more comfortable spending more (when we are already hitting our savings goals), I am just not that phased by it.

I know super savers that need an okay to start spending more. A lot of us work incredibly hard. Squirreling money away and never spending any of it can sometimes lead us to leave memories on the table.

As Cody Garrett once said, some will “die with unrealized personal experiences (not just unrealized gains).” It is one of my favorite quotes.

Being aware of the increase in expenses while annual savings and investment targets are still being met is no issue to me!

The second reason: There’s nothing wrong with wanting more.

I think that lifestyle creep can actually be one of the biggest motivators, especially for younger people. Personally, I think about different things I’d like to afford nearly every week. Whether it be something like the ability to eat at any local restaurant without having to think twice about the bill all the way to affording my first home.

I want more. And I know that working harder will likely get me there. I’d love to be able to afford certain things and when I put myself in the position to do so and can maintain a strong savings rate, I won’t hesitate.

Now, the important part here is that the ‘wanting more’ part should come before increasing lifestyle expenses. We don’t want to increase lifestyle expenses before those increased earnings materialize. Then we run into issues.

The third reason: We work hard, enjoy some of it.

I love to know that young people are able to enjoy some of the fruits of their labor. I have friends and clients that work incredibly hard. Like seriously, their work ethic is actually enviable. They are nonstop.

These types of people deserve to live in the moment every now and then. They deserve to treat themselves to vacations or splurge on something that someone else might deem silly.

Don’t get me wrong, unintentional lifestyle creep can be absolutely detrimental to wealth accumulation. But purposefully increasing expenses when our savings rates are where they need to be? That’s optimizing for life right there.

At the end of the day, as earnings increase, so should savings and so can lifestyle expenses. Striking that balance of intentionally enjoying more while increasing our savings is key.

PS: Most financial advisors would never judge your spending rate. I get a gut feeling that some people avoid an advisor for fear of judgement. Not once have I ever judged someone by their expenses. Everyone has different definitions of comfort and we work to increase income to allow people the level of comfort they want as well as hit the savings goals they need to track for retirement.

This is for informational purposes only and is not intended as legal, tax, or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of publication and are subject to change without notice. Past performance is not indicative of future results.