How to reverse lifestyle creep

Lifestyle creep is sneaky. That's why they call it creep. They don't call it a lifestyle EXPLOSION… if they did, well, you'd probably notice an explosion right? 🙂

A couple weeks ago, I'm emailing with a reader (Edward) about his biggest challenge (I ask everyone who signs up to our newsletter for their biggest challenge) and his was lifestyle creep. He wanted to save more but, in looking back at his spending, felt like his lifestyle had crept upwards without him even realizing it.

Fortunately, lifestyle creep can, to some extent, be reversible.

What is lifestyle creep?

Lifestyle creep just means you're spending more and more of your surplus cash flow. You take in income, you pay out your expenses, and the rest is surplus cash flow.

It's most common in folks nearing retirement as your previously fixed expenses start disappearing – a mortgage, a car loan, kids graduate and move out (hopefully!), etc. We experienced a boost in surplus cash flow this Fall when our oldest went to Kindergarten, which ended his daycare expenses.

While it's most acute nearing retirement, it happens throughout your adult life too. You get a bonus or a pay raise, you start spending some of it.

But some lifestyle creep is healthy and natural.

If you are single, have no kids, and rent a small apartment – you'll have relatively low expenses. You're feeding one mouth and living in one bedroom.

If you get married, have kids, and move into a house – your lifestyle will be more expensive. But you're feeding more mouths, living in more bedrooms, and it's unreasonable to think that this “creep” can be reversed so you spend as much as you did as a bachelor.

Today, we're only going to focus on lifestyle creep that doesn't play a meaningful role in your life. Your lifestyle may have gone up, but you don't appreciate what you're getting for the extra money, and now you look at your budget and it's maxed out.

That's the lifestyle creep you should be eradicating.

It's NOT about restriction

Sometimes we need to cut expenses because life is a series of trade offs. If you want to buy a new house, you need to come up with a down payment. You can earn more money or spend less or wait longer to buy that new house. It's your choice.

When you battle lifestyle creep, it may not be obvious what has crept up. You haven't actively made those choices and that's a bad thing.

It's about tradeoffs

Reducing lifestyle creep isn't about restricting your spending for the sake of lowering it. It's about making trade offs so that you save (and then spend) where things matter.

Do you want to retire a year earlier or go on an extra vacation to your timeshare a year?

Do you want to be able to help your kids with college or buy a nicer car?

Since we can't have everything, it's about actively making choices so we pick – vacation or retire earlier. There is no correct answer.

The only mistake is to not actively participate in the decision.

Identify and reduce what's meaningless

This is a two step process:

  • Identify the creep,
  • Eradicate or reduce the creep.

To know what to reduce, you need to identify everything you're spending money on. Your cable & internet, SiriusXM satellite radio in your car, your gym membership or your magazine subscriptions. The simplest way to do this is with a full accounting of your expenses.

The best way to find these is to use budgeting software that tracks your expenses. You can use Mint or Personal Capital (Personal Capital Review) to quickly see what your monthly fixed expenses are.

Now you have a list — it's time to separate them.

I separate lifestyle creep expenses into two categories:

  • Expenses that are higher than you need, and,
  • Expenses that are higher than you realized.

Higher Than You Need

These are expenses that you need but that you're currently overpaying for with respect to their value to you.

The best illustration of this is heating your house. Let's say you're comfortable with the house being 70 degrees F. Would you say that you'd also be comfortable at 69 degrees? 68 degrees?

There is some set point at which your comfort becomes an issue. If you lower your thermostat by one degree, the general rule of thumb says you can probably save around 3% on your heating bill. Same goes for AC.

The exercise here is to look at your expenses and try to find the excess expense. You need heating and air conditioning, but are you paying for too much of either?

Let's look at a very common expense – the gym membership. Gym memberships, on the face of them, are positive. You get access to equipment, you can build strength and stamina, and you don't have to maintain or store anything.

They love the gym.
They love the gym.

They're great if you go. But plenty of people have memberships but never use them! I see this first hand when gyms are packed in January and part of February, before returning to normal by March.

If you have a membership, start keeping a record of how often you go. Then calculate how much each trip is costing you.

If your membership costs $100 a month and you go 20 times a month, that's $4 a trip.

If you go 5 times a month, that's $20 a trip.

Aaaand if you go 0 times a month, that's dumb.

Are you overpaying for the gym? Your usage rate will dictate that.

Once you've identified these, you can take steps to reduce them with confidence because you know you're overpaying.

Higher Than You Realized

We get busy and the things that are less important get put on the back burner. We frequently pay for subscriptions and subscriptions get renewed, often for slightly higher.

The boiling frog is a story about a frog being slowly boiled alive. If you drop him in a pot of boiling water, he'll jump out immediately. If you put him in cold water and slowly increase the temperature, he'll sit in there until he's boiled alive. Who knows how true it is but you get the metaphor.

You have a lot of expenses that made sense when you signed up. Over time, as prices increased and you didn't notice, they got higher and higher to the point that you might not sign up if given the option today at the present price.

In many cases, you should use a company's profit motive against them by trying to get promotional pricing each time you sign up. You can do this with nearly anything that has a contract. It's best if there is healthy competition but ever service is competing against being cancelled entirely. Comparison shopping is a must for all subscription based expenses.

The best part about this exercise is that it's the opposite of other money saving exercises. Many other ways to save money involve a lot of work for a little return. By negotiating contracts or cancelling them entirely, you do a little work and get the savings throughout the year. That's a better to do it!

Cut cut cut

Now comes the hard part — with a log of your monthly expenses, identifying which ones are good (fine the way they are), which ones have creeped too high, you need to take action.

Cut or renegotiate lower.

You need to make an active decision on your spending and this forces you to actively decide.

What If You Just Like Nicer Things?

Renegotiating and cutting your expenses that have creeped up is relatively easy.

What if you just like nicer things? What if you would rather fly on an airplane than drive? What if you like going to nice restaurants and ordering an appetizer, entree, dessert, and wine?

This is a more pervasive concept of lifestyle inflation and one that's harder to identify and combat… but it's very possible.

Whenever we visit my parents on Long Island, we fly. It's a 45 minute flight or a 5-6 hour drive. With two young kids, flying is by far the better choice but it's more expensive. We can afford it, in part because we have Southwest Airline's Companion Pass, so this is our preferred method.

If you want to reduce that type of lifestyle creep, I recommend listing out all the “nice things” in your life in priority order. Then reducing the lowest priority items.

For example, we can't give up flying to Long Island, especially during the holidays when driving a car can be brutal. We can, however, give up how often we eat out at restaurants.

In fact, we've done this (partly as a function of having young kids) and replaced it with cooking more at home. We've gotten better at cooking, we still get to eat delicious food (that's lower in salt, sugar, and fat!), we save money, and it's at a schedule more conducive to our lifestyle.

It's hard to cut something entirely from your life, that's like a smoker going cold turkey. But you can reduce or replace that spending (which is a habit after all!) while still retaining what you enjoy about the process.

Have you been struggling with or battling lifestyle creep? What has worked well for you?

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Jim Wang

About Jim Wang

Jim Wang is a thirty-something father of three who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and a farm in Illinois via AcreTrader.

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  1. Physician on FIRE says

    Some do call it lifestyle explosion – it’s precisely what occurs when to many physicians when they transition from residents earning $50,000 a year to full fledged docs earning $200,000 and up. BOOM goes the dynamite.

    Of course, it’s not a good idea, especially with the huge student loan balances most are carrying. I grew into my income slowly by being a traveling doc with all expenses paid for a couple years. I ramped up spending a lot once we “settled down,” but have dialed back as we’ve come to understand that spending and happiness are rather loosely correlated.

    Thanks for sharing your tips on how to fight the insidious creep. It’s not easy.

    Best,
    -PoF

    • Jim Wang says

      That great insight PoF, I’m not surprised physicians experience that explosion. I know going from earning a few thousand a year in college to $60k was a huge jump for me. My lifestyle didn’t explode at first because I was single, had no idea what I was doing, and my hobbies are pretty inexpensive!

  2. Making Your Money Matter says

    I do feel like tracking your expenses is key to battling financial creep (and everything else in PF). I just went through my expected total numbers for the year in order to create my 2017 budget and saw that we were spending a much bigger amount than I had thought on eating out. I thought about it and then decided to just budget more for it-it’s something we enjoy and worth it to us. However, we cut back on other things like clothing and try to keep our regular utility bills low so that we have plenty of room for saving and our other financial goals.

    • Jim Wang says

      All too often people see budgeting as restrictions – it’s about making active choices. If you want to eat out more, eat out more! (just make sure your budget knows right?)

  3. Isabelle Mishaw says

    Good read. Thank you for reminding me that I need to review my expenses for 2017. And also that if I see that we have been eating out a lot (first NOT to freak out, lol) to take a step back and consider whether eating out is working for us and lower the budget in another category or if I need to rethink my eating options all together or maybe a little bit of both, depending on the meal.

  4. Fred says

    I love to go out to restaurants, especially the nicer restaurants. A budgeting trick I now use for eating out is avoiding any beverages (except for water), and avoiding dessert. If I skip a non-alcoholic beer at $6.95 or a lemonade for $4.95, not only do I avoid the cost of the beverage, but it also helps reduce the tax and the tip. When family members see that I am just sticking with water, they have a tendency do do the same thing. (Same psychological technique with desserts.)
    I did this because as I checked over my receipts for lunches and dinners over the previous year (I always try to keep the receipt of the list of items ordered in addition to the credit card receipt), I realized that I was spending roughly $26 per meal additional, just for my beverage and dessert, with tax and tip. Just going out once a week cost me about $1,352 for the year, which is an amount that I could certainly put to better use.
    By doing this, I’m healthier and my wallet is healthier.

    • Isabelle says

      that is a great idea! I will work on eliminating drinks and dessert when eating out. won’t even look at the drink or dessert menu. 🙂 Thank you Fred

      • Jim Wang says

        I never eat dessert and if I’m not having an adult beverage, it’s usually water for me too (or tea). Little tradeoffs like that won’t make or break a budget but if I’m not going to enjoy it all that much, why waste?

    • David G says

      I’ve taken to just ordering water and passing on desert, too! I’ve also cut out ordering appetizers just so I wouldn’t have to wait so long to eat something. It really helps. Well, it would also help if I didn’t tip. My wife says I tip too much, but as a former server I can’t help it.

    • Marisa Stone says

      I have been doing the same thing for several years. Having water with Lemon for a beverage, skipping appetizers and desert.

      Did make an exception at a restaurant a couple of days ago for the holidays. It doubled the price of dinner to have deserts and just green tea(tea was $3 bucks EACH). We are a family of 5(2 are teenagers) and desert was $8 a person…yikes.

      Exactly why eating out is few and far between. I can cook for us for a week for the same amount we spent on lunch…talk about buyers remorse….lol

  5. David G says

    What a great article, and such a timely reminder here at the end of the calendar year to do some navel gazing and trimming the little weeds that have crept in around our healthy plants.

    I’ve paid off about 21k in student loans in the past 4 months but lifestyle creep has probably cost me around 1k just because I’ve been too tired to grocery shop and make my own meals after working 75 hour weeks. Eating out every day saves me 60 to 90 minutes of sleep. I would gladly exchange lifestyle creep for erstwhile sleep sometimes, but they seem to come together.

  6. Leo T. Ly @ Isaved5k.com says

    One of the things that my wife used to do is buy organic fruits and vegetables for the kids. They cost an arm and a leg. To combat that I planted some of my fruits and veggies in my backyard in the summer, but can’t grow anything in the winter. Maybe I should be building a green house. The other creep is the toys for the kids. How can I argue when everything is for the kids?

  7. Lo-An says

    Thanks again for the reminder to get my financials in order and to remind me to hit the gym. I find that going to the gym often saves me ALOT of money. You’ll less likely go out drinking after the gym and you usually prep your meals at home. I just have to wait until after the “new year resolution gymers” die down a bit.

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