Halloween is my absolute favourite night of the year. I dig the campy costumes, the cheesy decorations and I truly enjoy sitting out on my front porch doling out treats to little ghosts and goblins. For one day of the year, we’re allowed to celebrate the macabre, the ghoulish and the downright creepy.
But there’s another type of creep, known as spending or lifestyle creep, that we should all be more wary of. Lifestyle creep occurs when we allow our standard of living to increase as our discretionary income rises as well. The more we make, the more we spend. Things that were once considered out-of-reach luxuries become must-have necessities. In some cases, the spending grows faster than our incomes, making lifestyle creep more of a lifestyle sprint. And that’s a race that’s impossible to win.
Young graduates are prime candidates to the allure of lifestyle creep. After years of Mr. Noodles meals, hand me down furniture and monthly student bus passes, it’s easy to understand why someone who has just landed their first “real” job might want to treat themselves to a new car or a trip to Europe. However, by delaying those expenditures for just a bit, they could put that money towards paying off some student debt or perhaps saving towards a gently used car instead of buying an expensive new one. A couple of years ago, I saw a poster for a student credit card that read “Live as a student without living like a student.” I think they had it backwards. Graduates should continue to live like students for a couple of years after they are no longer students.
Another demographic that can be susceptible to the perils of lifestyle creep are those approaching retirement. In these cases, it might not be an increase in income that provides the creepy opportunity but a reduction in expenses instead. Maybe they just finished paying off the mortgage (a very good thing!) or perhaps their last child has left home making their empty nest a much less expensive one. This can provide a fantastic opportunity to really sock away some money for retirement which may not be far off. But similar to the student example above, after years of paying the bills, it’s easy to see why these mid-lifers would want to splurge on a vacation home or a fancy car.
To be clear, I don’t think there’s anything wrong with a little lifestyle creep in your life. After all, what’s the point of working towards a higher income if you never get to enjoy some of the spoils. But the key word that sentence needs to be some. It’s when you spend all of your raises or more than your raises that you’re asking for trouble. Blanket advice is always tricky but a good rule of thumb for when you get a raise is to direct half of it towards your financial goals (like savings or paying down your mortgage) and keeping the other half for treating yourself.
Or trick or treating!