It’s the subtle, sneaking changes in spending habits that may be most chilling—learn how to spot the signs of lifestyle creep.
This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.In the world of personal finance, it’s the subtle, sneaking changes in spending habits that may be most chilling. The phenomenon is known as lifestyle creep, and it’s one of the biggest — and most overlooked — barriers to building long-term wealth.
And it’s here, “when your expenses continuously increase in lockstep with your income,” that lifestyle creep can set in, Nilay Gandhi, a CFP and senior wealth adviser with Vanguard, said in an email interview. However, these thoughts and feelings may be signs that your higher spending is happening automatically, rather than intentionally, Lyons says.
Thanks to compounding, even small investments have the potential to grow significantly over a long enough period, said Gandhi, who’s based in Malvern, Pennsylvania. But if your spending consistently increases with your income, there’s none left for investing. Lifestyle creep can also lead to additional life stresses, Shah says. For example, if your lifestyle becomes dependent on a certain level of income, what happens if you want to switch jobs or careers?How to prevent lifestyle creep There are several ways to keep lifestyle creep at bay, but Shah, Gandhi and Lyons all agree the best place to start is to create a financial plan and a budget, and stick with both.
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