How Rachel Cruze Advises You To Spot and Stop Lifestyle Creep
In today’s consumer-driven society, it’s easy to fall into the trap of lifestyle creep when keeping up with the Joneses. Increasing your income and earning more money is great unless you turn around and spend it all on newer and more expensive things.
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Financial expert Rachel Cruze offers invaluable advice on how to identify and combat this subtle yet detrimental habit that can lead even the wealthy to the cycle of living paycheck to paycheck.
Quick Take: Lifestyle Creep
Lifestyle creep, or lifestyle inflation, occurs when discretionary spending rises as your income increases. With additional money, what formerly would have been considered luxuries are now necessities. It’s the gradual process of upgrading your lifestyle — bigger homes, nicer cars, expensive vacations — often without realizing the long-term financial consequences.
“All this really is is that as your paycheck grows over time so do your expenses, and most working Americans experience gradual salary growth along with steady inflation throughout their professional career. Rarely does someone go from making $35,000 a year to $400,000 a year overnight. Now if this were the case that margin would be much easier to grasp because they were used to living on you know $38,000 or $35,000 a year. But what happens is that if it slowly goes up it might be harder, and it is for some people to track and to manage as their lifestyle continues to increase.”
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How To Recognize and Avoid Lifestyle Creep
Spotting the signs of lifestyle creep is the first step toward stopping it. Cruze explains that lifestyle creep is dangerous when pitted against saving money because it prevents people from investing or spending effectively. It’s natural to want to enjoy the fruits of your labor, but when it comes down to it, it is up to you to determine your best standard of living.
Whether it’s building your bank account or battling credit card debt, Cruze has some ideas for you to not only recognize lifestyle creep, but also avoid it.
Increased Fixed Expenses vs. Setting Financial Goals
Be wary if your monthly expenses have risen significantly over time. This could include higher rent or mortgage payments, utility bills and subscriptions. There’s always room to edit or cut back. Just because you can afford something doesn’t mean you need it.
Cruze emphasizes that curbing lifestyle creep requires intentionality and discipline. To help combat increased fixed expenses you can set specific financial goals. Budgeting where you spend and where you save is crucial to achieving the financial future for which you are striving.
This type of mindset can motivate you to be in saving mode rather than spending mode. Whether it’s buying a home, saving for retirement or building an emergency fund, knowing what you’re working toward can help curb impulsive spending, even if your increased income has some wiggle room.
Frequently Upgrading vs. Practicing Generosity
If you find yourself consistently upgrading your phone, car or wardrobe without necessity, it’s a red flag. Ask yourself if these purchases are truly essential or simply a response to having more disposable income. Shiny and new is always tempting — and this is not to say you can’t treat yourself with a splurge once in a while — but it helps to first determine why you are buying something.
Instead of making an impulse buy and upgrading when not necessary, ask yourself if what you are replacing still works and maybe not treat things as quickly disposable. Cruze would advise you to practice contentment and highlight the importance of being happy with what you have.
This type of gratitude can shift your focus from wanting more to appreciating what you already possess. This mindset can also help switch your focus from yourself to others and motivate you to give back. When you see what less fortunate people are doing without it can put what you have into perspective, and how it can be used to help others.
Minimal Savings Growth vs. Getting on Budget
Despite earning more, if your savings account isn’t growing, it’s a clear sign that lifestyle creep is consuming your extra income. If your spending has gone up but your savings has not, then your budget is out of whack and needs to be rebalanced.
A budget is a powerful tool for managing your money. Cruze advises making a plan for our extra income to shape your future in a better and more responsible way. By tracking your spending down to the transaction, you can not only see where your money is going but also start to direct it to where you’d prefer it to go.
Debt Accumulation vs. Automated Savings
When your money moves are at a standstill it can lead you to making poor financial decisions. Using credit to fund a seemingly wealthy lifestyle can lead to mounting debt. If you rely on credit cards or loans to maintain your way of life, it’s time to reassess your spending habits and edit where little luxuries have become common purchases.
One of the best ways to ensure you are staying on goal and putting away money consistently is to automate your savings. Set up automatic transfers to your savings or investment accounts to make sure some of your paycheck is going directly toward savings. This way, you’re paying yourself first before you have a chance to spend the money.
Final Take To GO
The bottom line is that lifestyle creep can silently erode your financial stability, but by following Rachel Cruze’s advice, you can better direct your money moves toward building a secure future. She advises making adjustments that align with your financial goals, even if it means making temporary sacrifices.
Also, stop comparing yourself to others. That is only likely to fuel lifestyle creep. Cruze points out that social media often portrays a distorted reality. The more you focus on your own financial journey, the clearer your path toward a fiscally responsible future will be.
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