What is ‘lifestyle creep’?

I admit, before a conversation with a friend at the weekend, I’d never heard of the term. I’ve always been one where I have too much month at the end of my money…perhaps this has something to do with it.

Lifestyle creep can occur when people increase their income. Whether employed or self-employed or a mixture of both (see our article on the number of people with side hustles), people may be consciously increasing the amount they earn. There’s probably good reason for this: the pandemic has made a lot of people nervous about their employment situation and they may be creating a nest egg for if the worst happens, or they may be acutely feeling the impact of price rises and higher inflation, and have no choice but to increase their income because their outgoings cannot be cut any further.

According to lifestyle experts, however, once you begin earning more, your spending habits can change without you even noticing. In the supermarket, you may subconsciously select more expensive meals or cosmetics, or choose branded items instead of the supermarket’s basic range—knowing that you can afford to do so. You may book a rare weekend away, now that there’s a little money left over once all your bills are paid. If the car or washer breaks down, it’s not the panic it used to be; rather than buying the part needed, you replace it completely. The very rare treat of a takeaway at the weekend becomes a monthly ritual, perhaps even a bi-weekly/weekly one as time passes. Your attitude to borrowing may become lax, because you know you can afford to pay any credit back…which means the purchasing of larger items/upgrades becomes more attractive.

You may meet new friends as your social life soars, underpinned by your extra income. If they’re more affluent, it may be tempting to ‘keep up with the Joneses’ and spend/buy the same things they do, or go to more expensive places because they’re the venues they frequent.