What is Lifestyle creep?
As our income rises our spending habits also goes up. Personal finance has a term for such indulgences. Lifestyle creep.
It can move up slowly and can make it difficult to shed. We can convince ourselves that we deserve the expense, or that we can immensely afford it and learn to not be guilty about it.
How can a household draw a checklist and be sure things are in control?
1. Make it a practice to define an expense as a percentage of regular income. That enables understanding whether such expenses make a real dent on the household or not. For a household that is still repaying the home loan, buying a new car that will take the EMI over 50% of the income is a significant decision.
2. Be careful what routines and rituals you create. These are tough to break. A family that eats out at an expensive restaurant every weekend will struggle to break the habit. Make sure your lifestyle expenses offer a mix of experiences, rather than a defined high cost choice. Every holiday need not be abroad. Every travel need not be business class. The problem with routines is that breaking them will seem like a downgrade.
3. Keep room for returning to something simpler. A long trip by train to simply enjoy the sights and sounds and relive childhood memories will be seen as punishing, waste of time, and too pedestrian if your family has gotten accustomed to flying or driving everywhere. Make sure that you don't define what the family will do by strictly expensive choices.
4. Take care to see what the default choices are turning out to be. When you buy electronics or a car, if you are always looking for what is new and latest, you will upgrade too often. If you focus on functionalities, you may be able to see that upgrades don't make too much of a difference. Discuss as a family what your requirements from a large ticket expense are. Instead of making it all about the cost, turn it into a feature wise analysis.
5. Make sure you are not falling into the trap of instant gratification. While shopping for clothes and accessories, ask yourself if you want to come back to your online shopping cart after a day and review the items again.It is very likely you will drop off a few items. Don't make it a habit to browse and order too frequently, making it a pastime activity to fight boredom. Emotional buying creeps up too soon.
6. Find out if your lifestyle involves activity that won't involve spending money. Do you spend time singing songs and practicing music? Do you step out to the garden in your backyard and grow some plants? Do you go out to trek in the hills and enjoy the fresh air? Does sitting at the beach and watching the setting sun make you happy? Do you spend time with friends laughing about memories and stories? If your lifestyle offers nothing without opening your purse up, you might have to pause and think. There are real joys that don't cost much.
7. Exercise caution about the company you keep. See what binds you with the friends you have. If a common interest holds a relationship, you will find meaning as the relationship matures. Instead if every meet is an exercise in status comparison, you build needless social pressure in trying to keep up with them. If setting out to meet your social groups gets you worrying about what you wear, the age of your gadgets and the make of your car, you are in the wrong company that measures your worth based on what you have rather than on who you are.
8. Tell yourself that higher and stable income and comfort for yourself empowers you to make a difference to other lives. If your spending is always about you, you run the risk of becoming too self absorbed. The true joys of living are when you include others in your life and keep them in your thoughts and activities. Small acts of kindness and empathy to the others around you will keep you grounded. Give and see how much it changes you as a person.
Lifestyle creep is a silent killer when we let optional, discretionary and avoidable expenses to become compulsory, mandatory and unavoidable.
( Article written by Uma Shashikant)