Lifestyle inflation and lifestyle creep

The other day I had a chat with a friend. He told me he needed a bigger house, as the 2 bedroom home isn’t big enough for him, his wife and the baby. Being Frugal, I started asking questions about wants and needs: Do you really need it? Why do you need it? Are you sure it’s not a want? It became clear that he had so much stuff, that he needed to find more space to fit everything in.

The issues in the above experience are called lifestyle creep – we want more because we have more. Upping our lifestyles to an unaffordable level is easily achievable these days through credit card companies and personal loans offering us tomorrow’s lifestyle today. People see their credit card limits as a goal to be reached. 

We buy things we don’t need to please people we don’t like with money we don’t have. We buy/hoard stuff, as we might need it one day. 

On the other hand, we have inflation that quickly catches up on us. We live in the same way, but things become more expensive due to inflation, strikes, diseases, greed and the economic climate (e.g. exchange rates). 

Lifestyle inflation and lifestyle creep both have devastating long term effects on our money and personal finances. To pay for our lifestyle, we neglect the more important things: saving and investing.

The need for more

I often get people telling me they will not sacrifice their morning coffee – and that’s okay! The issue is not the morning coffee. The issue is that we spend money on things that are not important to us. 

We, as humans tend to have an insatiable hunger for more. We need a better car. We need a bigger home. 

And we want it now.

We need to reconsider our wants and needs. And then choose our wants more carefully. For example, I don’t have a television or an online subscription for on-demand video.

Yet, I love coffee. 

I spend money on coffee and not on things I don’t value. If you value books – spend money on it. But if you don’t value a fancy car, then don’t drive one!

Hoarders and expenses

I also know people who buy a (fourth) cellphone contract, just to get the ‘free’ vouchers – just to buy a fourth digital camera that they don’t need. Because of the effects of changing technology and inflation, these items soon become worthless.

Many people find their emotional security in things. Possessions. The sad thing is that the new car is not new anymore, and the smartphone isn’t as smart anymore after a year. But we just want more.

As you might’ve figured out, the issue here is emotional, not monetary. We need to learn to deal with the financial impact of our emotions.

The Diderot effect and expenses

A few hundred years ago there was this old man, who was given a gift of a night gown by someone.

He loved it very much.

Yet, when he looked at at his bedroom, it seemed out of place. He decided to buy new, expensive bedding to compliment it. Once this was in place, he needed a better wardrobe. And better clothes.

This seemed out of place with the lounge, so he bought a new chair. And a new dinner table. And better coffee.

You get the drift.  

This is how lifestyle creep works. It starts with something small, and at the end we wonder how we got here with a 2 324 439  678 horse power car and a 945 bedroom home.


I have lifestyle creep: what do I do now?

We’ve established now that the issue is emotional and cultural, and not money itself.

We need to decide when is enough, enough. Have a number in your head for big expenses. With how many pairs of shoes will I be satisfied? With how many books will I be happy? How many toys will I allow my kid to have? How many kitchen appliances will be acceptable to me?

Lifestyle inflation - Why is my lifestyle more expensive?!

Oftentimes, we try to keep out expenses low, but the prices of things increase. For example, the year on year increase for medical aid was 8.3% (Statssa) –  did you get an 8.3% increase in your job? 

Inflation is a silent killer that eats into our savings and disposable income. 

Make time to review your debit orders/expenses and negotiate where you can. For example:

  • Negotiate the interest rates of your home loan
  • Call your insurance company and ask for a better price on your insurance – (I love Naked Insurance, give them a try from this link here)
  • Do a price comparison on medical aid plans and move if you get a better deal. I halved my medical aid expenses about a year ago doing this!
  • Check what food brands you’re buying – is the brand loyalty really worth it? 
  • If you really need a credit card, make sure you confirm all costs, interest and credit limit. You need a good deal! 

Money and self control

We need to regularly evaluate the creep that does come in.

We also need to consider what must happen when we are standing in front of a menu wanting to buy that 5 litre cup of iced hazelnut latte with cream on top. Dr Jan Niemand did an awesome guest post here about money habits – and how to rethink your money. The crux is this – understand your triggers and learn to bypass them. 

Furthermore, if you know you have issues with money and self control, why not automate your finances? Setup a debit order 3 days after your salary is paid in. Pay the money into a savings account or an investment account. 

Remember: out of sight means out of mind!

Have check-in sessions

Set time apart to think about what’s important to you. 

Do I value morning coffees? Do I value that kitchen appliance? Would I miss the other 12 bathrooms in my house?

Keep reminding yourself of what you find important. 

Write down what is important to you. Paste it up somewhere. Make it visible. 

Reward yourself

We often use valid excuses for lifestyle creep:

  • I deserve to treat myself.
  • I work hard for my money.
  • #YOLO – I only live once

Though I believe you need to reward yourself – don’t do so at the cost of tomorrow.

When you reward yourself, do so within reason and reward yourself with something that you would appreciate. Whether it’s a massage, a phone that you saved up for, a cup of coffee or a hike in a nature reserve – do it.

One way, that works for me, is a fun fund. Have an amount that you use for something you love.

Remember – cutting lifestyle creep is about cutting things that are not important. 

Frugal's story

Though lifestyle creep doesn’t go away easily, I personally have had to cut expenses and own up to my name. 

For example, I have downscaled from a 3 bedroom to a 1 bedroom home in the last 4 years. Though it was awesome to have space, I realised that I have 4 sets of crockery, 3 whisks,  2 unused beds – all for me and Mrs Frugal.

We also had a scenario where we had to go from a very upper-class area and downgrade into one of my investment properties (where we had to use nuclear fusion to get rid of all the cockroaches) – more than halving our rent.

I have also had to review policies, insurance (not cancelling!), monthly groceries and where I buy my coffee. 

Once I have established what was important to me, it became easier to let some things go.

Conclusion

Lifestyle creep happens.

The issue is that we don’t know what we really value. 

If we know what we value, we can get rid of many things we don’t need.

Don’t let others dictate what you need.

Happy investing!

Sources consulted