What is Lifestyle Creep?

Small change of plans, our interview with an advisor fell through, but we are working to get it for a later week! I promise he didn’t change my mind about using an advisor, and I am just too scared to admit it. I promise…

Lifestyle Creep or “Keeping Up with the Joneses” is the easiest way to ruin a lavish retirement or break a budget. So what is it and how do you avoid it?

Lifestyle Creep refers to the tendency to upgrade your lifestyle as your income rises. It’s a sneaky adversary that can lead to a vicious cycle of ever-increasing expenses. Lifestyle creep doesn’t refer to a celebratory gift; I would never lie to you and say I don’t celebrate a raise with a new Yankee Candle or two (or seven).

Lifestyle creep refers to a consistent increase in your monthly expenses without a deliberate plan or need. It might be easy to take a new raise and justify HBO Max, a new gym membership, or financing the newest iPhone 15 Pro (apparently its only selling point is the titanium?), but those are the items that consistently eat into your monthly budget and add up. If you don’t pay attention, you might end up looking like SpongeBob and Patrick.

‘Keeping Up with the Joneses’ is a common expression used in conjunction with lifestyle creep. Have you watched your neighbor drive up in a new Ford Bronco and had to take your wife’s phone away to prevent her from ordering a Bronco right there at dinner?? Okay, just me? Well that is ‘Keeping Up with the Joneses.’ We see our neighbors upgrade their car or house and want to keep up. If you find it hard to fight the urge, just keep this in mind: a nice car and big house don’t show wealth. It shows spent money. Wealth isn’t seen.

So, how do you avoid falling into these traps? Sadly, it is mostly psychological, but there are some helpful techniques.

1. Be Aware of the Trap!

Just being aware of this trap can help you prevent it. It’s kind of like when someone points out that you have too many Yankee Candles and then it’s all you notice. Or when you notice someone chewing with their mouth open and now you're staring. If you see the trap, you can avoid it.

2. Increase auto contributions to your 401(k) or TSP.

Last week, Mike talked about Dollar Cost Averaging and how to take full advantage of compensation from your employer. If you currently contribute less than $1,875 per month, you could increase your contribution by the additional raise amount. You’ve been living with your previous pay check so don’t even give yourself the chance to spend that additional money.

3. Update your budget BEFORE the first increased paycheck.

You can prepare yourself for the additional money before the excitement takes over and judgment flies out the window. This will allow you to adjust savings, investments, and fun money in a deliberate way. You can enjoy the hard earned raise with peace of mind.

4. Finally, don’t deprive yourself.

This is a more personal recommendation. I do not subscribe to the hardcore F.I.R.E. community of aggressive cost cutting and investing. I believe a smart, long term plan allows you to prepare for an enjoyable retirement while still loving the road to retirement. As long as it's a one time purchase, not a subscription, and fits the budget, I say go for it. Buy those Lululemon shorts, 18th Yankee Candle, or a dozen doughnuts. Life is for the living.

Call to Action

Go back one year and look at your credit card statement compared to last month. You may be shocked to see what new subscriptions or services you bought!

What We’re Reading/Listening To:

Podcast: The Journal: Trial of Crypto’s Golden Boy. The Journal is doing a series all about Sam Bankman-Fried’s fraud trial. He took billions under the guise of FTX, stole it for his crypto investment company, and claimed only to be doing all of it in order to donate as much money as possible… allegedly. His trial started this week.

Debrief on Deck

Next week, Mike is going to dive into taxes and how they work. I offered to write it for him. “They don’t.” End of Newsletter. He told me is actually a bit more complicated than that. So get your tar and feathers ready for next week.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on social media (X (formerly Twitter) and Instagram).

Until then, stay the course.

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