Lifestyle Inflation: 11 Ways to Beat It

It starts with something positive. A pay raise. A new side hustle is taking off. Suddenly, there’s more money in the bank.

But in that case, why does it feel like you aren’t getting anywhere with finances? Maybe, despite the income increase, you look at your budget every month to find that you’re out of money far too quickly, and you aren’t sure why.

The answer is lifestyle inflation. I’ll talk about what it is, why you don’t want it, and how to beat it with these 11 ideas. 

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woman opening red wallet which is empty due to lifestyle inflation

What is Meant by Lifestyle Creep?

First of all, lifestyle creep and lifestyle inflation are the same thing and can be used interchangeably. But what is it?

It means that as your income increases, your spending increases right along with it. Suddenly, things that used to be luxuries are part of your daily life and are now considered necessities.

It may start off innocently enough. You tell yourself you can afford to grab a fancy cup of coffee once a week now that you make more. But soon, it’s an everyday habit costing you $25.00 a week. This is just one example, though. 

When this happens, you’ve fallen prey to lifestyle creep. It makes saving a challenge.

You won’t feel like you have any more money than before, even though you make more, because all of it is going back towards your new, shiny lifestyle.

The negatives of lifestyle inflation are things like overspending, lack of financial planning, feeling like you don’t have enough money, and confusion due to all of these factors. But you aren’t stuck – you can change things!

How Do You Reverse Lifestyle Creep?

It’s time to face the truth. No one is spending your money for you, after all.

Somewhere along the way of higher pay rates, things that are actually wants got confused with needs. Before you can fix this issue, be honest with yourself.

What is a want? What is a need? If you aren’t sure, let’s take a look at this list:

NeedsWants
GroceriesStreaming services for TV
Rent or mortgage paymentGrocery delivery
Electricity and utilitiesA nice car
TransportationA larger house
Basic clothingDesigner shoes
InsuranceBrand new phone

Some things are obviously not necessities, but others could be much easier to integrate into your lifestyle without realizing it, like TV streaming subscriptions. Ask if you need it to survive or is it just something that seems fun or new?

Does Lifestyle Creep Affect You?

Maybe you think lifestyle inflation is a problem for you, but you aren’t sure. How can you tell? 

Are you still living paycheck to paycheck despite increases in earnings?

When you start to make more money, your first thought might be excitement that you could save or invest more.

But what if that doesn’t happen, and you are still living paycheck to paycheck? This means you are spending the excess, preventing yourself from reaching your money goals.

Compare your budget to 1 year ago, 5 years ago, etc. 

If you keep track of your budgets in an app or spreadsheet, look back a year or more to see the differences.

If you no longer have your budgets from previous years, just think about the amount of money you made and your significant expenses.

Has anything changed? Are your costs any higher? Are they for necessary things or wants?

Evaluate your spending mindset

Do things you used to do without seem like no big deal to buy now?

Ask yourself why that is and whether your pay increases have been so significant that these expenses no longer matter. Chances are, there are still ways you can save money.

Related: Most Common Spending Triggers and How to Beat Them

How Do You Combat Lifestyle Inflation?

1. Track your Expenses

If you don’t look at the numbers, it’s challenging to know where to start. Check out the amount of income you bring in each month and how much of that goes towards “need” expenses. (Mortgage, car, food, etc.)

After that, determine how much is spent in the “want” category. (Things like fancy clothes, travel, or a huge car payment.)

Tracking your expense can also happen over the course of a few weeks or months. See where you are spending your money and how often you are overspending. Or look back over your bank statements.

2. Make Your Financial Plan and Stick To It

It’s easy to either never make a financial plan or not follow through with it. But there are ways to fix that.

First, create a financial plan. Determine how much to save each month. Then determine what your goals are for your money for the following year. 

After that, find a system that you can stick with. Some budgeting planners can be helpful with this, or maybe you need accountability from a friend.

Or try a reward system. Find something that helps you stick with your plan and go for it. 

3. Artificially reduce the amount of money you bring home by automated savings.

If you find that budgeting and telling yourself “no” is just not working, don’t worry! There are other ways.

Save yourself the hassle by automating your savings. As soon as you get paid, automatically send the amount you want to save to a different account.

This leaves only the money you need to pay bills and what you feel comfortable spending on other things.

Doing this makes you feel like the money isn’t even there, saving you from needing to remind yourself not to spend. It’s probably one of the simplest tricks for savings out there. 

4. Delay gratification.

Delaying gratification is something of a lost art. It’s simply telling yourself, “I can buy that, just not yet.”

You wait when making purchases to save money. It can also help you purchase things you really want, as opposed to items that you buy and soon forget about.

Next time you’re tempted by an unnecessary purchase, try the delayed gratification approach. Tell yourself you want to wait to buy something really great, and then wait.

The chances are, you’ll forget about the item, and you’ll save money. Or you can even tell yourself to wait a week before buying, and by that time, you may not want the item anymore. 

5. Pay off debt, allocate those saved payments to savings.

Debt can take a lot of money to maintain. Instead of staying stuck in the same cycle, make a plan to pay off your debt. As soon as you do, continue making payments, but put it towards savings instead. 

Your budget and payments will stay the same. Still, instead of paying someone else, you’ll be paying yourself, making this a great way to beat lifestyle inflation.

Soon, you can have enough saved for an emergency fund, a down payment for a house, or add to your retirement account.

6. Downsize your home.

This is a tough one, but it’s a great way to get rid of lifestyle creep if you can do it. When unintentionally inflating your lifestyle, you might have bought a larger home that costs more because you reasoned that you can afford it now.

But if it’s costing you a lot and keeps you from your goals, it might be time to downsize. Sell your home and use the earnings you make to purchase something a bit smaller with a more reasonable payment.

This might save you a lot of cash and help you get back on track financially. This is an option most people balk at but you really can’t compare the stress reduction and benefits of a paid off home.

7. Drive a more modest car/own fewer cars.

A big sign of lifestyle inflation is a fancy car or multiple expensive cars. Instead of giving in to this costly habit, try driving a more modest vehicle that costs less.

Maybe buy something second-hand that still works well. And if you can buy it in cash instead of having a car payment, you can save even more.

You could also consider downsizing to one car instead of two to save on gas and car payments. This isn’t for everyone, but if your lifestyle allows for it, save the money and become a one-car household.

You may think you need your fancy cars to signify you’ve made it but you’d be surprised how many truly wealthy people practice stealth wealth.

8. Move Somewhere Less Expensive.

Although more drastic, you can always move somewhere that costs less to avoid large house payments and extra costs associated with the location. This may involve moving to an entirely new state or county, in some cases, which works if your job is flexible.

But you don’t have to go far. Often towns or cities located next to each other have a difference in cost. Consider moving to the less expensive part of town and commuting a few more minutes to work if necessary. 

Obviously, it’s essential to organize all the moving costs, combined with how much money you’d save. Then you can see if the amount is worth it for you.

Related: 7 Tips to Be Able to Afford to Move

9. Sell luxury items that are costing you money.

You may not think about things costing you money after buying them, but they can! Some luxury items have to be maintained and cost money, such as expensive cars or unused subscriptions.

Some things can cost you money simply because you aren’t selling them and they aren’t used often, like a designer dress. Rather than keeping these things around as they cost you more and more, sell them if you can. 

This won’t apply to every luxury item. Still, things like designer clothes and handbags, some artwork, or cars, can be sold for a profit. Try The RealReal for designer clothes and shoes.

Sell to friends and family or online and see how much you can make. It might be more than you’d think! Then use that money to help you with your savings or debt payoff.

That way, you avoid lifestyle inflation by not having too many items you don’t need. You can also avoid buying them in the future, saving you even more cash.

Related: How to Make Money Selling on eBay

10. Give up expensive hobbies.

Expensive hobbies seem fun when you sign up for them or are first buying the equipment you need, but they can cost you big time and are a massive part of lifestyle creep.

What are some examples? Golf. A membership at an expensive gym or studio. Owning a horse. Car enthusiasts who buy a lot of auto parts.

You get the idea. Some hobbies are cheap or free, and others can cost you hundreds or thousands of dollars over time.

While giving up a hobby you really love can be challenging, try it for a while. You can resume the hobby later, but in the meantime, fill your schedule with new, cheaper hobbies like reading, running, soccer, or yoga out in nature. 

The idea with lifestyle inflation is that your life feels the same but costs you more. So give up things that don’t add much value but cost you money.

If you find other ways to save and miss your hobby, you can pick it up again once you have your lifestyle creep under control. 

11. Sell stuff you aren’t using.

If you have a bunch of stuff that isn’t being used, make some money from it and remove lifestyle inflation. Things you can sell are probably all over the place – from that old desk in the garage to clothes or books. 

If you have old electronics or cell phones laying around, see how much you can get for them. You’d be surprised.

Even if you don’t make much from each item individually, remember it all adds up and will make you some money in the end. After you make some money off your unused items, add it to your savings or budget and keep going with your goals. 

Lifestyle inflation happens gradually, so being aware of it is important to your financial future. 

The really challenging thing about lifestyle inflation is that you may not even notice it’s happening. This is because we acquire more possessions and add expenses over time.

One small expense here, and another one there can add up. When you examine your budget as a whole, you might see many areas that need improvement.

Use these 11 ideas to beat lifestyle inflation and make it easier to reach your money goals and stick to a budget.

By improving your habits, replacing hobbies, and selling things, you put yourself in charge of your life again. Your financial future matters, so make good choices now that will pay off later!

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Steffa Mantilla round headshot
Steffa Mantilla

Certified Financial Education Instructor

Steffa is a Certified Financial Education Instructor (CFEI) and the founder behind Money Tamer. Her 12-year background in operant conditioning and positive behavioral change training is used to help people find effective motivators to change their harmful money behaviors. Steffa explains the reasons “why” behind people’s financial behaviors and how to successfully change them. After paying off over $80,000 in debt through budgeting, she now teaches families how to get their own finances in order. You can learn more about her here.

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