Better Financial Health in 15 Minutes (or less!)

The Hidden Danger of Lifestyle Creep

• Stacey Hyde

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Ever wonder why that big raise or promotion didn't actually change your financial situation? The culprit might be what financial experts call "lifestyle creep" – the gradual elevation of spending habits that silently consumes increased income before it can build your wealth.

In this focused financial guidance session, we examine how even six-figure earners find themselves living paycheck to paycheck due to incremental lifestyle upgrades. Those seemingly minor changes – switching from home-cooked meals to frequent takeout, upgrading from budget vacations to luxury resorts, or adding multiple streaming services – collectively create a significant drain on financial resources. I share a revealing conversation with a friend spending thousands monthly on meal delivery services while simultaneously seeking financial advice, highlighting how awareness doesn't always translate to action.

The antidote to lifestyle creep isn't deprivation but deliberate decision-making. I recommend comparing current spending against statements from two years ago to identify inflation in personal expenses, and suggest following a modified 50-30-20 rule when handling raises: limit lifestyle increases to just 30% of new income while directing the remainder toward savings and investments. Building real wealth doesn't come from earning more – it comes from keeping more of what you earn. Try this practical challenge: when you receive your next raise, maintain your current lifestyle for a full month and experience how it feels to have that extra money accumulating rather than disappearing. Then make intentional choices about where that money should go for maximum long-term benefit.

Remember that today's financial discipline creates tomorrow's freedom. Small, consistent actions to combat lifestyle creep will compound over time, allowing your future self to enjoy genuine financial security rather than just an upgraded version of paycheck-to-paycheck living. What could your financial future look like if you kept more of each raise you earned?

Envision Financial Planning. 5100 Poplar Avenue, Suite 2428, Memphis, TN 38137. (901) 422-7526. This communication is strictly intended for individuals residing in the United States. Advisory Services offered through Envision Financial Planning, a Registered Investment Adviser.

Speaker 1:

Hi, I'm Stacey Hyde and I'm back with another episode of Better Financial Health in 15 minutes or less. And today I'd like to talk about something I call lifestyle creep. You got the big raise, you got the new car, but at the end of the month there's still almost no money left. Where did it go, and how does this, and what can you do about it? So lifestyle creep is when, slowly, over time, you maybe start not bringing your lunches often, so you eat out more or you meet friends for drinks, but instead of going to somebody's house, you're going out to a bar but now it's not the corner bar, it's this nicer bar in this fancy restaurant and sometimes you're hungry, so you stay and have dinner, or you order takeout or meal delivery services multiple times a week instead of going to the grocery store, and so all of those things add up. Or maybe, instead of taking the budget-friendly all-inclusive vacation or going camping, you've gone to you know a much nicer resort and you've upgraded your plane ticket, because who doesn't want more leg room and to make sure that they can get their bags in the overhead bins? Been there, done that. So that type of spending can really erode your savings and impact your long-term goals and it can cause you to have a paycheck to paycheck lifestyle, even making six figures.

Speaker 1:

I was talking to a friend the other day and she was like man, I need a financial planner. And I started asking her. She goes oh, I know, we spend what'd? She tell me, a couple of thousand dollars a month on meal delivery services. I was like, oh, wow, so that's you know. And she didn't really even seem willing to cut back on that. And that's really the first step is being understanding where it's going. She understood that, but she wasn't ready to make a change. And so, in order to have a better life in the future, for future you, you have to make some changes today, and it's really not any fun to live paycheck to paycheck. So what you want to look at when you look to see what's going on she obviously had done this are your expenses rising faster than your income, and that can be easy today with inflation and the tariffs and things like that going on.

Speaker 1:

And you want to compare. Pull out or go online, as most of us do, and pull an old credit card statement from two years ago, pull an old bank statement from two years ago and compare what your expenses are today versus what they were then, and a lot of the streaming services have had, um, quite a bit of increases and if you're not using them all, you may want to cancel them. I know some people that they'll have netflix for three months. They'll watch all the stuff they want, then they'll get apple for a couple of months, watch what they want there and then, and they kind of cycle through them so they never have more than one at a time. And then you know, I think we're all addicted to our amazon prime for not just the movies, um, but also the free delivery. Or, as my husband likes to point out, it's not free, we're paying for the included delivery services and I think that is a good distinction to look at.

Speaker 1:

But what you want to think about is sort of the um 50-30-20 rule and anytime you get a raise, you really want to limit the lifestyle piece to 30% of your raise, or if it can be less, that's all the better. I was actually telling my daughter and son-in-law that the real key to building lasting wealth is to not raise your lifestyle every time you got a raise. If you were comfortable at one level, just stay there and then you can take that money and increase your savings, increase your 401k at work, add more to your Roth IRA, but don't forget to put that money in your savings and set it aside. No, it doesn't have the potential to grow as much as stuff that you put in stock, but it's there if you need a new car or you have a repair on your home or something else, or you have an unexpected medical bill bill, because, let's be real, out-of-pocket payments for medical expenses can really add up quickly, so you want to make sure you're prepared for that too.

Speaker 1:

So the challenge I want to ask kind of ask you to try out today is, the next time you get a raise, really be deliberate about where you spend that extra money and make sure that it really has a nice impact for you.

Speaker 1:

Or what you could even do is take the raise, don't change anything for a month and see how it feels to have that extra money in your bank account. Don't let it just sit there in your regular checking account, though, because that's not gonna going to earn you anything. You want to make sure you're transferring it to a high yield savings account, a money market account or to fund some of those other longer term goals. So, and the key thing to keep in mind is that real wealth does not come from making more money. It comes from keeping more money and, at the end of the day, your future self will thank you for keeping more money today, and it will grow over time, even if it feels like for a while that it's not making that much difference. I promise you the power of compound interest will work for you over time. Thanks for tuning in. This has been another episode of Better Financial Health in 15 Minutes or Less.