Beware the Costs of “Lifestyle Creep”
According to an April analysis from the Yale University Budget Lab , the Trump tariffs we’ve seen so far would increase spending for the average American household by about $4,900. And since you’re forced to spend more money on everyday luxuries, it’s all too easy to adapt to the new normal. I’ve previously talked about how too many people overestimate the impact of your morning iced coffee on your long-term finances, but at the same time, it’s all too easy to fall into the trap of spending more money every day, which can make it difficult to save for the future.
This “new normal” of spending money falls under what is known as “lifestyle creep.” And given the current state of inflation and tariffs, now is not the time to let all your little luxuries inflate your budget disproportionately. As you prepare for the fallout from the ongoing trade war, be prepared to continue changing your personal shopping habits. Here’s what you need to know about the consequences of lifestyle changes and what you can do to avoid them.
What is lifestyle creep (and how to deal with it)
Typically, lifestyle creep is a pattern of spending more money as you make more money. But even if you’re not making more money, given the state of inflation and tariffs, you may be slowly adjusting to a more expensive new normal.
And remember, luxury is relative; For many, lifestyle creep is the difference between living paycheck to paycheck and realizing you can comfortably order DoorDash a few nights a week. Unfortunately, even small luxuries can lead to hoarding. And when you’re dealing with economic forces beyond your control, it’s best to control any inflated lifestyle costs that you can control.
Create a budget and stick to it
The best budget is the one that suits you. There are many popular options , such as the 50/20/30 method. Here’s what it looks like in general terms:
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50% of your monthly expenses go towards essentials. Your home, your transportation, your food, etc.
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20% of your monthly expenses go toward savings. You can also group debt payments into this category because paying off debt will help you build savings later.
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30% of your monthly expenses goes towards everything else. This could include gym memberships, travel, gifts and meals.
Unfortunately, there is no single magic table. Finding the one that makes sense for your personal situation may require some trial and error. Here’s my guide to getting started with budgeting.
Become a More Conscientious Spender
Now that you’ve created a budget, it’s time to stick to it. A good place to start is with your bank statements, checking to see if all the things you’re spending money on are actually valuable to you (and not some subscription service you’ve long forgotten about ). You may be surprised at how many expenses you can eliminate, whether because they were unintentional or caused by stress.
A simple tip to help you avoid unnecessary purchases is to write down the things you want to buy before you buy them. By reading through the items on this “shopping list,” you can make a more informed decision about what you really need.
Save money in a rainy day fund
The main symptom of lifestyle changes is the inability to increase your emergency fund. If the amount you save remains the same even after your income increases, chances are you’re putting that money towards smaller lifestyle changes instead. Be aware of how much you’re saving and make sure it grows with your earnings.
You’re still allowed to pamper yourself
Living below your means does not mean you have to live an ascetic lifestyle. Allow yourself to indulge in things that make you happy from time to time, especially if those indulgences improve your overall relationship with money. It is important to treat yourself thoughtfully . Ask yourself: “How do I want this purchase to make me feel? How do I want it to make me feel? What feelings am I trying to avoid by buying it?” This may look like spending money on family vacations while cutting down on takeout orders.
When you’re confident that you’re only spending money on things you like, rather than spending money on things you don’t like, you’ll be able to make much better important financial decisions.