Lifestyle Creep: What is it and why does this type of debt matter?

Finally! You secured that new job, or promotion, or pay rise. It is high time you treated yourself to a new car, new skis and a better hiking pack. Not to mention that every single article of clothing you buy going forward will be branded and stylish, even if the price tag on that is a little higher… This is what lifestyle creep looks like.

What is lifestyle creep?

Lifestyle creep (almost inevitably) happens when your discretionary income increases.

So, what is discretionary income?

Discretionary income is the amount of money you or your household has left once you have paid for the strict necessities: food, transport, housing, utilities, and clothing.

When life events lead to you having more money in your pocket, you have more discretionary income. This happens when you get a promotion, score your first full-time job after graduating college, or land a huge new deal, for example.

Lifestyle Creep Defined

Lifestyle creep is where your discretionary spending starts to slowly creep up once you find yourself with more money to spare. Expenses that you formerly saw as a luxury – or a treat – start to be seen as a necessity.

It usually starts small:

Instead of going to the gym, you work out with a personal trainer.

You now have Netflix, Disney+, and Prime so you can watch all your favourite shows.

The latest iPhone is a must have for your productivity and your downtime.

Is lifestyle creep a bad thing?

Honestly, not always. It comes with the territory. You have worked hard to get yourself to where you are. And you do deserve to treat yourself to the nicer things you crave.

But lifestyle creep can easily become a bad thing.

Over time, your mentality changes. You no longer consider where you could save a few dollars. Shopping around for deals becomes a thing of the past. Household chores are entirely outsourced. Life is good.

That is, until your expenditure creeps towards your total discretionary income.

When this happens, your expenses will affect your ability to save for or invest in your future.

Or worse – you might find that your debt is mounting and becoming unserviceable. This causes sleepless nights, stress, and arguments until that debt is completely resolved.

Managing Lifestyle Creep

The key to managing lifestyle creep is to have a plan. We are not saying you need to keep living like a student until you retire. But you should have a budget that balances your needs today with your future needs.

You can buy the car you have been dreaming of owning your entire life. But if you do, you might need to cut back on the personal training and Disney+ so you can continue to save for the future too.

Be sure to regularly check in with your current and future spending too. It is so easy to overspend without realising if you do not keep an eye on your bank balances.

Balance and planning are your best defence against unsustainable lifestyle creep.

Stressed About Your Debt?

4 Pillars Consulting are debt resolution experts. We have helped Canadians resolve more than $1 billion in debt with their creditors. Today, more than 97% of our clients are living debt free.

We work with individual sand families who are frustrated, overwhelmed, and scared due to their mounting debts, high interest, and paycheck-to-paycheck lifestyle.

With over 60 offices across Canada, we are here for you.

Start with a Free Consultation.


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