# Understanding Lifestyle Creep: Impact on Your Finances and Solutions

![Woman in cafe with shopping bags paying with a credit card](https://www.investopedia.com/thmb/tw8T1piPDkZEmIt8AcjhDk6b_sc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1648880480-5fae58fc9abe48f8a984afac55e65bc6.jpg)

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## What Is Lifestyle Creep?

Lifestyle creep is when your standard of living rises alongside your [discretionary income](https://www.investopedia.com/terms/d/discretionaryincome.asp)—and soon enough, former luxuries become new necessities. It happens little by little, without you really realizing it: it sneaks ("creeps") up on you.  

### Key Takeaways

*   Lifestyle creep gradually occurs when increased discretionary income leads to spending on former luxuries, inadvertently making them new necessities.  
    
*   This phenomenon can impact financial stability, especially during income decreases, by potentially exhausting savings if spending habits aren't adjusted.  
    
*   Young savers and near-retirees are particularly vulnerable as lifestyle changes during peak earning years may hinder long-term financial goals.  
    
*   Combatting lifestyle creep involves budgeting and distinguishing between needs and wants to maintain financial clarity and prevent overspending.  
    
*   Popular budgeting methods, such as the 50/30/20 rule, offer a structured approach to managing income allocation for needs, wants, and savings, assisting in counteracting lifestyle creep.  
    

## Understanding Lifestyle Creep: The Subtle Shift in Spending Habits

With lifestyle creep, you're spending more without realizing it, which means you might not truly enjoy the spending.

Examples of lifestyle creep include:

*   Eating out or getting food delivered so frequently that it doesn't feel special anymore
*   Filling up your closet with so much stuff that it becomes overwhelming
*   Buying stuff you don't really enjoy on Instagram and TikTok
*   Buying video games you don't play, or media you don't watch
*   Having so many subscriptions that you can't enjoy them all  
    
*   Buying or renting more house than you actually enjoy
*   Spending so much on a hobby or travel that it no longer feels worthwhile

> **Tip**
>
> To combat lifestyle creep, use a budget and distinguish between wants and needs.

## How Lifestyle Creep Affects Near-Retirees

Lifestyle creep can affect those who are approaching [retirement](https://www.investopedia.com/terms/r/retirement.asp). Some people [five to 10 years before retirement](https://www.investopedia.com/articles/retirement/07/5yearstoretirement.asp) are in their peak earning years and might have already paid off their longstanding recurring expenses, such as a [mortgage](https://www.investopedia.com/terms/m/mortgage.asp). With this new discretionary income, their standard of living may inch up without them realizing it. They might go for a more expensive vehicle or a pricier vacation without really thinking about why.

Retirees may need more funds if lifestyle creep has raised their standard of living before retirement. They might lack resources for retirement because they spent rather than saved their surplus cash flow.

## How Younger Savers Experience Lifestyle Creep

Lifestyle creep can also be felt by younger consumers, such as when they land their first well-paying job. They might start buying things that were previously out of reach, without really noticing it happening. This can hinder [buying a first home](https://www.investopedia.com/terms/f/firsttimehomebuyer.asp), saving for retirement, and paying off [student debt](https://www.investopedia.com/terms/s/student-debt.asp). To counteract this, use big life goals to guide spending and create a budget.

## What Is a Budget?

A budget helps you figure out how you will spend your money each month. It also helps you track how much you're spending.

To make a budget, you need to know exactly how much is coming in, and how much is going out. First, list your income (how much you make) and expenses (how much you spend). Subtract your expenses from your income.

To do this, you'll need to study your checking account. If you have any credit cards, you'll need to check your recent activity, typically over the last month. One way you can track your expenses is by using a budgeting app.

Your goal is for the result to be positive: for you to have money left over. (You can save what's left over, or allocate it to your spending categories.) If the result is negative, then you'll need to cut some of your expenses until the result is positive.

After this exercise, try to follow your budget for the next month. If you overspend in one category, try to underspend in another, so it evens out. It can be very difficult to follow a budget, but it's worth a try.  

## What Is the 50/30/20 rule?

The [50/30/20 rule](https://www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp) is a budgeting method. It states that when you get paid, 50% of your paycheck (your after-tax income) should go toward needs, 30% should go toward wants, and 20% should go toward savings.

## What Is the 70/20/10 Rule?

The 70/20/10 rule is a budgeting method. It suggests the following for your [net (after-tax) income](https://www.investopedia.com/terms/n/netincome.asp): 70% should go towards living expenses, 20% should go towards savings, and 10% should go towards donations.

One downside of this method is that it doesn't distinguish between wants and needs. They are grouped together in the 70% segment.

## What Is the 40/30/20/10 Rule?

The 40/30/20/10 rule is a budgeting method. It recommends that you divide your paycheck (after-tax income) this way: 40% should go towards needs, 30% should go towards wants, 20% should go towards paying off debt or savings, and 10% should go towards other financial goals, such as [charitable giving](https://www.investopedia.com/terms/c/charitabledonation.asp).

## What Is the 60/20/20 Rule?

The 60/20/20 rule is a budgeting method. It says you should segment your after-tax income this way: 60% should go towards needs, 20% should go towards wants, and 20% should go towards your savings, such as creating an [emergency fund](https://www.investopedia.com/terms/e/emergency_fund.asp) that equals three to six months of your expenses.

## Conclusion: Managing Lifestyle Creep for Financial Stability

Lifestyle creep occurs when increased income leads to a higher standard of living. You start spending more money without realizing it, diverging from your former lifestyle. As your income improves, so does your lifestyle. This may not necessarily be a bad thing, depending on if you can afford it. But be mindful of your spending. Are you enjoying it? Or is it, well, creeping up on you?

> **Article Sources**
>
> 1.  Consumer.gov. "[Making a Budget](https://consumer.gov/managing-your-money/making-budget)."