Getting rewarded with a rise in wage is a very satisfying moment. However, without us noticing, a lot of people gets caught up in the “lifestyle creep” phenomenon. What is a lifestyle creep, and how does it affect us?
Understanding lifestyle creep: the concept
Lifestyle creep is, simply explained, when your spendings for lifestyle grows as your income increases. A lot of people might think, “what’s the big deal with it?”, “They deserve it”, and others. However, Investopedia notes that over time people with lifestyle creep often end up confusing a necessity versus a want. They slowly think they need to spend more of their money on frivolous things. Without a good budgeting plan, people with such a lifestyle will only end up with more regrets, and even debts.
Why do people end up living with the phenomenon?
The Millennial Money Woman suggests that people with lifestyle creep could be doing it for status, or maybe to show off their wealth. To some people, it could also mean a sign of being successful. Other times, it’s probably because the thing is an unrealized dream from the younger days. Regardless, living with such type of lifestyle could really wreck you.
How will lifestyle creep cost you?
Without proper budgeting in the expenses, people with lifestyle creep will end up living paycheck to paycheck. Ironic, because with more income, they could have allocated more money for saving or income. The Millennial Money Woman also mentioned that living paycheck from paycheck makes you become too dependent on one income stream.
Having less money saved means you will need to work hard for quite a long time. In another word, say bye to early retirement. How will you even afford your life post-retirement if you are still struggling to live from paycheck to paycheck?
The worst thing that probably you could experience is falling into the pit of debt. The worst-case possible is living with your unpaid debts and getting yourself cut from your job. While you might be one of the excellent workers in your job, unexpected things happen. Take for example the coronavirus pandemic, that cost millions of people around the world unemployed.
Lastly, lifestyle creep would only give you more stress by the end of the day. All the luxuries may give you happiness, but how long will it last for? If you end up with the worst cases: zero savings, millions of debts, and unemployment, how will you stay afloat? Act wiser with your money.
Read also: 10 Financial Goals to Achieve Before 30 (Part 1)
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