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What to do about the lifestyle creep
Taboo money perspectives
You're in Good Company
January 28, 2024
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Your Taboo Money Perspectives
The other day I was reading an article about the difference between being “rich” and “wealthy”. I was intrigued, because I’d never really considered that they might mean quite different things… It turns out there’s a big difference. Allow me to explain.
I read that “there is no faster way to feel rich than to spend lots of money on really nice things”... Can definitely relate to that... It went on to say, if you spend money on things, you end up with the things and not the money.
Anyone else heard the stat that up to 70% of lottery winners go broke? Don’t mind me having a massive “aha” moment.
Where rich is visible - nice house, expensive car, boujee holidays - wealth is hidden. It is income not spent, providing the option to buy something later. Its value lies in providing you with options, flexibility, and growth to buy, donate, experience and enjoy opportunities in the future.
The problem for many of us is that it is easy to find rich role models, and far harder to find wealthy ones because, by definition, their success isn’t on show.
Has anyone else heard people comment about someone who is super wealthy being stingy? I’m thinking that this rhetoric is starting to make sense…
Deep down, I believe most of us want to be wealthy - have freedom and flexibility over having “things” - but herein lies the problem: it is so entrenched in our minds that to have money is to spend money, that we don’t get to see the restraint it takes to actually be wealthy. And if we can’t see it, it’s a whole lot harder for us to learn about it.
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Have you succumbed to the lifestyle creep?
Lucy Dean recently explained the phenomenon in the Financial Review:
When extra income is quickly absorbed by more expensive tastes, or things that you once considered luxuries seem like necessities, bam, you’ve been struck by the lifestyle creep.
In other words, it’s the definition of becoming richer, not wealthier.
The lifestyle creep can happen to anyone. It doesn’t matter if you’re making six figures, and you’re not in the clear if you draw the line at designer clothes. We’re all capable of convincing ourselves we need a new outfit for work, signing up for another subscription service without cancelling the ones we don’t use, and going from meal-prepping to ordering sushi again on UberEats once again.
A story from a community member on their experience with “the creep”…
A couple of years ago, I got a credit card because there was a sign up bonus of 100,000 points, which got me a plane ticket to the US. The mindset I found myself in after getting the card, was that I should put everything on it because I could earn points. However what I failed to consider, and what I understand clearly now, is that a credit card is not for everyone, myself included.
Some people are disciplined and can pay back every expense as it comes, but I fell into the trap of telling myself that I’d pay it back with my next pay cheque. This unfortunately turned into a vicious and ongoing cycle that I wasn’t able to break. I would see a new jacket I wanted, put it on the credit card and then wait for my next pay cheque to pay it off, only to then not have enough ‘cash’ that month, and having to fall back onto the credit card.
I honestly felt so trapped. I objectively knew that I could just stop spending more than I earned, but the psychology of feeling like I had ‘free money’ kept overriding my senses and I kept seeking the dopamine hits from materialistic items. A lot of which stemmed from seeing new items on my Instagram or TikTok and wanting the next best thing.
I ended up borrowing a couple of grand from my parents to pay off the card, cancelled it, and then paid back my parents over a couple of months.
Moral of my lifestyle creep story is that you could wear the same s**t to every social event and no one would likely even notice. And when I stopped buying stuff I couldn’t really afford, I was getting a new dopamine hit - this time from not having to worry about paying off a big sum of credit each month.
Here are some signs that you may have succumbed to the creep:
You avoid checking your bank account. The lifestyle creep can easily creep on in when you don’t maintain some level of awareness over how much you can afford to spend.
You don’t feel “in control” when it comes to your money. Maybe you find yourself wondering where all your money left at the end of each pay cycle, or you feel a sense of dread when thinking about getting on top of your finances. This might be a sign that you’re spending beyond your means.
Your savings isn’t increasing. If your savings (and/or investing) balance hasn’t been going up despite pay rises or bonuses at work, it’s time to ask yourself, where has all that extra money been going?
Your expenses have been going up in many (or most) areas of your life. You might have signed up to the more luxe gym, or been treating yourself to more expensive skincare. If you’ve noticed that you’re spending more (even if you feel like you can afford it!) this is a sign that the lifestyle creep has kicked in.
Whilst writing this, part of my brain is thinking, but money is meant to be spent! Why work so hard if you’re not able to enjoy it? In other words, is the lifestyle creep really so bad?
I now realise that this is the “rich” mindset: the idea that spending money on nice things makes you feel like you have a lot of money. But what I really want is to be wealthy, so I can achieve those longer-term freedom goals we talked about. So what do we do about it?
When it comes to fixing my behaviours, I find it helpful to first understand “why” I’m doing something. It allows me to recognise the behaviour, question it, and make more conscious and thoughtful decisions. Which brings us nicely to our second question of the week…
How does comparison influence the way you spend?
I’ve recently been reflecting on the way social media can make us feel with our peers and people we don’t even know always doing the next best thing… travelling, trying new restaurants, flaunting a new label, you name it.
My brain with its new found knowledge: “rich stuff!!!”
Having recently moved cities and having watched my friends lives unfold on social media from afar, I still find myself feeling surprised when, now that we’re living in the same city, I ask what they’re up to on a Friday night and they tell me they’re staying in.
Social media lead me to genuinely believe that the people I knew were always out socialising, which I now realise was subconsciously influencing me to do the same.
The comparison trap is out here stealing my joy, my paycheque and my sanity!
An ex-colleague and YIGC fan, who is about 10 years ahead of me in age and work-seniority (aka - wise!!!) reached out after episode one of our taboo money series to let me know that he too had felt similar feels at my age and stage.
He also expressed that he used to wonder when my colleagues and I rolled into another Friday night drinks after work, how we could all afford to buy food and drinks at the rate we did on such a regular basis.
It has honestly got me wondering, are we all just out here spending money we can’t afford to, because we think the next person can?
Can money buy you happiness?
A recent chat in our DMs enlightened me to an interesting perspective.
When you look at people with nice things, let’s say designer clothes, we’re not actually marvelling at the individual’s success that has enabled them to afford that wardrobe.
We’re thinking about ourselves! We’re thinking about how nice it would be to own the clothes, and how if we were able to, that would be a signal of “success” or having “made it”.
Far from being concerned with the achievements of others, we find ourselves contemplating our own aspirations, and the idea that possessing such items could be a tangible marker of our own success.
Which leads me to ask, do expensive clothes, or [insert aspirational item here] really make us happy?
This brings us full circle… These items might indicate someone is “rich”, but what about “wealthy”?
When starting You’re In Good Company, we were regularly asked why it is important to us to invest. The answer was because it gives you freedom. Freedom to make decisions - big life decisions like whether you can leave the job that’s making you miserable, afford the unexpected medical bill, or take the holiday with your best friends - without having your financial situation overly impact your decision.
This is the definition of being wealthy.
In last week’s episode, Dyl Buckley shared how getting clear on his values has allowed him to spend money in a way that makes him much happier, and ultimately build wealth by avoiding leaking dollars on things that don’t actually spark joy (hello Marie Condo).
It got us wondering, so we asked the YIGC community what are the things they can “always justify spending on”?
Gym! Good for mental and physical health, as well as paying productivity dividends
Holidays
☕️
Gym, coffee, experiences
iCloud storage!! And lollies
Tickets to a show
Overwhelmingly, our community values experiences over material things. Which brings us back to the top of this newsletter (excuse me while I quote myself):
Deep down, I believe most of us want to be wealthy - have freedom and flexibility over having “things” - but herein lies the problem: it is so entrenched in our minds that to have money is to spend money, that we don’t get to see the restraint it takes to actually be wealthy. And if we can’t see it, it’s a whole lot harder for us to learn about it.
I’m not sure what the answer is, other than to say I think if we can normalise being more open and honest about our money situation, it has to help. My goal for 2024 is to get crystal clear on my values, and as much as possible align my spending to them. And I don’t want to do so quietly! I want to verbalise this to my friends and family so we can all get on the same page and work on this together. It may be harder to find role models who have nailed the “wealth” approach - but I’m using more open conversations as a start.
Let’s see how we go!
Get excited for tomorrow’s episode which broaches two of the most requested topics: buying a house + wedding culture. Probably the juiciest yet - so get your responses for next weeks newsletter ready!
Until next week,
Mads and Soph x
Hey friends, Maddy here! I saw a stat the other day that said almost half of Gen Z say they are overspending on the “good life”, like going out and shopping. OVER spending being the key word there… I’ve been trying to remind myself that it doesn’t have to be one or the other, spending or saving, but more about spending mindfully…
One thing I’ve found really helps is Up’s newest feature called Hi-Fi. It’s basically an automated system that helps me manage my money on auto-pilot. I now get notifications for upcoming bills, have my expenses aligned, and am actually getting an understanding of what my outgoings are. And the best part is that it helps me to know how much I’m due to have left over at the end of each pay cycle so I can spend more responsibly on the fun stuff!
So join us, and 750,000 other young Australians and download Australia’s highest rated banking app. Up is making dealing with money easy for our generation.