Today we’re going to talk about the lifestyle creep, how to identify it, and how to course correct if you find yourself in this situation.
The Lifestyle Creep
The lifestyle creep occurs when an individual’s standard of living improves and expenses that were previously considered wants become needs. The rise in discretionary income can happen either through an increase in income or a decrease in costs. A common goal that many of us share is working hard to improve our standard of living for ourselves and our families. We have desires and goals that drive us to develop the skills and experiences needed to move up in our careers, and therefore earn more money.
Maybe you’re working toward buying a first or second home; that car you’ve always wanted; or your kid’s education. The list is endless. While those desires and goals vary from person to person, increased income or reduced costs, or a combination of the two naturally leads to more money in your pocket. You’ve worked hard, you’ve sacrificed, and your mindset may have subconsciously changed. Non-essential items that were previously viewed as a want may now be viewed as a need. There are many examples of non-essential spending like eating out more frequently and more expensively, replacing a car sooner than you need to, or purchasing even more expensive clothing or jewelry. To be sure, none of these examples are bad per se.
Your Money, Your Decision
In other words, where you choose to spend your dollars is your decision. However, the potential downside is that lifestyle creep left unidentified or unchecked can pose significant risk to one’s long-term financial goals and security. We want to help identify your life and money goals. Assess your standard of living now, what you’d like it to look like in retirement, and then track your continuous progress along the way.
We ask ourselves, are there areas of opportunity or improvement to help the success of reaching those goals? Do you have the right protections in place in the event of a disability, an accident on your property, or loss of life? Does your estate plan appropriately reflect your wishes? Success in life, both personally and financially, is often intertwined. At Wealth Dimensions Group, we’re not here to judge your spending or savings habits. Our goal is to help frame what’s most important to you, ascertain where you are toward reaching those goals, and offer observations and solutions that best position you for the life you envision.
For informational purposes only. Not intended as investment advice or a recommendation of any particular security or strategy. Past performance is not indicative of future results. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. For more information about Wealth Dimensions, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov or contact us at 513-554-6000. Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.