Don’t Let “Lifestyle Creep” Steal Your Raise
First comes the job, then comes the raise, then comes the good life — right?
Fast forward one rotation of the earth around the sun. We find Maddie with her “old” phone and no smile in sight. Her shoulders slump under the weight of the financial burdens that seemed to materialize out of thin air. She has stylish new furniture in her living room, a mountain of shoes in her closet, a pile of receipts for take-out food in her wallet, but somehow — less peace.
What happened? Maddie didn’t go wild. But her six percent raise was almost 100 percent gone within the year, leaving Maddie wondering how she got here.
When More Isn’t Enough
Like Maddie, many people find it hard to adjust to a pay increase. It doesn’t make sense how more can so quickly turn into “not enough.” It’s called “lifestyle creep,” and it’s as common as the common cold — and often as contagious. Investopedia defines lifestyle creep as:
A situation where people’s lifestyle or standard of living improves as their discretionary income rises … former luxuries are now considered necessities.
Think of it as dishes in the sink on the weekend. They seem to come out of nowhere, multiplying and creating more headaches Sunday night than if you’d kept up with them all weekend. Extra spending initially creeps into your life without notice, but takes your money down the drain before you know it.
The good news is, that sneaky rise in your expenses can be identified, exposed and eliminated. Try these three steps to guard against hidden spending before it gets any creepier:
1. Organize your money into buckets. No matter how much money you make, it is helpful to start by organizing your resources into buckets. Use the image of buckets to mentally organize your money into three high-level areas:
No matter how much money God has provided, you can save some of it, share some of it with your church and those less fortunate, and enjoy spending some of it. Each area is important and affects not only you, but also your relationships, including your relationship with God.
Saving money is not only smart; it’s also biblical. Proverbs presents a principle of planning ahead for seasons of need. One example is found in Proverbs 6:6-8, which says, “Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest.”
And you don’t have to look far to find biblical support for giving to your church and those in need. 2 Corinthians 9:7 tells us, “Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver.”
The benefits of saving and giving are obvious, and the biblical basis is evident. That may be why some people actually struggle with spending money. But living tight-fisted like some kind of Ebenezer Scrooge may be an unappreciative gesture to the One who provides for your basic needs and gives you good gifts. Matthew 7:9-10, talking about Father God’s relationship to His children, says, “Or which one of you, if his son asks him for bread, will give him a stone? Or if he asks for a fish, will give him a serpent?”
God loves to give to those who ask. He is generous toward us, and sometimes that involves financial blessing. So trust in God’s current provision for your life and take a few minutes to envision your money filling up (and sloshing out of — why not?) three buckets — save, share, spend.
2. Commit to a percentage. Now that you have your three buckets, assign a percentage to each bucket: saving, spending and sharing.
Remember Maddie? She makes $47,500 a year as a social media manager. She loves her job, especially the convenience of working out at the office gym over lunch, skipping the cost of a gym membership. Her six percent raise takes her annual gross (total before taxes) pay to $50,350.
Remember her surprise at how quickly her raise went from “big bucks” to “big debt”? Fifty grand sounded like so much more than $47,500! But when she added up the 12 months of eating out an extra time each week ($780), the new IKEA couch ($800) and bookcase unit ($222), and a new iPhone ($800) Maddie had spent 91.3 percent of her six percent raise. At the end of the day, it’s like she got less than a one percent raise. Ugh.
Had Maddie set her percentages first, her $2,850 raise may have looked more like: savings 30% ($855); spending 55% ($1567.50); and tithe and share 15% ($427.50).
Maddie can still enjoy her new raise. She can eat out an additional time each week and buy a not-used couch and still be well within her 55%. However, the new iPhone and bookcase should wait.
After you nail down your three S buckets, consider your Ps.
● Personal percentages
As you choose the percentages you want to assign to each bucket, remember that these numbers will vary from person to person based on your priorities and the Lord’s leading. Maddie’s percentages may not be a good fit for you. Pray, prioritize and personalize the numbers to fit you, your future goals and your season of life.
The beauty of percentages is that you don’t have to change them when your financial situation changes. Whether you get a raise or face a job loss, you can manage your money based on these percentages. Or maybe you’re in a season of no income at all. Percentages work here too. Zero times zero is zero. (Can’t you just hear your elementary math teacher in your head?)
And remember, monies for your spending percentage are more monies to be spent, period. If you get a raise, spend that new, larger amount. Guilt-free. If part of your “spending” plan is knocking out that student loan, great. Pay it down early. But abandon the guilt.
Your personalized percentages will flex with you as your income flexes and keep you within sensible boundaries for healthy spending.
3. Form healthy money habits now. They say it takes 21 days of consistency to form a habit. We’d agree that they (whoever “they” are) are probably right, and we’d add that we know plenty of people who wish they had an extra 21 years of good money habits to help their current financial situation.
The money habits you form now will affect your future, including your future relationships. One of the best money management habits you can form now is to eliminate “lifestyle creep” and spend less money than you make. Sounds simple. Sounds logical. But it can be difficult, especially when you’re starting out without a lot.
Maddie felt justified with the new phone, the new wardrobe and the new furniture, but her spending ended up stealing her raise. Money management is a skill. You will get better at it as you spend time and work at it — like cooking, or skiing, or weightlifting. Proverbs 22:3 warns, “The prudent sees danger and hides himself, but the simple go on and suffer for it.”
We have heard from lots of young professionals that money management is a topic they’d rather avoid. The concept of money and wealth can feel downright uncomfortable. You’re not sure where to start or whether focusing on money is even appropriate. God knew we’d struggle with money; that’s why there are over 2,000 verses in the Bible about money, wealth and greed.
We know money management is not everyone’s favorite subject (it’s not even ours). But establishing healthy money habits now will pay off tremendously in your future. Invest in yourself and steward your resources well by giving some thought to your S’s (save, share, spend) and your P’s (pray, prioritize, percentages) Then watch the fruit that develops from your good habits.
Give lifestyle creep the boot. Your future self will thank you.
Copyright 2017 Scott and Bethany Palmer. All rights reserved.
About the Author
Scott and Bethany Palmer, The Money Couple®, are regulars on national TV and radio and speak internationally about The 5 Money Personalities™. To learn more about your Money Personalities, get the free article “20 Questions to Ask Before You Say ‘I Do,'” and take the free, scientific quiz, visit TheMoneyCouple.com or pick up a copy of their book The 5 Money Personalities: Speaking the Same Love and Money Language.