Subconsciously keeping up with the Joneses and letting your costs of lifestyle creep up is a very real threat.
Regular reader will remember that we relocated to the Channel Islands this year. Despite being quite happy to be super frugal in England, we’re already noticing tings creeping in.
Solid examples of where we’ve deviated from our previous behaviours:
- Food in general costs more here anyway as it’s shipped across, so quite often better quality versions get bought because the difference in price by percentage isn’t so obvious as in mainland UK
- I’m in the same five-mile square as my clients from work, so it’s wise to dress a bit smarter than I used to when I commuted to London from a city my clients would never have visited. My scruffy t-shirts stick out here, so I’m less reliant on them as a wardrobe staple and now pay more for clothes. That’s a bigger cost increase than you might expect.
- We’re presently living in someone else’s house, so almost all our weekends involve going out to eat/ have a drink for the night as a change of scenery. This is pretty expensive and other entertainment stuff we would do – like invite friends over for dinner or whatever – is temporarily being replaced by this.
- Our £300k 3-bed in England was cheaper than a reasonable 1-bed flat here, so we’re about to pay a ridiculous amount on a flat or house. Eye watering. We’ll be doing well to keep below £2k a month for a 2-bed, even with a 20% deposit. That’s almost what my entire pay was just a couple of years ago!
Lifestyle creep is like a car crash in slow motion
You know it’s coming, you want to avoid it, but it’s inevitable.
I’m a sucker for going out to eat dinner. Don’t get me wrong, I’m a pretty good cook and I actually enjoy cooking, but I work long hours and the faff of deciding what to eat after a hard day’s lawyer-ing is sometimes too much.
But you know what? It’s Friday. I’ll treat us both to a nice dinner out, babe. Another wine? Sure, why not… …eurgh, too much wine last night, maybe some convenience food for lunch…
That’s me at my financial worst. I make the absolute worst decisions when there’s no immediate consequences for *no longer* being tired and hungry.
You know what? I’m working hard, I make investments, I’m financially stable. Why can’t I have a bit of fun? Once, maybe twice a month won’t hurt… or maybe just on Fridays?… or maybe it’s OK as long as I’m in budget..?
This is the bit that changes it from just a regular splurge to actual creep: when I justify both the actions and sanction their repetition.
Yours might be clothing, books, video games, cars, houses… but you probably will have a weakness to lifestyle creep
A few mates of mine really bought into the officer lifestyle in the military. They always wore a nice, branded pair of chinos, a shirt from a non-high street brand, a merino jumper in winter and had sometimes a selection of jackets. Driving a car older than 6 years old or smaller than a Ford Focus was frowned upon.
It’s a good thing they had military pensions, because they were always broke.
In that case, it was deliberate lifestyle creep to maintain an identity. We had a kind of dress code, things that we all did in common and our workplace was deliberately status-driven. That’s not really a problem for the military, but it is a problem for financial independence campaigners.
I’m now a lawyer. Recently, a buddy reached out to me to ask how I’d funded the one-year legal practice course, hoping to follow in my footsteps. When I told him I’d supplemented the grant from my firm with my savings for the year, I could hear his heart sink on the phone: he hadn’t built up any savings.
I’m sure he’s fine, by the way, but that’s a hard wake-up call.
Lifestyle creep is human nature
Which is a problem for humans, i.e most of us.
The book The Chimp Paradox by Professor Stephen Peters talks about how your conscious brain is divided between your thinking rational human part and your emotional animalistic inner chimp. The human part is you reading this blog; the chimp part is when you think to yourself “I never do any of that! This doesn’t apply to me!”. The book goes into a lot more detail, but that’s a pretty quick example.
Sadly, it’s impossible to brute force the inner chimp into submission. Turns out that’s a human trait. Instead, you have to recognise it and placate it.
It follows that you may be able to fight the urge to drop £200 on a night out on the town, buuut you’re probably going to buy yourself a cheeky takeaway, or even a ready meal… and maybe get dessert, because you have been so good about not spending that £200, so it’s practically a saving…
… even if you’re now spending £30 on dinner at home, which is quite a bit.
Fortunately, there are things you can do to minimise the impact
Realistically, you’re probably not going to defeat lifestyle creep, or at least not entirely.
If I could, I would. Definitely.
The best most of us can do is mitigate the harm and try to limit how far off the Path of Righteousness we deviate.
Here are some ideas that work for me and might work for you:
Cheat Days Only!
A favourite of bodybuilders and the characters of The Purge alike, limiting your bad habits by time is kind of bearable and there’s only so much harm you can do in a day (he says).
Consider reducing your weakness spending to Fridays only or something similar. It’s easier to tell your inner chimp to wait until Friday than a flat-out “no“.
The Next Best Thing
Like in the example above, it’s financially better to treat yourself to an oven pizza and ice cream than to head out to Pizza Hut. It’s better to get obsessive about running than skydiving.
You get the picture. Accept you’re going to damage your wallet slightly but if it stops your going hard on the credit card it’s definitely a better outcome, even if far from perfect for your financial independence campaign.
Pay yourself first
If your investments are automated or the core investments at least get deposited on or near payday, you can rest assured that your worst possible outcome is that you’re still growing your pot for financial independence.
I’ve got a direct debit to my investment account (if you’re in mainland UK, I’d use an ISA if I were you – but they don’t exist here) which is set up the day after payday. That’s the real boat plan pot. As long as this is made, I will achieve financial independence to the standard required to make the boat plan happen.
Anything else I invest just improves my position or speeds me up.
Buy investments as a treat
Bit rogue, but hear me out.
I rely on my automated investments to get my to the Boat Plan. They will bring me success.
However, I also buy individual stocks, gold and crypto with “spare” cash outside of this plan.
I get the kick of spending money (let’s face it: spending money is a kick) but instead of throwing it at whatever short-term idea I have I now have another asset to my name.
Even if the market completely tanks in whatever asset I’ve bought, I’m no worse off in a few years than if I’d spent it on whatever thing I would’ve wasted it on, but the upside is considerably higher.
Spend intentionally
I’ve already written about what spending intentionally means to me. I find that the more deliberate my spending plans are, the less I fall victim to lifestyle creep. If I know I’m going to spend £131 on the next block of swimming lessons, there’s no way I’m going to spend that allocated £131 on something random or overspend on an additional dinner out that week.
Final thoughts
Lifestyle creep is probably going to happen to you, and it has definitely happened to me. If it didn’t, I’d still be living on my student budget adjusted for inflation twelve years later. The fact that I can’t recall how I managed that shows how far my lifestyle has crept already.
I don’t think it’s something I’m going to beat myself up over. As long as I’m paying myself first and doing the other steps above, I should be fine for financial independence. All the same, it’s something to bear in mind when the temptation comes to do things like overspend on a house in the next few months or take up new and potentially super-expensive hobbies.