Lifestyle Inflation, Creep, and Your Financial Future

Over the last several years, I’ve interviewed hundreds of people to understand how we can significantly impact their lifestyle. I’ve seen firsthand the impact of living rich, which means high income, overspending, and generally having a lot of debt. On the other hand, wealthy people usually have lower incomes and focus on acquiring wealth.

I’ve also met people who don’t fall into either category.

They are currently satisfied and even happy. However, they share that they don’t always desire extra money.

Interestingly, many of these people have fallen into lifestyle inflation and creep. Today, you’ll learn how to avoid this phenomenon, which can seem like no big deal but can wreak havoc on your financial health.

So, if you want a bright financial future666 and retirement, you’ll love today’s episode.

Summary: Wealth Inside and Out® Podcast – “Lifestyle Inflation and How it Impacts Your Money”

What you will learn:

How lifestyle inflation impacts you and your money
What is lifestyle inflation and creep?
How it impacts your financial well-being
Why inflation is such a problem in retirement
How to mitigate and even avoid inflation during retirement

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“Lifestyle Inflation, Creep, and Your Financial Future”

Recently, I was conversing with a peer, and we discussed people who share that they are satisfied, fulfilled, and even happy. They don’t have any desire to change anything.

And the vast majority of them are not saving for their future. Or if they are, they don’t really have a coordinated plan. They may be investing money in their company 401K, but beyond that, they are not saving or investing.

They may have a house, but planning for their future is not at the forefront.

Often, they don’t have long-term care, which is critical. They don’t have the personal investments to sustain their lifestyle.

Women Living in Poverty

Of the people over age 65 living in poverty, almost 75% are women. Most were not poor or broke while they were working or married.

Unless it’s your dream to live in a scary neighborhood and eat food from the dollar store, it’s not something I recommend.

Today’s episode will help you focus on what you want your future to look like so it doesn’t involve a broke retirement.

This episode applies more to people who either have money or are making a good living but don’t have the right plan.

Planning for the Future While Enjoying the Present

But before you panic, get depressed, or even beat yourself up, it’s not that you can’t enjoy your life now and even occasionally overindulge. You need to be conscious of your money and make smart financial decisions.

I want you to focus on what you want. What does it mean to live fulfilled? And a lot of people say, well, I am fulfilled. Okay, that’s great that you’re fulfilled now, but what about 10, 20, or 30 years from now?

You want to create a plan so you can enjoy today and tomorrow.

How does lifestyle creep impact your financial well-being?

When your standard of living increases and improves, you start spending more money. Your income increases, and you are now buying a nicer car or house and taking more expensive vacations. It wreaks havoc on your long-term financial needs.

The equation is that higher income equates to higher expenses and often higher debt.

As I shared in a previous episode, a client of mine was a centi-millionaire, someone with a net worth of over 100 million.

He said one of the most important things to me, “You can’t get into the make more, spend more syndrome that most people fall prey to.”

He didn’t call it lifestyle creep; he just said most people get into the cycle of making more money and then spending it.

The goal is to make more money and accumulate more wealth.

Let’s review signs of lifestyle creep

Living Paycheck to Paycheck

This entails spending all the money you get from your paycheck, leaving no money for saving, investing, or emergencies.

Reduced Savings and Investments

You have reduced savings in investments compared to your peers, who will be okay financially. This means others who have money in the bank and have personal investments.

As you spend more money to live, you have less to invest. The result is often a broke retirement.

Limited Emergency Funds

Most people who are overspending don’t have sufficient funds for emergencies, such as medical expenses, car repairs, or even an unexpected job loss.

This can lead to stress and cause you to borrow money and incur debt.

Delayed or Broke Retirement

You need to determine how much money you need in retirement. This requires that you review the numbers and determine the amount you need to save.

If you don’t know, you need to hire a qualified advisor. They can help determine how much money you need to invest to achieve your goal.

That will allow you to avoid delaying retirement or being unable to retire. As a result, you are more likely to better enjoy your life now.

Stress and Financial Instability

A lot of divorces and discord occur because of this. One of the partners is a spendthrift.

They’re not concerned about saving money for retirement, which can affect their mental and physical health and relationships.

How do you mitigate and even avoid lifestyle inflation?

These insights will help you get and stay on track to create a retirement and financially free-life you love.

8 Ways to Avoid Lifestyle Creep

Ways to Avoid Lifestyle Creep

In the podcast, we cover all eight strategies; here are a few of them:

1. Create a Spending Plan

This is your budget, which tracks your spending. Monitor it and look for areas where you might be spending too much money. A qualified financial advisor or even a money coach can help you. Start saving and investing early in this area.

3. Set and Measure Financial Goals

Your investing and savings goals should focus on short and long-term financial goals.

Set clear goals. Start saving early. Consider buying a home. You might want to plan on starting a family.

Whatever your goals, you’ve got to allocate your resources accordingly.

4. Live Below Your Means

I know, that is so unpopular, right? Because everyone wants to look like they have money.

We recently went out to dinner with some friends, and they drove.
Their car is worth about $150,000. They have money, but they also have a very high lifestyle. Hanging out with rich people is exciting and a dopamine hit.

The problem is it can be so addictive that some people want to stay in that, and that’s where it becomes devastating.

Instead of spending everything you earn, start living on a little less.

5. Automate Your Savings

If you can, set up retirement at work through a 401k. Invest the maximum amount. As you start earning more money and investing more, it will help you live golden years in retirement (instead of miserable years).

7. Regularly Review Your Finances

You also want to have regular reviews of your finances.

8. Hire a Qualified Financial Advisor or Money Coach

If you need help with finances or budget accountability, a financial advisor or a money coach can be great.

Additional Tips to Improve the Quality of Life

1. Save for retirement
2. Pay off credit cards each month
3. Monitor your spending habits
4. Set up a separate savings account for your emergency fund

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