Early Retirement

An Argument for Lifestyle Creep

When lifestyle creep can be a powerful thingIf you’re in the FIRE community and you’ve heard of lifestyle creep, it’s probably been in negative context. Outside of questioning the 4% rule, it’s hard to think of bigger sin for FIRE folks than succumbing to lifestyle creep.

However, I’m not so sure it deserves such a bad rap.

Is spending more as you earn more money really such a bad thing? Can it derail your retirement plans? Shouldn’t you be investing more your index fund portfolio?

The short answer is, “yes” to all of the above.

The longer answer is, “yes, but there are ways you can smartly experience lifestyle creep without getting off track.”

We’ll dive into all those reasons and more, but let’s not get ahead of ourselves. First things first, what actually is Lifestyle Creep?

Lifestyle Creep Definition

Investopedia says, “lifestyle creep occurs when an individual’s standard of living improves as their discretionary income rises and former luxuries become new necessities.”

It’s actually a really good definition.

It layman’s terms, that would read, “lifestyle creep happens when your income rises and your former wants becomes needs.”

To bring it to life, here’s a quick example.

Let’s say John makes $40,000 a year after taxes and after his 401(k) contributions. His typical annual expenses are $30,000 and he’s saving $10,000.

Not bad John!

And it gets better, because today John found out he got a raise. Now he will be making $50,000 a year after taxes!

We checked in with John a few (365) days after his raise to see how’s he doing. Turns out, a few things have changed in with lifestyle:

  • His annual vacation became a bi-annual (twice a year) vacation.
  • He upgraded his apartment and pays a little more in rent.
  • Monthly date nights became weekly date nights.
  • And he spends slightly more using his credit card every month.

When he ran the numbers at the end of the year, John found that his expenses rose to $40,000 and he was still saving only $10,000 despite his raise.

That, in a long-winded example, is lifestyle creep.

But, not all lifestyle creep is created equal. What if after his new raise John had:

  • Spent $39,000 and saved $11,000
  • Or, spent $35,000 and saved $15,000
  • Or, spent $31,000 and saved $19,000

In all of those scenarios, John increased his spending when he got his promotion. But he’s also still saving more than before he got promotion.

This is the dilemma we’ll dive further into below – is every form of lifestyle creep a bad one?

Reasons Lifestyle Creep is Normally a Bad Thing

You Save the Same, or Less

Honestly, this reason I cannot dispel easily. If you save the same (like our first example with John above) or even less than before an income increase, then you’re probably experiencing a negative form of lifestyle creep.

This is the reason “rich” people can go broke. Their spending keeps up with their income, but not their saving.

This is what happens when you put more on your premium credit cards every month without thinking about the negative consequences.

You Spend on Things You Don’t Actually Value

Another reason lifestyle creep gets a bad reputation is because it’s assumed you’re spending money on things that you don’t actually need or value.

I mean, hey, if you were getting by in life without it before why should you need it now? Right?


While there is some validity to this argument, it’s not always the case. Sometimes, there are things you value that you just can’t afford at the time. And now that you can, it could be worth it to make that purchase.

You Delay Your Potential Retirement Date

Last but not least – ultimately, the reason lifestyle creep is avoided so much in the FIRE community is because it delays the date that you actually can reach FIRE.

Every less dollar you save today pushes back your financial independence date. And if that’s your ultimate goal, then it’s easy to see how lifestyle creep can become the enemy.

When Lifestyle Creep Can be a Good Thing

With the negatives out of the way, let’s dive into some of the good reasons!

And there are a lot of reasons lifestyle creep can be a good thing, but I’ll walk through the three that are most obvious to me below.

Your Creep is Less Than Your Raise

In general, I view this more as a rule for the next two reasons. In my mind, if your lifestyle creep is less than your raise then you are setting yourself up for a win-win situation.

Win #1: You save more.

Win #2: You spend more.

The key is, for win #2 to be a good thing, you have to make sure you are spending on things that matter to you. Which brings me to the next two reasons why lifestyle creep can be a good thing.

It Raises Your Quality of Life

Spending money on things you value is not something that should be frowned upon.

If you had been eyeing that new apartment and now you can afford it, maybe you should go for it.

Or if you now have enough to eat out twice a week instead of once, it may not be a bad thing.

I’m not saying to give into every aching desire, but just the few that are really important to you and that you can now afford. In the words of Tom Haverford, “Treat Yourself.” When you can afford it, and when it will make a difference in your life.

What is a bad thing is mindlessly spending more money without being conscious about it. I’m talking about the coffee you buy not because you truly want it that bad, but because “it’s only $3.” Or that new shirt you buy because you “deserve it” even though you’re not entirely sure it’s actually worth the cost.

If you’re spending money on things you value, and it’s within your budget, then go ahead and raise your quality of life.

It Saves You Time

Time is money, so they say.

Honestly, my argument here is as simple as that. It’s actually the basis of the FIRE argument too – save and invest more now so that in a few years you don’t have to work ever again.

Boom! Unlimited time.

But what if you want some extra time now and not in 10 (or 20, or 30 years).

I say, go ahead and buy it. Whether it means taking the occasional uber or subscribing to grocery delivery, if it makes your life easier and saves you time, then it could be worth it.

Why Lifestyle Creep Usually Happens (and How to Avoid It)

It’s clear that lifestyle creep can be a good thing. But not always.

If you are experiencing a bad form of lifestyle creep, here are two potential root causes and how to combat them.

1. Laziness

This first is laziness.

It could be that you are too lazy to budget, and just never took the time to properly account for your new income and how much you should be saving now.

It could also be now that you have your newfound wealth and higher income, you can better justify being lazy and spending on more “wants” as if they’re “needs”.

Either way, the best way to combat this root cause is to build a budget and stick to it.

2. More Money, Less Time

With a raise usually comes a promotion. And with a promotion can sometimes come longer hours.

Some people find themselves spending more as they have less time available to them in a new job. Eating more takeout or using Uber over public transport are two real-life examples of how this can happen.

And, as we discussed above, there’s nothing necessarily wrong with buying yourself some time (as long as it fits in your budget).

But if you do want to combat this root cause, similar to laziness, you should build a budget. But this time, a budget of your time. You might be surprised how much time you have throughout the day that is “wasted” and could be put towards making a lunch (or any other money-saving task).

In Summary: Lifestyle Creep

Honestly, everyone should have some lifestyle creep. Otherwise, what’s the point?

Well, I get it, the point is that you want to reach FIRE.

But that shouldn’t mean the journey to get there has to be miserable. In the words of Ferris Bueller:

“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”

Just Start Investing logoKevin runs the personal finance website Just Start Investing, where he focuses on making investing easy. Just Start Investing has been featured on Business Insider, Forbes, and US News & World Report, among other major publications for his easy-to-follow writing. Check out Just Start Investing to learn the simple strategies to start investing today, as well as ways to optimize your credit cards, banking and budget.

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