Lifestyle Creep is a Poor Habit

tip-o-the-morning

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“Same house, same wife, same car.” – Bill King, CPA

One of my client’s has been on a roll. Their income began to rise significantly about five years ago. One of the first things they did with all of this extra money was to spend it on a very expensive million dollar home in an upscale neighborhood. But that wasn’t all. They proceeded to spend approximately $150,000 refurbishing their very expensive million dollar home. Now they are stuck with an expensive home, with higher real estate taxes, higher utility bills, and significantly greater maintenance costs.

I had another client who, after a banner year, went out and bought an expensive $100,000 sports car. 

Another client of mine, during his high income years, spent nearly $1 million on things he was eventually forced to sell for pennies on the dollar, when he lost his job, in order for his family to survive.

That’s called lifestyle creep – Increasing your standard of living in order to match your increased income. 

It’s a common Poor Habit among many who suddenly find themselves making more money.

The Rich Habit is to forgo the desire to spend your money today and, instead, sock it away into savings and investments that grow in value and provide financial resources that can be used in the future to maintain your standard of living.

That Rich Habit is called Delayed Gratification – putting off something you want today for something you want tomorrow – financial independence.

Delayed Gratification is a habit that must be forged because Instant Gratification is hardwired into the DNA of every human.

In the early days of human existence, it was feast or famine. During very rare periods of food abundance ancient humans would take immediate advantage of this abundance and gorge themselves. Doing so enabled early humans to build up significant stores of fat. When food scarcity returned, early humans were then able to survive by living off those stores of fat accumulated during the periods of food abundance.

This Instant Gratification trait, this desire to gorge ourselves during periods of abundance, is still with us today. However, in the modern era, food abundance has been replaced by financial abundance. During periods of financial abundance, humans are evolutionarily hardwired to gorge themselves financially, by spending their financial abundance immediately on more expensive homes, exotic sports cars, the latest in technology, etc.

The problem is, once you spend your money, it’s gone. When scarcity returns, you are forced to sell your stuff. If the stuff you purchased depreciated in value, you get pennies on the dollar.

One of my oldest and dearest friends explained to me his rule for financial success:

“same house, same wife, same car.”

There’s a lot of wisdom in these words. What they really mean is that no matter what good fortune visits you in life, do not change your standard of living. Don’t supersize your life by buying things you really do not need. Live a modest life and forge the Rich Habit of Delayed Gratification – putting off what you want today so that you can have something to fall back on in the future.

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Thomas C. Corley About Thomas C. Corley

Tom Corley is a bestselling author, speaker, and media contributor for Business Insider, CNBC and a few other national media outlets.

His Rich Habits research has been read, viewed or heard by over 50 million people in 25 countries around the world.

Besides being an author, Tom is also a CPA, CFP, and hold a master’s degree in taxation. As president of Cerefice and Company, CPAs, Tom heads one of the premier financial firms in New Jersey.
 
Phone Number: 732-382-3800 Ext. 103.
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Comments

  1. Shripad says:

    This is really nice one lot of wisdom in these words thank you for sharing..

    • JoansGate says:

      Great article-my hubster +I just retired, no pensions, just Social security, 401ks + savings. We carry NO debt at all. We eat out once/week, love in a New England beach town, so our summer entertainment+ exercise is the beach, I love to cook, we read alot + try to live simply
      I just found out that we’re Affluent Investors,too, according to the Web. Of you look at our home + frugal lifestyle, you’d never knew it!! Sometimes the nest things in life are really free.

  2. I’m very thankful that lifestyle creep hasn’t been an issue with my household. We are very good about taking any raises and sending them into one savings account or another. I helps that we have very specific goals and set our plan up every December so we can rock it the next year!

  3. It’s tough to see lifestyle creep because, by definition, it’s sneaky. But by forcing yourself to make these tradeoffs and active decisions, you set yourself up for success later because you don’t just “go with the flow” of increased spending.

    You pick – get this now, or get closer to financial freedom (or rather, don’t delay financial freedom) – and that choice is crucial, even if you pick spending now. At least it’s not “automatic.”

  4. Wise words! I grew up poor, got married and started to do financially well in life, spent money, saved little, but eventually figured it out. Money doesn’t buy true happiness. Now I live modestly so that we can do as you say – “put off what you want today so that you can have something to fall back on in the future.” Thanks for sharing.

  5. I definitely agree with the “same house, same car, same wife” mantra. Especially with the “same wife” part. I’ve seen divorce wreck people extremely hard financially. In the end either both people lose and the lawyer wins, or one person loses hard and the lawyers win.

    However, not succumbing to lifestyle inflation alone would add a decent protective barrier, I would think.

  6. I think some of us also inherited a saving mentality. Cavemen who could ration mammoth meat over several months were more likely to survive a harsh winter compared to those who devoured a fresh kill every two weeks, living bison-to-bison when the bison hunting was good. Learning to set some aside for later helped ensure survival.

    The quote is a good one, a variation on the “one house, one spouse” rhyming advice I’ve heard for financial success.

    Cheers!
    -PoF

  7. Great freaking advice. Love the quote! Avoiding lifestyle creep is the hardest part of it all. My wife and I are looking for houses. We know what we want to spend, where we want to. Is it an expensive area…sure. But we are modestly dipping our toes into an area that is susceptible to lifestyle creep. Having a level head is key and being comfortable with living modestly is the key to success to avoid the creep..which we are. Thanks again for the read.

    Bert

  8. I like the quote too. Simple and to the point.
    Same wife should be #1, though. 🙂

  9. One of my favorite quotes is “it takes 15 years to make an overnight success”. I’m guilty of the multimillion dollar home and six figure automobiles in the garage…but they were all after the delayed gratification. About year 13 of socking away 70+% of my take home I figured it’s probably ok to diversify some assets from paper to physical stuff.

  10. It is tough to keep yourself in control when you have worked hard and earned a lot of money. But if you do want the good life, it is the best thing you can do! Definitely going for the Same Wife part. The car will go at some point, and we will move too. 😉

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