Lifestyle creep could be stopping you from getting ahead but there are ways to beat it. (Source: Ben Nash/Getty)
It often seems like it doesn’t matter how much you earn, you don’t seem to get ahead. This is the trap of lifestyle creep, the silent wealth killer that’s killing the progress of most Aussies trying to get ahead.
And it’s not just about buying a fancy car or lux overseas holidays. Lifestyle creep is the subtle, almost invisible rise in your spending that comes with an increasing income. And it’s the reason so many people feel like they’re going backwards, even when their income is higher than it’s ever been.
The illusion of more
The average salary across Australia today is $102,731 p.a., which sounds like a big number - but it doesn’t always feel that way. The issue isn’t that you’re doing something wrong, it’s that your expenses keep going up without you noticing.
You get a pay bump and move a little closer to work, or into a home with a little more space. You want to provide decent care and schooling for your kids. You add a second car because you need to. And maybe there’s just a little bit more of enjoying the nicer things because you see people in your circle doing it too.
None of these things are irresponsible. But that’s exactly how lifestyle creep works… It turns things that used to feel like luxuries into your new normal. Whether it’s school fees, home upgrades, or just a bit more spending on eating out, the effect is the same - you earn more but don’t build more.
A recent survey from Compare Club found that more than one-third of Aussies earning $200,000 plus live paycheck to paycheck - with 50 per cent of their income going straight to bills. That’s not a luxury problem, it’s a structure problem.
The real cost of creeping expenses
To put this in perspective, I wanted to give an example. Let’s just say you get a pay rise of $200 each month. It’s not nothing, but it feels small and it’s easy for this extra cash to be absorbed into your spending. But if you’d invested the money instead, over ten years you’d see the money grow to $39,558.
This isn’t life changing, but keep this going and things escalate quickly - over the next 10 years, the money would grow to $140,310. Another ten years would see the money grow to over $396,000 - and ten years more would see the money grow to a cool $1.05 million. This is based only on the average Australian sharemarket return of 9.8 per cent, something that’s simple enough for anyone to achieve with a basic index fund.
That’s over a million dollars, just from a pay bump that could just as easily have disappeared without you even really feeling it. And that’s the real cost of lifestyle creep.
Lifestyle creep doesn’t happen because people are reckless - it happens because you’re human. Each small expense and upgrade feels justified, and just because it doesn’t wreck your budget, it doesn’t feel like a problem.
But the thing is that every extra dollar that goes towards funding your ‘new normal’ is a dollar that’s not going towards hitting your next financial milestone - whether that’s a home deposit, passive income target, or building an investment portfolio that gives you choices.
How to beat lifestyle creep
If you don’t want to be a lifelong victim to lifestyle creep, there are two key things you need to do. The good news is, they’re both simple - but will completely change the game when it comes to your money (and your progress).
Nail your banking structure
Most people operate with one main bank account and a vague mental budget, but that doesn’t really work if you’re serious about getting ahead. The solution is to create an automatic savings system that works for you on autopilot.
There are a few key elements that should be part of your savings system. The first is ensuring that when you get paid, one of the first things that happens is that money is sent to your savings or investments automatically without you having to do anything. Not at the end of your pay cycle, but the beginning.
Lifestyle creep is when your spending increases in line with your income. (Source: Getty)
The next most important key ingredient is having your day-to-day spending separated from your bills and your other money. This means your bills will get paid on time without you having to think about them, and just as importantly, when you get your next pay bump, it will get captured rather than just absorbed.
There are a lot of different ways to be right when it comes to your savings, but it’s important you have some structure. It doesn’t need to be perfect from day one, but you do need to get started - from there you can refine and optimise it over time to improve your results.
Get clear on what your money can do for you
It’s really easy to justify extra spending when you don’t have a bigger plan. But the moment you connect your money to a clear target or outcome; your next property, your first $100,000 in investments, or hitting a passive income target, every dollar starts to matter more.
Finding an extra couple of hundred dollars a month, as shown above, could grow to be worth over a million dollars over the course of your working life. That’s not just nice-to-have, that’s life changing - paying off your mortgage, building a passive income stream, or a big step towards true financial security.
When you start to think about your savings as the seed capital for your future, not just deferred spending, it becomes a lot easier to say no to the things that don’t move you closer to what’s really important to you. Small financial wins today will lead to huge milestones in the future. All you need to do is give your money a job, and then watch the mindset shift as you start crushing your goals.
The wrap
Lifestyle creep is the silent killer of your financial momentum. It doesn’t come through loud, instead it shows up in small, incremental shifts that you hardly notice in the moment. But over time, it robs you of the very thing your income should be buying - freedom.
If you want to get ahead, the key isn’t just to earn more - it’s to keep more. Earning well is great, but it means nothing if you’re not using your money to get ahead.
Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth. Ben’s new book, Virgin Millionaire; the step-by-step guide to your first million and beyond is out now on Amazon | Audiobook.
If you want some help with your money and investing, you can book a call with Pivot Wealth here.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.
