Lifestyle Creep and Why Spending More as You Earn More Could Make Sense
The conventional wisdom around money often boils down to constant restriction and delayed gratification.
Consistent and substantial saving is critical - you'll get no argument from me about this. But the idea that you should perpetually deny yourself any lifestyle improvements as your income grows simply isn't realistic or necessarily the most effective path to long-term financial – or personal - well-being.
The truth is, letting your lifestyle improve as you earn more can make sense. It just requires a thoughtful, systematic approach.
Beyond Self-Denial: Living for Today and Tomorrow
The problem with personal austerity or extreme frugality is that it tends ignores the present. You're alive now, and while planning for the future is essential, it shouldn't come at the complete expense of enjoying your life today.
Sadly, I’ve seen first-hand that many cultures around money have one common result whenever people choose to spend to improve life for themselves and their families in the present: guilt. But money should exist to serve you, and not the other way around.
A balanced approach acknowledges both: saving for the future while also allowing yourself to reap the rewards of your hard work.
Your effort to earn the financial success you’ve achieved to-date likely wasn’t driven only by the desire to enjoy the final 10, 15, or 20 years of your life. Yet how often do we find ourselves pressured culturally or internally to do essentially that? What’s worse, despite the incessant drumbeat around official retirement age, none of us actually know which 10, 15, or 20 years of our lives will be the last.
Managed, Systematic, and Thoughtful Strategy
This isn't about having a license to impulse buy. It's about consciously upgrading your lifestyle in a way that aligns with your situation and contributes to your overall well-being.
This could mean:
- Spending with a focus on values: Instead of just cutting expenses, identify what truly matters to you and prioritize spending in those areas.
- Setting clear financial goals: Define what you want to achieve financially, both short-term and long-term, to guide your cash management, spending, and investing decisions.
- Operate from a system: Know in advance how your current and future increases in pay and/or cash flow will be used to grow your lifestyle and keep your savings rate intact. You can do both - if you do it intentionally. Make it automatic, so your life doesn’t have to constantly reduce to an internal battle between your present and future selves.
- Regularly reviewing your finances: Track your income, expenses, and savings rate to ensure you're staying on track with your intentions.
The Power of Leverage: Investing in Your Highest and Best Use
One of the most compelling reasons to increase spending as you earn more is the opportunity to leverage your time and energy. This means focusing on your "highest and best use" – a phrase borrowed from real estate that refers to the optimal use of a piece of land given constraints, such as physical characteristics, feasibility, and legality. In your life, though, this means the activities that generate the most value for you given your skills and available options, whether it's through work, business, or personal development.
Let's illustrate with an example. Imagine you're a freelance writer earning significantly more than you used to. Instead of spending hours on administrative tasks or basic graphic design, you could hire a virtual assistant or a graphic designer. This frees up your time to focus on writing, which is where you generate the most income.
Maybe when you were starting out in your business, you chose to mow your own lawn and do all your own cleaning to save money and stay frugal. But now that your (implicit or explicit) hourly rate for performing the core duties of your career has drastically increased, it would essentially cost you money to keep doing everything for yourself. "Saving" in this way would be an illusion; your expenses would stay lower, but you'd have less money overall.
This is a bit like financial leverage. Borrowing money at a low interest rate (a common example might be a mortgage) can be beneficial if you reinvest those funds into something that yields a consistently higher return than the interest cost. The key is the reinvestment. Simply spending the borrowed money negates the advantage. Make sure that the fruits of your spending are things of high value to you; it could be more time to work directly, but it could also be more time with your family that you can’t spend when you’re busy working. It could even be the protection of your earning ability, assets, or lifestyle (more on this below).
The same principle applies to delegating tasks. The money you spend on outsourcing is only worthwhile if it allows you to generate more income or value than the cost of the service. This requires:
- Clear delegation: Defining the tasks and expectations for those you hire.
- Tracking the return on investment: Monitoring whether the delegation is actually freeing up your time and leading to increased productivity, income, or high-value activity.
- Accountability: Having a partner, mentor, or financial advisor can provide valuable accountability to ensure you're making smart decisions.
Protecting Your Growing Assets: A Really Good Reason to Spend
As your earnings and assets increase, it's likely that so too will your need for protection and management.
This might involve:
- Better insurance: Higher earning and higher dollar-value assets mean you should think very seriously about how much you're spending to protect not just your car or your home, but also your health, life, and ability to work and generate income.
- Professional financial advice: Guidance on investments, taxes, and estate planning – as the stakes grow, it’s appropriate for the cost of getting it right to grow as well.
- Security measures: Home security systems, cybersecurity software, or other measures to protect your property and data.
These expenses are not frivolous; they are necessary to safeguard what you've worked hard to achieve.
A Balanced Approach to Lifestyle Improvement
Lifestyle creep doesn't have to be a negative. By approaching it with intention, strategy, and a focus on leveraging your time and resources, you can create a life that's both fulfilling in the present and secure in the future. It's about finding the right balance between enjoying the fruits of your labor and investing wisely for tomorrow.
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