It almost seems like a rite of passage; you get a job and suddenly you need to “prove” to everyone that you’ve made it. You need a new car, new clothes, the best apartment. This is known as lifestyle creep. As you make more money, you feel the need to spend this money on more expensive things. If you have fallen for it, and many of you have, there are important reasons why you should avoid or delay lifestyle creep as long as possible. (And don’t feel bad if you have fallen for it, as I have too!)
Planning Your Future
There is nothing worse than having to delay your future. Be it delaying the wedding because you have to save up more money for it, or delay retirement because you just can’t afford it. The greatest asset you have is time. By investing as much money as you can at a young age, you get to take advantage of time. You let that money grow and compound upon itself.
Maybe you are in the middle of your career and you hate every minute of it. But because you bought the McMansion and the new BMW, you have to go to work in order to pay the bills. Think of how great it would be to have the freedom to quit your job if you hated and spend your days doing what you really enjoy. How great would that be?
I recently had lunch with a friend who did just this. He hated (and I mean hated) his job. It was a lousy job – I know because I worked with him for three years before I couldn’t take it anymore). He is in his mid-40’s. He just paid off his mortgage and has no major bills. His wife works and he will be covered under her health insurance. I’ve never see him smile so much.
Spending Time With Your Kids
The main reason I try to avoid lifestyle creep is because I want to be around to see my family grow. I want to go to the soccer game or the music recital. I don’t want to miss those times because I have to work overtime to pay the bills. Avoiding lifestyle creep keeps the door open for me to attend these events.
Always remember that you don’t have to show or prove to others that you’ve made it. In fact, the typical millionaire drives a late model car and lives in an average house. You probably wouldn’t know he had money if he passed you on the street. Learn to be happy with what you have.
But, don’t take this as me saying that you cannot buy any new toys for yourself or live unhappily while you plan for the future. What I am saying is to be reasonable with it. You can be happy now and later. If you really want something now and can afford it, by all means, buy it. Don’t be so miserable now that you resent saving or planning for the future. Just make sure your current spending is in moderation so that you have to opportunity to take advantage of any situations that come your way in the future.