An exploration of money, mindset and a meaningful life
Lifestyle Creep

Lifestyle creep: Why having more money is about mindset not a pay rise

If you’ve ever had a pay rise and then felt no better off, it’s probably because of a little thing known as lifestyle creep. No, it’s not some weirdo stalking you. Lifestyle creep is a phenomenon or rather, a human tendency, to increase spending in proportion to how much you earn.

‘I’ll sort my finances out when I get a payrise – I’ll have so much extra money!’

‘I’ll pay off my credit card when I get a pay rise.’

“I’ll start saving once I start my new job.”

If you have ever thought this way, you’re definitely not alone. Think back to when that extra money came in – did you end up doing what you said you would? Chances are that a short time after you got that pay rise, you magically seemed to have the same amount of money as before. This is lifestyle creep.

I recently had a client come to me because she was about to get a payrise. She told me that even though the money hadn’t yet hit her bank account she noticed that she’d already started spending the extra money. A classic case of lifestyle creep! Luckily, she was smart enough to recognise this was happening and reached out to me to help her get the most out of the extra money.

So, why do we do this? And more importantly, what can you do to ensure that the next pay rise is going towards achieving your financial goals and not mindless spending?

Why your brain is wired to want more

If you’re worried something is wrong with you because you keep spending money, then rest assured it’s just human nature. In fact, the reason we’re always wanting more is so common it’s got a name – hedonic adaptation.

Developed by psychologists Philip Brickman and Donald Campbell in 1971, the theory, also called the hedonic treadmill, suggests that humans get used to situations very quickly. So, if you make more money, then your expectations and wants tend to rise at the same rate.

Hedonic also comes from ‘hedonism’, a concept that goes back as far as the ancient Greeks and describes how human behaviour is driven by pleasure. Spending money gives you pleasure, that dopamine hit which produces a burst of happiness. In terms of spending money, this hit starts when you click ‘buy now’ on that online shopping cart, and gives you further bursts as you receive, unbox and start using that new purchase. Then, it ends and your brain craves the dopamine again.

I never have enough money

So, how does this hedonic adaptation help us identify patterns around how we spend our money? How do we avoid feeling like we never have enough?

Well, it’s important to note that it’s not always about problem spending – you don’t necessarily have an addiction to buying or a problematic spending habit (like a poker machine addiction) to be subject to lifestyle creep.

In fact, in some ways it’s the opposite – more about unconscious spending habits that we don’t notice. That’s what makes it slip beneath the radar for many people.

For example, we’re in the habit of eating takeaway twice a week, so without thinking we increase that to three because we have the idea we can afford it now. We like buying clothes online so somewhere in our brain is implanted the notion we have more to spend. ‘I like both these dresses, I’ll just get two, because I just got a pay rise.’

We grow our expectations of what we can afford: a slightly more expensive holiday, a better television. You can see how it goes on and on and eventually adds up… especially in a capitalist world that is constantly feeding us targeted ads!

How a positive money mindset can help

I can never talk enough about how important your money mindset is to achieving your financial goals, and lifestyle creep is no exception.

Firstly, it’s about planning. What financial goals do you have? How much money do you need to achieve them? Having firm and specific goals in mind is a great motivator in being mindful in how you spend money.

Then, you need to be aware of your spending. Take those unconscious spending habits and take steps to make yourself aware of them. A good first step is to decide what you want to spend money on and put it into your budget. Eating out, holidays, clothes, appliances, gadgets are all examples of purchases you need to account for.

And when you get a pay rise, look at how much it will translate to per week, after tax – that $10k might sound like a lot but how much extra will actually be in your pocket?

Remember, a strong money mindset is not about denying yourself the things that give you joy. A plan which makes you feel sad or deprived is not positive nor sustainable in the long term. So, for example, if you really love clothes then keep buying clothes, but have a budget for clothes and stick to it. That will turn your choice to buy clothes from an unconscious one to a deliberate one. And it will help you combat all those tricks retailers have to make you spend more – buy three and get a 20% discount, spend an extra $50 to get free shipping, and so on.

Getting Support

Finally, you need to slowly but surely develop confidence around your money mindset. Like any skill, the longer you practice the better you will get. Remember, changing your financial habits takes time and awareness. So if you’re still finding lifestyle creep difficult to manage, or you’re not sure how or where to start, reach out to a friend, family or financial professional for support.

If a good budgeting template is something you need to get started, download my FREE Ultimate Budgeting Tool.