[Video] Is it Inflation or Lifestyle Creep Making us Feel Poor

Do you feel like your money is constantly being drained? If we’re going to be honest with ourselves today, is it inflation or is it ‘lifestyle creep’ that is really draining our bank accounts? Let's address what is actually making us feel like we have less money.

First, inflation has certainly been an issue since we emerged from the pandemic and lockdowns. It peaked around 7% on an annual basis in 2021, which was the highest it had been since the early 1980s. But inflation has come down dramatically in recent months, and as tracked by the consumer price index (CPI), it was down to 3.4% in 2023.

The last few times I’ve filled up my gas tank, I’ve paid under $3 per gallon, and that’s as low as it’s been since we came out of lock down, when gas prices tanked because no one was going anywhere. 

Now, if inflation has come down, along with gas prices, why are so many of us feeling financially squeezed? Well, a little thing us financial types like to call lifestyle creep, seems to be prevalent in our country these days. 

Lifestyle creep is basically when our standard of living improves and stuff we previously purchased for ourselves as a perk or a treat has now become a “need.” “This is a need, not a want!” I may have heard that a time or two from my loved ones. “I need a new car! I need new shoes even though I already have 110 pairs! I need to go to Target! I need an Amazon box delivered every day, or I don’t feel important.”

Can any of you relate to that? Have any of you heard any of that? We love those dopamine hits don’t we….  And to be fair, I love my heated garage and heated steering wheel in the winter. And I love my air-conditioned seats in the summer. 

This attitude of "I deserve this," rather than distinguishing wants from needs when buying, could potentially derail future needs or retirement plans. It’s a delicate balance between spending and living throughout your life, and saving for future needs like retirement. 

Lifestyle creep often starts small - maybe something like eating out more often - but can quickly escalate into a more spendthrift lifestyle. You are living a little bit beyond your means, day by day, and the next thing you know, your lifestyle has grown beyond your budget.

We see this sometimes with our prospective clients, because we work with those close to, or in, retirement. What happens is, sometimes those in their peak earning years, before they retire, maybe they’ve paid off all their debts and mortgages, and often their kids are either already on their own or finishing up college and soon will be, so they have more disposable income than they’ve every had.

So what happens? Well, they spend more - maybe on fancier vehicles, or vacations, or toilets made out of gold, etc.…  

Obviously, we can’t control inflation. But we can control our discretionary spending, and it starts with knowing what we’re spending on and how much we’re spending, basically tracking our budgets. The numbers don’t lie. But often people lie with the numbers - or typically, don’t know the numbers at all, and this is where the creep comes from.

We’re spending more and more, and we’re not even aware. We don't know the numbers, we don’t how much we’re spending on ‘x’ or ‘y’. And now we need to pull back the reins. We need to control what we can control.

If you don’t know where to start, make a list of all your expenditures, and go through and see how much you’re spending, and on what, and cut out what you don’t need. If you aren’t sure, have a friend, family member, or professional help you. Budgeting, a bit of willpower, and forming good habits, will help avoid lifestyle creep.

It’s also important to acknowledge the role of social media and the ‘keeping up with the Joneses' mentality, which can be a huge part of lifestyle creep. It’s human nature. 

But one issue with social media, and there are many, is that it's taken the ‘Joneses’ and ‘fear of missing out’ or FOMO, to whole new level. Because we see people all over the world doing crazy, amazing, different things, and we see this and say “Hey, I should buy my private, Virgin Islands!” Okay, maybe that’s over the top, but you get the point. 

Bottom line: Yes, inflation has been an issue. But now that it has come down dramatically, it’s time to look at the man, or woman, in the mirror. We should be asking "Do I really need to spend this money? What are my goals? How is this serving me and what I want to accomplish?" And forget the ‘Joneses.’

A CERTIFIED financial planner™ professional can help you plan for your retirement. Schedule a call today so we can talk about your situation. 

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