Lifestyle Creep: What It Is & How to Avoid It

Milvionne Chery Copeland, WalletHub WriterApr 11, 2025

Milvionne Chery Copeland, WalletHub Writer
Apr 11, 2025

Lifestyle creep is when you increase your spending as your income rises, turning nice-to-have expenses into must-haves. This is also known as lifestyle inflation, as your cost of living tends to rise slowly, so you don’t notice how much you’re spending until it creeps up on you.

Key Things to Know About Lifestyle Creep

The main concept behind lifestyle creep is that when you earn more money, you tend to spend more money.
Lifestyle creep typically happens after starting a new job with higher pay or getting a raise or a bonus at work. It may also happen after paying off debt since you freed up money that previously went to debt payments.
One of the biggest signs of lifestyle creep is not having any savings or saving less than you previously did, despite earning more.
You can avoid lifestyle creep by doing things like making a budget, tracking your spending, and increasing your savings.

Try WalletHub's budgeting tools!

Signs of Lifestyle Creep

You have no savings or you’re saving less.

As you make more money, you put more of that money toward your expenses instead of allocating a portion of it to savings. You may even be spending more to the point that you are pulling from your savings to cover your expenses.

You are spending more.

You may add new recurring expenses, like a gym membership or streaming service, for example. You may also decide to dine out more, upgrade your wardrobe, or look for a larger and more expensive apartment or home with your boost in income. Whatever it is you’re buying, steadily increasing spending isn’t a great sign.

You’re living paycheck to paycheck.

If all your new income goes to paying your new expenses, you’ll be living paycheck to paycheck with little or no money left to put into savings. This leaves you very vulnerable to unexpected bills.

You’re not sure where your money goes every month.

If you have difficulty keeping track of your expenses and how much you spend, this can make it easy for you to overspend without realizing it.

You have debt piling up.

If you are spending so much that you’re using credit cards and loans to cover your expenses with no plan to pay them back, you’re definitely trying to do too much with your added income.

Effects of Lifestyle Creep

It’s hard to resist spending a little more when you get an increase in pay. However, if you’re not careful, lifestyle creep can:

Prevent you from saving for important future goals like paying for your child’s college education or retiring.
Limit the amount of money you have available to pay for emergencies, such medical bills or repairs for your car.
Cause you to take on debt, leading to potential credit damage if you are unable to pay that debt back.
Increase your financial stress, having a negative impact on your mental and physical health.
Make it harder to adjust to job loss or a decrease in salary.

The good thing is lifestyle creep is avoidable, if you take the right precautions. Below we list what you can do to prevent lifestyle creep.

How to Avoid Lifestyle Creep

Make a Budget

Making a budget allows you to plan out how you will spend your money. You can also set spending limits for different types of expenses, so you can make sure that you are not overspending on unnecessary purchases and that you have money left over to put into savings.

WalletHub provides a step-by-step budgeting guide that can help you make a budget and additional budgeting tips that can help you optimize your money. You can also make a budget right from your WalletHub account.

Track Your Expenses

You should track your expenses so you know where your money is going and how much you are actually spending. You can track your expenses by analyzing your bank and credit card statements, organizing your expenses in a spreadsheet, or using a budgeting app.

A budgeting app, like the WalletHub app, may let you sync your financial accounts so that your transactions are automatically tracked. You can also set up alerts, so you can know when you are approaching your spending limit.

Increase Your Savings

As your income increases, the amount that you allocate to savings should increase, too. One of the first things you should do when you get a raise is adjust how much you set aside for savings, before you use the income increase for other expenses. This includes increasing how much you contribute to your emergency fund and your retirement account. You can even have your checking account automatically transfer funds to your savings account or investment account, so you don’t have to remember to do it.

Set Goals

Whether it’s saving up for a down payment on your first home or retiring early, setting goals motivate you to save your money instead of spend it. Instead of giving in to new expenses and falling into the lifestyle creep trap, applying a portion of your income boost to any goals you have can help you achieve them faster.

Avoid Impulse Buys

Impulse buys are unplanned purchases you may not need that can lead to overspending and possible debt. Making unnecessary purchases can also affect your ability to save money for future financial goals. You can avoid impulse purchases by giving yourself a waiting period to decide if you really need the purchase, shopping with a list to stay focused on what you need, and removing your credit card from online shopping sites to make it harder for you to make a quick purchase.

Learn more money management tips.

Lifestyle Creep FAQ(8 questions)

Editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. Please keep in mind that it is not a financial institution’s responsibility to ensure all posts and questions are answered.

Upvotes

What percentage of my income should I save?

Dmitriy Fomichenko, President, Sense Financial

Advisors often recommend a rate of saving around 10 to 15%, but it also depends on your level of income and spending, your age, your retirement goals, and so on.
If your employer offers a matching contribution to your 401k plan, make sure to take advantage of that.
A good way to figure out how much to save is to find out how much you will need to retire. Using the 4% rule, you can divide your projected annual spending by 4% to find the total amount you need to accumulate for retirement. From there, you can look at your average return on investments and the number of years you have left before retirement to calculate a saving rate.

Upvotes

How do you budget your paycheck?

Milvionne Chery Copeland, Writer

The best way to budget your paycheck is to put 20% of the money into savings, allocate 50% to necessary expenses like food and your mortgage/rent, and use the remaining 30% for fun and other discretionary spending. This is called a 50/30/20 budget.

There are other budgeting strategies you can try, too. But no matter how you decide to allocate the money from your paycheck, you will need to make a list of your expenses...

Upvotes

How to Stop Spending Money

Milvionne Chery Copeland, Writer

To stop spending so much money, you can do things like create a budget, remove your credit card information from retail websites you frequent, use cash for in-person shopping, or try a no-spend challenge. It's also important to understand what causes you to spend money so you can address the root problems.

Psychological Reasons for Overspending

Spending money can sometimes be tied to our emotions. Some people may use retail therapy, or the act of making purchases to improve their mood, as a coping mechanism when they are sad or depressed. Shopping can give you an emotional high since it releases feel-good chemicals in your brain.

View entire answer

Upvote

What are the benefits of budgeting?

Tina Smith

Pay your bills, save for emergency and future

View more answers

Upvotes

How much of your income should go to expenses?

Milvionne Chery Copeland, Writer

You should spend no more than 80% of your income on your expenses, with 50% going to your needs (like housing, food, and utilities) and 30% going to discretionary spending. If you allocate the remaining 20% to savings, you'll be following the popular 50/30/20 rule. Even if you use different budget percentages or categories, keeping your expenses below 80% of your income can allow you to save for the future and help prevent you from...

Upvotes

What are the pros and cons of budgeting?

Milvionne Chery Copeland, Writer

The biggest pros of budgeting are that it can help prevent you from overspending and encourages you to save money for the future. On the other hand, the biggest cons are the time commitment involved and the constraints on your spending.

Pros of Budgeting

Helps prevent overspending

With a budget, you can plan out exactly how you will use your income to cover your expenses. This gives you visibility over what you...

Upvotes

What are the key components of successful budgeting?

Milvionne Chery Copeland, Writer

The key components of successful budgeting include setting budget goals, calculating your income, and tracking and prioritizing expenses. You should also build an emergency fund, manage your debt, put money away for long-term savings, and regularly review your budget.

8 Key Components of Successful Budgeting

1. Setting budget goals

You should have clear objectives you want to accomplish when you make a budget. These objectives can keep you motivated so you want...

Upvotes

How can I use ChatGPT to make a budget?

Milvionne Chery Copeland, Writer

You can use ChatGPT to make a budget if you input the right prompts, or if you use one of ChatGPT's budget tools, such as the Budget Analyzer. With ChatGPT, you can organize your monthly bills and everyday expenses into categories and get suggestions on how to allocate your income and find areas to cut spending.

ChatGPT is an AI tool that allows you to enter questions and instructions and get a detailed response. It...

Was this article helpful?

Expert Commentary

WalletHub experts are widely quoted. Contact our media team to schedule an interview.

Important Disclosures

Ad Disclosure: Certain offers that appear on this site originate from paying advertisers. For full transparency, here is a list of our current advertisers.

Advertisers compensate WalletHub when you click on a link, or your application is approved, or your account is opened. Advertising impacts how and where offers appear on this site (including, for example, the order in which they appear and their prevalence). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.

Advertising enables WalletHub to provide you proprietary tools, services, and content at no charge. Advertising does not impact WalletHub's editorial content including our best picks, reviews, ratings and opinions. Those are completely independent and not provided, commissioned, or endorsed by any company, as our editors follow a strict editorial policy.

WalletHub is not a financial advisor. Our goal is to provide you with top-notch content, data, and tools. You are responsible for deciding what financial products and providers are best for your needs.

Irrespective of whether an institution or professional is a paid advertiser, the presence of information on WalletHub does not constitute a referral or endorsement of the institution or professional by us or vice versa.

We work hard to show you up-to-date product terms, however, this information does not originate from us and thus, we do not guarantee its accuracy. Actual terms may vary. Before submitting an application, always verify all terms and conditions with the offering institution. Please let us know if you notice any differences.