Lifestyle Creep

DEFINITION of 'Lifestyle Creep '

A situation where people's lifestyle or standard of living improves as their discretionary income rises either through an increase in income or decrease in costs. As lifestyle creep occurs, and more money is spent on lifestyle, former luxuries are now considered necessities.

BREAKING DOWN 'Lifestyle Creep '

Lifestyle creep is particularly a problem to those individuals approaching retirement. People, five to ten years before retirement are typically in their peak earning years, but at the same time many of their earlier expenses, such as paying off a mortgage, or raising a family have been reduced dramatically. Faced with a surplus of cash, some people use it to buy more expensive cars, more expensive vacations or possibly a second home.

Since the goal in retirement is to maintain the lifestyle enjoyed in the last few years before retirement, these retirees require more funds to support their new, more lavish lifestyles. Unfortunately, they don't have the resources to do this because they spent their surplus cash flow.

RELATED TERMS
  1. Young And Wealthy But Normal - ...

    A class of self-made millionaires that live relatively modest ...
  2. Consumption Smoothing

    The ways in which people try to optimize their lifetime standard ...
  3. Retirement Planning

    The process of determining retirement income goals and the actions ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles ...
  5. Market Segment

    A group of people that share one or more characteristics. Each ...
  6. Creeping Tender Offer

    A takeover strategy involving the gradual acquisition of the ...
Related Articles
  1. Retirement

    Time To Rethink Your Post-Work Needs

    Don't rely on popular wisdom. Get the facts and plan for a comfortable future.
  2. Retirement

    Financial Planning: It's About More Than Money

    Determine what you need to do now to make a drastic lifestyle change later.
  3. Options & Futures

    Enjoy Life Now And Still Save For Later

    Find out how to balance living well today and retiring well tomorrow.
  4. Budgeting

    How To Manage Lifestyle Inflation

    Learn how to manage your finances so that making extra money actually equates to getting ahead.
  5. Retirement

    Turning A Subsistence Retirement Into A Luxurious Retirement

    It seems many investors these days, particularly seniors, either go it alone with no outside guidance or they completely abdicate responsibility to a financial advisor who may or may not have ...
  6. Financial Advisors

    Retirement Savings: How Much is Enough?

    Sure, you can never save too much for retirement, but just how much is enough?
  7. Retirement

    Your Retirement Lifestyle

    Planning for retirement doesn't just mean saving money. It also involves how you'll live. Some thoughts to consider before you close that office door.
  8. Financial Advisors

    Retirement Bliss? Not So fast: When Savings Lag

    Most people aren't saving enough for retirement. Here are some tips savers and financial advisors can use to change that.
  9. Retirement

    What’s The Minimum I Need To Retire?

    You might easily be able to retire on $1 million. Then again, you might not. It all comes down to your personal situation.
  10. Retirement

    How Much Money Do You Need to Retire at 56?

    Who wouldn't want to retire early and enjoy the good life? The question is, "How much will it cost?" Here's a quick and dirty way to get an answer.
RELATED FAQS
  1. How do I retire?

    When considering how to plan for retirement, firstly think about the age at which you want to retire and the lifestyle you ... Read Answer >>
  2. Why do economists think it is important to track discretionary income?

    Learn about the importance of discretionary income to economists, particularly for economists who emphasize consumer spending ... Read Answer >>
  3. Should I put money into a retirement account even if it isn't tax deductible?

    One of the biggest and most often-touted advantages of putting money into a retirement account is the tax savings that come ... Read Answer >>
  4. What is the best fund?

    Just about to retire. ... Read Answer >>
  5. How can I avoid paying taxes on my Social Security income?

    Learn how to calculate the percentage of Social Security income benefits that may be taxable, and discover strategies to ... Read Answer >>
  6. Should I sit tight and wait for the market to go back up?

    I am only 2 years away from retirement. My 401k has taken a big hit because of the current "correction". Most of ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center