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4 Ways to Save Your Retirement from Lifestyle Creep

As we become more financially successful, many of us may find ourselves living large without quite knowing how we got there. Sometimes we find that things we once wanted have now become needs. As a result, though our paychecks are bigger, so are our expenses. This can have a real impact on meeting our personal financial goals.

This is called lifestyle creep, or lifestyle inflation. It occurs when your standard of living improves as your discretionary income rises. Lifestyle creep can be particularly problematic for those preparing for retirement. You might be in your peak earning years and have paid off most of your longstanding recurring expenses like your mortgage, already put aside money for the kids’ education and have been diligently maxing out your 401(k). You’ve been responsible, so you deserve to spend a little extra, right? 

I encourage you to pause before you say, “So what? We can afford it!” Those impacted by lifestyle creep will require additional savings and investments to support their up-scaled lifestyle. Spending the surplus cash flow now rather than saving it as a resource for a more comfortable retirement could hinder your goals. Here are four effective ways to reduce lifestyle creep:

1. Re-frame Your Mindset: Choices Versus Sacrifices

It’s important to think about the impact of lifestyle inflation before you make upward adjustments to your spending. When you make strategic, conscious choices about when and how to adjust spending, decisions will feel more like a choice rather than a sacrifice. This often starts with keeping your values and goals in mind as you spend, so you are keeping in mind what you want most versus what you want right now.

Forget about keeping up with the Joneses – this is your life, on your terms. You have the power. (For related reading, see: Stop Keeping up With the Joneses – They're Broke.)

2. Spend With Purpose

The best way to prevent lifestyle creep from sneaking up on you is to actively participate in your spending. Instead of buying on impulse, decide to spend with purpose. Be aware of the impact or consequences of your spending choices. Make them within the context of what’s truly important to you, both in the short-term and long-term. After all, if you don’t spend the money now, it will still be in your accounts later. Seek quality over quantity, and differentiate between wants and needs. Here's a great action tip: consider waiting 24 hours before making a purchase decision.

Vanessa Friedman, the chief fashion critic for The New York Times, recently wrote a column in praise of wearing a dress again and again. She singled out individuals like Tiffany Haddish, the Duchess of Cambridge, and Bryce Dallas Howard as modeling a different kind of value system for doing so. Friedman goes on to say we should value our clothes and their cost. She touched on the value of weighing pros and cons, sacrificing a bit, having an internal debate and making a purchase decision.

A decision made in this manner appreciates quality garments and validates the investment that is the purchase, especially if you wear such a garment over many years and aren’t afraid to admit it. One well-considered garment is worth 10 “fast fashion” purchases. It puts a premium on quality and helps you accumulate less junk. (For related reading, see: Downshift to Simplify Your Life.)

3. Keep Your Goals in Mind

Keep your meaningful goals displayed in a place where you can see them, such as a photo on your refrigerator or on a bulletin board in the kitchen. This will visually reinforce your decisions when you are thinking about how to spend your cash flow. The goal is to keep your means in mind when you research and make a purchase. Self-awareness is the number one way to combat lifestyle creep. We all know the rush of retail therapy, but it’s nothing compared to the confidence that comes with making an informed decision based on your goals. 

4. Know Where Your Money Goes

Develop an awareness of how your money comes in and out of your life. Think about whether your spending reflects your values and priorities. For example, what message does your spending convey to your children? Are these messages aligned? This thought process can help you approach your spending in a way that may feel good to you.

Even Oprah Winfrey, who just became one of the 500 richest people in the world, has spoken about buying things because of a perception that she should be decorating her home a certain way and how it didn’t reflect what really made her happy.

Re-committing to your financial goals keeps you in the driver’s seat and often contributes to a real sense of satisfaction. Take another look at your budget and expenses. You may find expenses that are higher than you prefer, and still others that are higher than you realize. Both are excellent areas to focus on reducing.

Seek a balance between saving for the future and living your life today. This will also make the luxury items you research and decide to purchase more meaningful. Spend with purpose, with your goals front and center, in alignment with your values. This is not only great for your present life, but it can have a very positive impact on your future.

(For more from this author, see: Planning Financially for Life's Major Moments.)