After exploring the differences in the cost of living between Singapore and the UK last month, let’s turn our attention to lifestyle creep.
As the name suggests, the problem can creep up without you realising. While in the short-term it allows you to enjoy the results of your hard work, over the long term it could harm your financial wellbeing and prevent you from reaching your long-term goals.
A rise in income could make you vulnerable to lifestyle creep
As you earn more, you start to spend more – often without even realising it.
Small upgrades, such as eating at nicer restaurants, buying luxury brands, or upgrading your home and car, could over the longer term slowly erode your ability to save and invest.
Of course, at first, these changes feel deserved – you’ve worked hard for your money and spending is your way of rewarding success.
The tipping point is when incremental lifestyle upgrades become the new normal.
Since lifestyle creep could leave you with little or no surplus cash to put towards your bigger financial goals, if you let it get out of hand, it could jeopardise your long-term financial security.
How to recognise lifestyle creep
Lifestyle creep is subtle, which is what makes it so powerful.
Some signs to watch out for include:
- Rising fixed expenses: A bigger mortgage, higher rent, or luxury subscriptions that eat into your monthly budget.
- Frequent upgrades: Regularly replacing perfectly functional items (phones, cars, clothes) to get newer versions.
- Failing to increase the amount you save: Despite earning more, your savings and investments aren’t increasing in line.
- Emotional spending: Rewarding yourself after promotions, bonuses, or pay rises with expensive purchases.
If any of these ring bells for you, you may already be experiencing lifestyle creep.
Ignoring lifestyle creep could lead to long-term consequences
Because it hampers your ability to build wealth, lifestyle creep often increases short-term comfort at the expense of long-term financial security.
Over time, you risk becoming trapped in a cycle of high expenses that demand continued high income – leaving little room for flexibility or to cover the cost of unexpected life events.
This is particularly relevant in Singapore, where higher salaries are often accompanied by higher expectations of lifestyle.
If you fail to manage your finances with care, you could quickly find the benefits of higher earnings are lost to ever-increasing expenditure.
5 practical tips to prevent lifestyle creep derailing your long-term goals
The good news is that lifestyle creep is manageable.
Here are five intentional steps you could take to help safeguard your financial future, while still enjoying increasing earnings.
1. Create a budget
Budgeting is about awareness. Track your income and expenses so you can see where your money is going.
Modern budgeting tools and apps make this easier than ever, allowing you to categorise spending and identify areas where you can cut back.
With a clear understanding of where your money goes, you may find it easier to resist unnecessary upgrades.
2. Set clear financial goals
Having defined goals – whether that’s buying a home, funding your children’s education, or enjoying an early retirement – creates a framework for your decisions. When you’re tempted by an impulse purchase, ask yourself whether it helps or hinders your progress towards those goals.
This one simple check and balance could help you to curb unnecessary spending.
3. Practise mindful spending
Mindful spending doesn’t mean you have to deny yourself enjoyment. It’s simply about aligning your spending with your values.
Pause and ask yourself: will buying this enhance my quality of life, or is it merely an indulgence?
Making conscious choices in this way can help you enjoy life today while still planning for tomorrow.
4. Pay yourself first
When you “pay yourself first” you intentionally set aside money for savings and investments before you turn to everyday spending.
Automating transfers into investment or savings accounts ensures that you prioritise growing your wealth over lifestyle upgrades.
5. Have a long-term financial plan
A comprehensive financial plan aligns your spending, saving, and investing with your future aspirations.
By mapping out how today’s choices impact tomorrow’s outcomes, you’ll be more motivated to avoid lifestyle creep.
Find the right balance
Managing lifestyle creep isn’t about denying yourself treats – it’s all about finding the right balance.
It’s perfectly reasonable to treat yourself after achieving milestones, but doing so within a structured plan ensures that you’re not jeopardising your long-term goals.
The key is to strike a sustainable balance between enjoying your success now and securing financial freedom later.
If you’re worried that lifestyle creep could be harming your financial future and would like help to devise a personal financial plan to get you back on track, we’d be delighted to hear from you.
