Lifestyle Creep: The Ultimate Adversary To Building Wealth

The key to building wealth is really quite simple.  Live within your means, save and invest 10-20% of your earnings, and repeat that process for 30-40 years.  If you can do those few things, you WILL be wealthy.  Unfortunately, so many families struggle to accomplish this.  The biggest hurdle to building wealth is what I call “Lifestyle Creep;” this is when you add little expenses here and there so that your budget surplus (on paper) gets diminished or vanishes entirely.  If you live like you can afford everything, you’ll have no surplus and possibly struggle with credit card debt.  There are 3 steps to avoiding lifestyle creep:

  1. Pay yourself first (for your goals): Identify the 3 or 4 things that your family REALLY values, and work hard to make those goals happen.  This could be retirement, a different house, travel, and/or education (just some examples).
  2. Pay your normal bills.  You have to pay the utilities, mortgage, etc.
  3. Try to leave a little margin for surprises, but you can spend/allocate the rest towards fun/discretionary stuff (memberships, housekeeping, subscriptions, yard maintenance, clothing, furniture, etc.)

Most people swap Step 1 and Step 3 – that is lifestyle creep! It gets them into trouble financially.  When you have lifestyle creep, no matter how much you earn, you’ll find ways to spend it; consequently, you’ll have no margin leftover to save for goals.  However, if you can stick to the steps outlined above, it will help prevent lifestyle creep, and give you better odds of reaching your goals.  Follow the steps above and you’ll start to build wealth!

Do you struggle with lifestyle creep?

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