Lifestyle Creep: Are You Living Beyond Your Means?
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For the first seven years of our marriage, my wife and I lived in an apartment without an automatic dishwasher. It wasn’t something we ever thought about: we’re renters, so we couldn’t have put in a dishwasher if we’d wanted to, and I never considered washing dishes a particularly onerous chore.
Then we moved to an apartment with a dishwasher. Wow, these things are great! You put dirty dishes in, and 90 minutes later…okay, you probably know this. Anyway, when we looked for our next apartment, I didn’t even want to consider a place without a dishwasher. They can have my dishwasher when they pry it from my cold dishpan hands. Never mind that I was no less happy in my dishwasher-free years.
I was a victim of lifestyle creep, which is a fancy name for keeping up with the Joneses. Lifestyle creep is the enemy of savings. It turns luxuries into necessities. And it’s a fact of life in a wealthy culture. “We get tons of messages all the time that tell us that what we have is not enough,” says Ken Robinson, a certified financial planner in Cleveland and author of Don’t Make a Budget.
No news there, I trust. So let’s go back to my dishwasher for a moment. A dishwasher is actually useful, right? Daniel Gilbert’s cigars, not so much. Gilbert is a Harvard psychology professor and the author of Stumbling on Happiness, in which he observes:
I too could have been happy without cigars if only I had not experienced their pharmacological mysteries in my wayward youth. But I did, and because I did I now know what I am missing when I don’t, hence that glorious moment during my spring vacation when I am reclining in a lawn chair on the golden sands of Kauai, sipping Talisker and watching the sun slip slowly into a taffeta sea, is just not quite perfect if I don’t also have something stinky and Cuban in my hand.
Ew. But my dishwasher and I know how he feels.
Who cares?
So, what’s the big deal? I want my standard of living to improve over time, and I assume you feel the same way.
Here’s the big deal:
* Your lifestyle can easily creep beyond your means to pay for it. Even if you’re not spending more money than you have, it’s all too easy to spend money today that should be set aside for retirement. (In fact, you can see just how much today’s discretionary expenses could add up to if put into a retirement fund with the help of Mint’s calculator.)
* The more expensive your lifestyle, the farther you have to fall in a crisis. If you live modestly and save a lot (and carry good insurance), you’ll be equipped to absorb a big financial hit. Some people live close to the edge by necessity; why do it by choice?
Every year after we do our taxes, my wife and I sit down and talk about our financial status and goals for the year. This is usually more fun than it sounds. This year we came to an unusual conclusion. Do we want to save more, donate more, and make more money? Sure. But what’s the single most important thing we can do to stay on the right track, financially?
Continue living in our cheap apartment for as long as possible.
Automatic Savings — Manual Spending
So, what’s the secret to keeping lifestyle creep in check, when the world is constantly dangling shiny things and cigars in your face?
It’s no secret. It’s the same advice personal finance columnists have been doling out since we were writing on cave walls.
“Make your savings automatic and make your spending very manual,” says Robinson. It’s “pay yourself first” for the modern age: set up an automatic paycheck deduction or electronic transfer to a savings account and put that savings as far out of mind as possible. Then, when you receive a raise or a windfall, it all goes into savings, because you’re already meeting your needs without it. That’s the same “automatic” as in the title of David Bach’s bestseller, The Automatic Millionaire.
The manual spending side means using cash or debit cards rather than credit cards. It just feels different.
People bristle at this advice, because it amounts to fooling yourself–which means admitting you are capable of being fooled. Or because it sounds miserly. Or because you’ve heard it a dozen times before. (And if you’ve heard this advice a dozen times before and already follow it, pat yourself on the back, because most people don’t.)
But it works. I am not a congenitally frugal person. Like nearly everyone, I’m subject to what Robinson calls (perhaps immodestly) Robinson’s Law: Spending expands to consume perceived available cash.
More than ever before, we have the tools to turn Robinson’s Law in our favor by making our savings automatic, thereby reducing our perceived available cash. Unfortunately, more than ever before, we have the tools to expand our perceived available cash: credit cards and home equity lines of credit.
Or do we?
A new baseline
It’s probably too soon to start talking about upsides to the recession, and it would be a mistake to declare that American spending habits have changed forever–remember how 9/11 was going to mark the death of irony?
But if your personal lines of credit have been slashed, try and see the silver lining: you’re being nudged over to the upside of Robinson’s Law. You can establish a new baseline against which to rein in your lifestyle creep.
By the way, Robinson — a successful financial planner and public speaker — doesn’t own a dishwasher.
Matthew Amster-Burton, author of the book Hungry Monkey, writes on food and finance from his home in Seattle.
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33 Comments so far
leave a comment” If you live modestly and save a lot (and carry good insurance), you’ll be equipped to absorb a big financial hit.”
That is only true if you live long enough to reap the benefits. I could argue on the other hand that being frugal and saving every penny for a rainy day means you miss out on a lot of sunny days.
You’ve been frugal all your life. You washed all your dishes and clothes by hand. You made your own coffee every day and save the money you would have spent at the local coffee shop. You only bought older, used cars and changed your oil and did other maintenance yourself. You are now 65 and two weeks away from retiring and start living that wonderful life of travel and adventure you’ve been saving for. Then that day on your way home you get hit by a drunk driver. Your spine is crushed and you are now dead. How does that frugal behaviour look now?
I am advocating a spendthrift lifestyle. Just saying that we don’t know how many sunny days we have nor do we KNOW for certain how all that financial planning will work out. It’s all a crap shoot.
of course this is how most people think, that they’re “depriving” themselves by “doing without.” fact is, all too many studies have pointed to the concept that happiness and sunny days are not related to all the shiny things one can own. in fact, the more you have, the more you want. read “stop acting rich” by the same guy who wrote “the millionaire next door.”
years ago i read about an informal meeting some very rich men, warren buffet included, were having. they needed to rent a car, could have rented anything–what did they rent? a ford taurus. likewise, sam walton drove a decades old pickup truck long after he could have thrown his money away on something shinier.
fact is, what you are buying by not spending every last quarter penny you own–and then some–is piece of mind. sure you could reach 65, get your spine crushed, end up dead, but what you “bought” all those years beforehand was the peace of mind knowing if you lost your job, or any other number of life events, you’d have a plan B. just ask all those pour soles in the news who have lost everything at a very late stage in their lives how it feels.
I get your point but this idea only works if you die suddenly, AND if you spend only what you earn, not more than what you have. Otherwise you’re indebted and will be forced to be in a job you don’t want by necessity to pay for the cars, credit cards, jumbo mortgage, etc. due to recklessness which is also not fun. Plus with people living longer and longer on average, your later years will be spent in poverty. But you can balance frugality with a fun life. Check out “A MILLION BUCKS BY 30″ by Alan Corey which is an awesome book on how a guy made 1 mil before he was 30 and had fun too.
Not anymore, thanks to my budget. It’s not easy itemizing each expense and putting money into my saving every week. However, the peace of mind it brings is priceless.
I wasn’t easy cutting back my cable to 13 channels or getting rid of my home phone, but these things had to be done.
Matthew,
I love the concept of this article; the term “creep” is a perfect way to describe this lifestyle transition, it can just “creep” up on you.
As you said, it’s not always some big lifestyle change that occurs overnight. Maybe you’re making a little more at your current job, or you picked up a second job, it’s easy to make small upgrades that can quickly add up — upgrading to a two-bedroom apt, eating out more, etc. You said it perfectly, “Even if you’re not spending more money than you have, it’s all too easy to spend money today that should be set aside for retirement.”
Personally I’m making an effort to live on the same amount of money I have been for the last couple years. It can be a tough balance, however, because there does come a time when you need a bigger living space or a new car.
Way to keep things in perspective, great article,
Tim Manni
I’ve definitely had the lifestyle creep. When I was a college student I spent like I was homeless, a few years later when I had a job I lived like a college student. Now I live like a normal person.
I feel the same way. While I lived in Germany, I didn’t use a dryer. Honestly, I didn’t miss it! Hang drying clothes isn’t that difficult. Washing dishes, not so difficult.
It’s about being happy and living modestly.
The dishwasher is an interesting example. It’s a small luxury you can forgo, but financially speaking is trivial.
Compare the cost of a dishwasher to a year’s cable TV fees, or a year’s cell phone bill. Or the car payments!
I agree with the thrust of the article, but the dishwasher example seems to be beside the point. As you arrive at retirement age, are you really going to be thinking: gee, I should have washed those dishes?
I talk about this a lot with my readers. The lifestyle choices we make directly impact our future. I like how you described it here. I typically think about it in terms of perspective. If we can develop a financial perspective, tailoring our outlook towards savings rather than convenience, then we can likely strip away some of the unnecessary desires of daily life and work towards a strong financial future.
Exactly.
When I lived in Central America I used to do all those chores with real elbow grease.
The dishwasher, and for that matter the laundry washer and dryer have no bearing on happiness. There’s even some zen in doing that work by hand.
It’s amazing how much the savings add up over years and decades.
For my situation, a lot of this article will be good advice in hopeful years to come. But as for right now while living on under 10 bucks an hour, the available cash is very true. I just opened a second checking account to put all of my ‘extra’ money into while my main one will serve for paying bills and rent. With any luck, this will be a great benefit to my being broke all the time.
Its like when you get a windfall of say $100 achieved any which way.
lottery, whatever…
yet you spend that $100 3X over or more
I agree with the general tone of the article. However, balance in life is the key. You don’t want to lose on the joys of life just either.
An important aspect ignored here is the value of time. Doing your own dishes, making your own coffee may not be so hard but are, nevertheless, time consuming. If we can add up such durations we can actually use ‘em for something more productive (even money making ideas).
I think it all depends on what you value, and what you want to get out of life. While everyone is different, there are many that try to ‘keep up with the joneses’. Middle-class millionaires, if you. People with expensive things, but no real savings to indicate any true wealth.
On the other hand, just because you lead a more modest lifestyle, doesn’t mean you have to save it all for a rainy day, to reap the benefits when you are 65.
I am 27 and have ‘lived modestly and saved a lot’ since I graduated college and started working full time, and because of this, I could afford to take several months off, travel the world, and live in the moment.
Sure, I made a few sacrifices, such as not dining out every week, or breaking my wallet at the bar every weekend, shunning starbucks, or living in the hippest neighborhood in NYC- but I am less concerned with keeping up with the joneses, and more interested in paying for experiences that I truly value. Again, it’s up to the individual to define what it is that they value; it’s different for each and every one of us.
With my savings, I make sure to allocate money for life experiences that I can enjoy in my youth, while also saving for the future (down payment/retirement), this way, I won’t have any regrets in my old age, just in case I meet an early demise.
When I lost my house and car (11 years ago), I had been struggling to maintain the lifestyle I had when I was married. I realized what I was doing wasn’t working. So, I bought myself a “hoopty” for transportation and paid off all my bills. I paid cash for everything and I then got myself 2 prepaid debit cards (one VISA, one MASTERCARD) for any emergencies, purchases, reservations, eg. that I might need or want to make. When I wanted something new, I saved for it. A lot of the “stuff” I thought I wanted, I never bought because most of it lost its appeal after a short period of time.
After a while, I realized I didn’t miss that 3 bedroom, 2 bath house (I was the only one living in it) with all the responsibilities and costs that came with it. I now live in a 1 bedroom apartment (with no dishwasher…lol), drive my dream car (and its paid for), and travel almost as much as I did when I was in the military. The best thing? I’m actually happy. As I made changes in my life, I figured out what was really important to me and what wasn’t. I guess Chris Rock was wrong when he said women can’t go backward in lifestyle. LOL
I stopped collecting Zippo lighters many years ago.
Imagine life without a cell phone or the internet or Ipods. Lifestyle creep is great if you can afford it. We live well below our income so that we can go travel and do the things we want to do. I have recently gotten into Scotch and I am buying $120.00 bottles. Some people might think this is crazy and I tend to agree. But I don’t have to worry about a mortgage payment or a car payment or paying my light bill. We save and live below our means so that I can have some indulgences. I don’t really collect anything so there isn’t anything I have to have.
I agree with Hutch that the dishwasher is a rather minimal example. I wish the author had given a figure for the actual costs of running a dishwasher daily –Let’s figure it out…(purchase of dishwasher, $350 divided by 10 yrs use, $35 a year= less than $3.00 per month, soap $5.00 per month, water/electricity $5.00 per month.. total cost $13 per month. Difference between hand washing and dishwasher… different soaps, no electricity, no purchase of dishwasher, but maybe you’re using latex gloves… maybe a savings of $8 per month… about 2 Starbucks coffees or one Big Mac supersized meal with tax.
We don’t have cable (save $50 per month), don’t go to Starbucks (very often), mostly eat and entertain at home… these things alone save HUNDREDS of dollars monthly.
regarding my comment above…um, it’s poor, not pour. or maybe it is pour: as in they poured their lives away on buying things they ended up not being able to keep anyway. then they had neither the shiny things nor the security and peace of mind that goes with it.
I don’t think the point is so much the dishwasher itself as their insistence on an *apartment* with a dishwasher. Which limits their options, most likely to more expensive apartments. Speaking from experience, the apartments in my area that have dishwashers in them average around 150.00 more a month than the ones without. Are you paying for the dishwasher? No, you’re paying for location, other amenities, space… but those upper-scale apartments are more likely to have a dishwasher (as a bonus!) than a smaller apartment without a pool further away from the middle of the city.
Think about it.
I plead guilty to lifestyle creep. Living solo is MUCH more expensive than living with a roommate.
Mint.com + Smartypig.com + checking account [for bills, and ready cash] = winning combo. You don’t have to just save for rainy days, you can save for “sunny” days as well. You can still budget to have fun and buy the things you like without spending recklessly [or randomly as I once did when addicted to amazon.com]…
With smartypig, you can set up longer term goals and track your progress. You set up one savings account, but it can have unlimited goals. For example, we just bought a new car [used but new to us], I immediately started a savings goal for a new car down the road, or the same for electronics or vacations, plus if an emergency does occur you can always pull the money back to your checking account. The kicker is the 2% interest earned, that’s $1 a year for every $50 in your savings account, paid quarterly, every 3 months your interest starts making interest.
Plus, with a budget, I pay attention to where my money goes, if I splurge on a really nice dinner the second week of the month, we don’t go out to eat at a restaurant again till the following month, we cook instead. I get two coffee shop trips a week instead of 7, and I go out to lunch once a week [instead of 3-5] while at work. These little things make a huge difference over time [when you plug this in to mints planner it will show you your projected monthly savings, and make sure to set the budget to roll over, which allows you to be a little more flexible].
Once you develop a budget in Mint [or any other program] its easy to see where you can move little bits of money here and there to really get your money situation in check. I’m currently saving 14% of every single paycheck, and still having fun. There is no reason at all that we can’t have a functional savings plan and fun at the same time.
After 2 years, I’ve paid off all my CC debt [I still have some student loans but I'm working on them], and my lifestyle hasn’t changed dramatically from life with credit cards [although I have realized just how evil they really are, now that I have no interest payments]. A lot of things in life are all about moderation, spend and save moderately and you can still have fun while saving for the future.
I love Mint. I rent, and I too have no dishwasher. I have been without for 3 years now, and all I have to say is YES I am missing out. And more so, explain how throwing a grand a month at rent is smarter than buying a home with a 1200 a month note? Yes its 200 dollars less I will have, but at least I get that money back when I sell the home.
Just saying, I can’t wait to have my house and dishwasher back in a few weeks.
I really enjoyed this article. Especially coming from a 18 year old high school student. It’s all about redefining value. Redefining luxury. Alot of people have been tricked into thinking that nice things = joy. But people lived joyus lives before all the expensive innovations came into play. At the same time, there’s nothing wrong with enjoying the finer things. Just don’t substitute those things for the lack of satisfication in life.
I’m more worried about the fact that my basic bills cost more than I make each month, and I’m already cut to the bone. It’s insanely frustrating when I make the least of anyone I know and I’m the only one that didn’t drop out of college. I was 37 when I finally paid off my college debt, and I also earned the GI bill and got a couple good student grants.
What’s the point of college for? To drive those of us who are smarter and wish to persevere into slavery to everyone else?
Hold the phone, using a dish washer is one thing but hand-washing clothes and hang-drying? Some people are forgetting that your time is worth money. I am all for not getting NEEDLESS things (like starbucks or the more expensive restaurant meal when you can have a hamburger) but when your talking about taking away your free time, thats completely different. Hell id rather bartend once a week to pay for my washer/dryer than handwash
Nicole, that was exactly my point about the dishwasher. Thanks for making it for me while I was out on vacation.
Folks, I’m not talking about glorifying or emulating poverty. (Phang, I feel for you, man.) I’m talking about asking yourself regularly (a) whether this supposed one-time expense is really setting you up for an ongoing expense, and (b) whether the expense is really going to make you happier. If it is, great. I just got back from a big, expensive vacation with my daughter that was worth every penny.
Incidentally, the vacation was to Japan, where most people hang laundry to dry.
Definitely a thought provoking article.
I’m not going to knock the automatic dishwasher. I think its one of the greatest inventions of the 20th century. Words can’t describe my appreciation for it now that I cook at home a lot.
I began saving 20% of my paycheck into a regular savings account in January. Point being, I never noticed how much I spent on wasteful luxuries and eating out; until saving resulted in a much tighter financial budget. This led to trimming back my cable bill, choices in entertainment, eating out, and general grocery purchases.
Kudos to Joshua for nailing it on the head with his post.
The dishwasher is actually a perfect example of lifestyle creep. It is a totally unnecessary appliance.
For 19 years I have not had a dishwasher. When my wife first moved in she raised holy hell about it. I assured her that dishes were quicker, easier and more under control without one. I had one rule: You dirty it, you clean it. Now.
A couple years ago I took my wife and her kids to a nice beach condo (with a dishwasher) for two weeks. I recorded the amount of time people spent rinsing off dishes and loading the dishwasher, and took note of the daily arguments about whose turn it was to “do” the dishes.
Turns out people spend more time rinsing dishes and loading a dishwasher than they do just hand washing the dishes. Then there’s the sink full of dirty dishes that exists between loads, and the arguments over the dishes, which don’t exist with a “use it and wash it” policy.
But we’ve been convinced that a dishwasher is SO necessary! Just like so many other things in our modern lives…
Wow, what utter rubbish. Dishwashers aren’t the luxury item they were 30 years ago. The base models start under $300.00. Even giving 15 minutes time savings 5 nights a week, at minimum wage it’s paid for in about 6 months. They’re a basic appliance that any modern kitchen should have. Plus they use less water than hand washing (that may end up being a wash cost wise with the power depending on your area, but any newer model will have modern power management).
Mind, I’m also in the midst of a battle with the utterly incompetent property manager who’s failed to repair the dishwasher I’m paying for, and I’m beyond resenting and well into livid about the lost time in the evening washing dishes. We’re up into four figures if I were billing the time I’ve lost hand washing vs. loading and running. (And really I’m more concerned about what this says about the manager’s ability to deal with a serious problem if they’re so inept about handling this.)
My husband and I just moved into a different apartment in Queens NY because: 1- It has a dishwasher and dishes truly made us UNhappy. This may sound ridiculous to some, but it was truly a sore spot in our relationship. We fought about washing them constantly. They piled up, we fought, rinse and repeat. 2- It has a washer and dryer. I was almost ready to live without this one when looking for a new place, but it’s great being able to wash my clothes into the wee hours of the night and put them all away smelling fresh whenever I want. It’s a bit of a luxury to me still, but I’ll take it. Most people in NY drop off their laundry to have it washed and folded then pick it up completed, so I actually opted for more work for myself by getting a place with our own washer/dryer. I like doing my own laundry. 3- Old apartment had roaches. They were everywhere, new apartment is rodent free and more modern.
When deciding if we wanted to pay what added up to about $300 more a month in higher rent and bills the dish-fighting was practically the deciding factor! However, although it may seem trivial to some, the dishes were our biggest and most common argument. Also, because we both work 2 jobs, the ease of what now amounts to a clean kitchen without chores waiting for us makes a huge difference. Coming home exhausted, late, after 10+ hour days and the last thing either of us wants to do is dig into an overflowing pile of dishes in the sink. We barely even want to cook…but that’s another matter altogether.
DRH, that’s great. I’m not asking people to justify their dishwashers, iPads, or anything else. I’m saying living at the edge of your means happens a little bit at a time without you even realizing it. But jeez, $300/month to put a recurring spousal argument to rest is a bargain.
My building has a big laundry room with multiple large-capacity washers and dryers. I love that!
Man, I know the dishwasher example is beside the point… but my husband did not grow up with one, so his first instinct was to use it as a dish drainer. We’ve been living in our current apartment/duplex for two years and have probably used the dishwasher on two occasions – once for our housewarming (there were around 20 guests) and again at Easter. Don’t really see dishwashers as a time saver; it takes almost two hours just to get a load done (when you could’ve just sucked up and cleaned them in 20 minutes). When we moved in together we had a television with cable. We started limiting our t.v. viewing after we began having dreams that involved television personalities (damn those TLC reality shows).. and once analog cable was phased out we chose not to upgrade and got rid of the t.v. set instead. While our income has increased significantly in the last few years our overall consumption has gone down considerably. Neither of us feel particularly entitled to having “finer” things… we like knowing that what we’re saving will buy us a nice vacation instead.
Life’s too short to cut out all our pleasures just for the sake of saving money. If you really enjoy coffee, make sure you buy the good stuff and spend less on something else. Things that you truly enjoy should never be cut out of your budget, for they are the things that make life worth living.