How to resist lifestyle creep?

[Woollencardi]

Dp and I are young professionals. Our salaries are good for our age and will go up every year.

We currently live what most would consider a good standard of living. Eat out, go to concerts, travel pretty much where ever we fancy. Essentially enjoying being young and child free. No plans for kids for a long while yet.

I see a lot of my friends “upgrade” their lifestyles, which is a personal choice and not a judgment. They rent the swankier apartment, stay at 5* hotels and upgrade to business class, always out at cocktail bars e t c

Of course it is tempting! But what are some measures we can take to resist this? I think the easiest one is to not rent a bigger apartment and stick with our little one. Perhaps increase automatic savings?

I think it's important to decide what matters to you and what is just nice to have. So when going on holiday I don't go self catering because I enjoy a holiday from cleaning and cooking, but will choose the cheapest option even if it looks a bit shabby. Cleanliness isn't negotiable, fancy lobbies and chocolates on the pillow is unnecessary.

Buying experiences rather than stuff is a good principle - it is more environmentally friendly and is supposed to result in more happiness. I spend a lot on sports coaching and race entries but get most of my kit second hand to save money and reduce waste.

Growing up, I knew if I wanted something for a creative hobby I was likely to get it, but my parents were strict on sweets and junk that will just get thrown away, and we're trying to do the same as parents.

Anyway, that's a few examples of my priorities - yours will be different but worth agreeing with your partner.

Work out what really matters. I had a very well paid job and saved a lot of money by not living a lavish lifestyle. When I retired in my 50s one of my colleagues said 'i wish I had spent less money, then I could do what you are doing '

watch some Mr Money Mustache videos on youtube. They are very inspiring for helping you remember how to keep to a smaller budget.

I agree to increase your savings amounts, thus having less money to waste on creep stuff. And pay yourself first (maybe you’re doing that already?).

Increasing savings could do it. There's a rule of thumb about spending 50% of your income on essentials, 30% on discretionary items and save 20%. The 50% should include provision for annual and irregular essential costs like car maintenance, white goods replacement and even savings for replacing your car - if you need a car for work, a 'basic' car is an essential, but if you want a faster shinier model, the extra cost should come from the discretionary pot. Likewise things like phones. A phone service and 'sufficient' smart phone shouldn't cost more than £10 a month, so a £40 iphone contract includes £30 pm of 'fun money'. Same for things like salon hair colouring, bought lunches etc etc. If it costs more than the cheapest option, it includes a 'lifestyle' element so should come out of the discretionary category, which is the one that should be prioritised below essential costs and savings.

You mention renting. Do you aim to buy a property? If so, then until you've saved a deposit so you can buy a suitably sized and located property, saving a deposit should be your priority (do you both have LISAs?) over a fancier lifestyle.

Similarly decent pension contributions and saving an emergency fund for job loss/increased costs when DC come along. The financial flowchart should help, but I think the step about increasing your discretionary spending is a bit premature if you haven't achieved a goal of buying a home or you're only making minimal pension contributions.

Also avoid falling into the trap of keeping up with the Jones and going along with other people's spending, especially if it's something you're not particular bothered about. They might have more spare money, be getting into debt, have little security so would be screwed if they lost their income etc.

I think the best way to do this is to budget properly, using a spreadsheet. Rows in the spreadsheet represent areas of expenditure and columns represent years. Fill in your budget for next year, based on current spending, then keep track of your actual expenses and compare the two every few months. If you go over budget in an area (eg holidays) you'll be able to see. That may be fine - you may have made a deliberate decision to spend more on that particular area, or it may have been an unexpected but necessary expense - but at least you're aware of it rather than oblivious.

Sorry if that sounds a bit tedious. I think it's worth it though!

You just have to make conscious choices. If you put bills and savings first, then you can only spend what is left over.

Many people use percentages, so if you have 40% bills, 30% savings, 30% disposable then every pay rise does allow for a bit more in the disposable envelope.

Seriously? Just spend within your means.

Definitely increase savings, so it goes out of your account as soon as your salary hits. You don't say if you have a pension or not, but future you will absolutely thank you for starting one now. And future you will be able to have an upgraded lifestyle when you retire.

I'd say don't get into unmanaged debt to have a better lifestyle.

Also work out what you really want to spend money on. I see my step son in his late 30s spending his £40k a year while living at home with his mum basically rent free - and he couldn't tell you what he's got out of it. It goes on beer and takeouts. He doesn't have flashy clothes, a car, or holidays....

But make sure you have enough fun money.

Also, from experience, it's really quite hard to drop back down once you've upgraded....

I would first try to figure out how much of your money is going where. I've made the mistake of cutting back on things that would actually improve my life (e.g. heating) and yet wasting the same amount of money on average meals out. In my experience you don't ever regret things like holidays and concerts as you remember them forever. You do regret anything that's a status symbol (e.g. overpriced "luxury" crap) or instantly forgettable (e.g. that round of drinks you really didn't need). Sounds like your friends may be falling into the status symbol trap. Set a savings goal and stick to it, you'll be so grateful one day when you really need that money.

But they need to think about saving too.

If they have a £5k income and spend it all each month, in 10 years time they'll have nothing to show for it.

If they save even 10% each month, their lifestyle could be barely any different, but if they put away £500 pm for 10 years and it grows at 5% pa, they'll have nearly £80k in savings.

If you really need added protection from temptation then I suggest increasing your standing orders to savings on pay day, so you never really see the money.

But a better approach is to really think about what you would gain from splashing money around like your friends? Surely there are diminishing returns from every extra £ spent?

I’m in my 60s now and had a great time spending money like water in my 20s. From my 30s onwards, with three kids and a husband who kept being made redundant, we had to spend my money on necessities. I regretted not having a savings buffer. Despite having a professional career and always working full time, I never felt I was that far from disaster. Reality had caught up with me and it was a struggle.

You never know what’s around the corner. Enjoy life but don’t waste money on bleeding cocktails and upgrades. In retrospect they can look pretty stupid.

There's a cost of living crisis. This kind of post is tasteless. I find it absurd that 2 professionals need to ask for help on how not to spend too much.

But that’s exactly the point - their means will increase so they can spend more.

OP I remember reading people who were successful in this sort of situation did one of two things. First they either have a clear line by line budget. Or second they pay themselves first ie they have automatic savings/investments. I did the latter - every time I got a pay rise pre kids I upped the automatic savings at the start of the month and also upped my pension contributions. Not all of it but at least half. That made lifestyle creep harder.

Means may not increase so live in the now with the means of now.

Chardonnay tastes, champagne money = happiness. Beer tastes, chardonnay money = happiness.

Champagne tastes, chardonnay money = misery.

Yes to "pay yourself first"
But also, half of any payrise onto the savings standing order.
So, take-home goes up £50, increase what goes to savings by £25, and enjoy the rest.

As suggested, decide what works for you. If you like the travelling and eating out you do now stick with that. Don’t compare yourself to your friends.

One mantra ‘Do I REALLY need that? would I REALLY enjoy that?’

I think there is a gulf between what you fancy and what you’d really get pleasure out of.
So a funky apartment might be nice but would you really miss not having one?
Upgrading to first class? Does it make a difference for a flight between London and Paris? London and HongKong?

And YY to long term projects. Whether it’s saving for retirement (not something you really think about when you’re under 30 but you sure think about when you’re 50 and have little time to build up a nest.), buying a house, building savings (whatever it is for - a child in the future, a house again etc…). Decide of an amount you want to save each month. Have a dd set up for the day after you’re paid. Also look at any amount left over at the end if the month, just before you’re paid and move that into your savings too.

And I’d also advise you to look at income protection and private healthcare of you haven’t already. That’s coming from me becoming disabled and learning it can happen to anyone. Having some protection is helpful - just like you’d buy a good car insurance etc…

I can't remember the exact ratios but I essentially divided every pay rise into pension, mortgage overpayments, long term savings, short term savings (holiday, Christmas) and fun money. Only the second two allowed for lifestyle creep, particularly as the pension, mortgage & savings amounts all got deducted from my pay (pension) or transferred out of my account within a day or two of being paid.
Bonuses tended to go straight onto bigger ticket items ... new carpets one year, sofas another, boiler another, bathroom refurb another & a car another. When I go the carpets & boiler, I did allow myself a little shopping spree too as, whilst they were much needed, they weren't very exciting in the way that the car was or give me the same daily satisfaction that the non-leaky shower and comfy, non-smelly sofas did!

Great attitude - having that already puts you ahead of many people. The things that worked for me were:

• Use a bit of every possible avenue of efficient automatic savings: pay the maximum pension contribution that gets employer matching contributions, overpay your mortgage as much as you're allowed, use your Lifetime ISA that the government tops up, have a standing order that pays each month into a regular ISA. If all that money goes out of the door automatically you won't be tempted to spend it.
• Decide what's "your things" and what isn't. I am not a car person - so I have always bought cheap, modest size, second hand cars because I know I won't get sufficient enjoyment from buying more. Similarly I am not a watch person, or a clothes person, or a 5* *star hotel person. Those things just don't benefit me enough to be worth the cost. However, I am a food and drink person, so when I eat out I have the best fillet steak and a nice bottle of wine. Because then I do get the value. So you can enjoy your nice earnings - but only on the things that REALLY do it for you.
• Buy what you need, not what you can afford. Need a tennis racquet? You can afford the £120 one. But how often are you really going to play tennis...would the £70 one be enough? etc Don't false economise and buy rubbish, but say to yourself - if I earned half as much, which one would I buy? And because I'm fortunate enough to earn double that - does it REALLY mean I need one costing twice as much?

Comparison is the thief of joy.

Stop caring about what other people are doing with their money and start thinking about what you really want to do with yours. Not just now, but in the future. Yes, you could stay in 5-star hotels instead of 3-star ones, but why do that? Just look at how much money you could save. Premier Inn beds are comfy and their breakfasts are great. That costs about a quarter of what you'd pay for bed and breakfast in a posh hotel.

You don't need a £300 handbag when a £30 bag (or the perfectly good one you already own) will do just as well.

Put a note on the fridge, and update it every week with the amount of money you haven't spent. Keep a running total. You will be astounded at how quickly it builds up.

Also bear in mind that your friends may not be spending ready cash, but are probably funding a lot of their insta-lifestyle with credit cards.

Work out your priorities for you and your partner and spend / save towards that rather than frittering away .

If you are renting an apartment, I would seriously think of looking to buy somewhere and save toward that. However - I would also advise against spending the most that you think you can afford on your accommodation. Circumstances can change and you don't want to be stuck not being able to afford the roof over your head, or even to have your luxury accommodation and no money to do anything.

We live in a two-bed semi on an ex-council estate . We could have afforded to have upgraded but prefer the spare cash for holidays, days and evenings out etc. likewise we have always made do with second hand cars.

And if you are planning a family in future, start saving toward that now. Child care is hugely expensive and it will make your future life a lot nicer if you have a savings pot you have put aside especially for this (or eg paying a cleaner if you are both working long hours).

It might seems a way off, but work out when you would like to retire and what your retirement would look like. Once you know how much you need for that, you can put a plan in place regarding expenditure (lifestyle) vs saving/investment (retirement).

Also, if you think you will want kids even if years away, bear in mind you'll need £25-30 k a year on nursery fees from when you go back to work, so potentially 3/4 years. I stupidly had no idea that was the case and didn't plan.

When you get a pay rise, the first thing to increase should be your pension and saving contributions.