Lifestyle Inflation

Personal Finance

Lifestyle inflation (or lifestyle creep) is the tendency to spend more as your income grows, leaving your savings rate flat or declining despite earning more. The pay raise that goes entirely toward a nicer apartment, a luxury car payment, or more dining out is the classic example. Fighting lifestyle creep doesn't mean living poor on a high income — it means deciding ahead of time what percentage of any raise gets saved and what percentage gets spent. A common rule: save 50% of every raise. Two earners making $200K combined who save 30% will out-build wealth versus a $400K household saving 5%.