A promotion, raise, closing a new retainer client or a sudden windfall often leads to a bigger paycheck. Soon, machine coffee might be replaced with a cappuccino from that fancy café down the road, home-cooked meals will be replaced with fancy dining experiences, wardrobes will get upgraded, and your car will start to feel old. And all these subtle upgrades feel deserved, a natural next step to a better life. After all, everyone around you seems to be doing the same. However, a year later, your bank balance tells a different story you are feeling financially stretched, despite the income boost. This is lifestyle creep, a subtle financial trap that can undermine even the most promising earning potential. It"s not dramatic or headline-grabbing, but if unchecked, it can derail your financial future.
Lifestyle creep, also known as lifestyle inflation, occurs when your standard of living rises with your income. Wants become needs, treats become habits. One-off indulgences, such as fancy dinners or designer brands, can transform into everyday expectations, subtly but significantly swelling expenses. From minor upgrades, such as organic groceries and additional content subscriptions, to major upgrades like phones, cars, or even homes, lifestyle creep occurs when yesterday"s luxury becomes today"s necessity.
One, the belief that each generation would do better than the last, and incomes would consistently increase, no longer holds. Incomes have plateaued, and in some economies, even declined in real terms. Inflation erodes purchasing power, and housing costs surge. The Periodic Labour Force Survey (PLFS) reported that, adjusted for inflation, real wages of salaried workers in India have remained unchanged since 2019.
Second, the disruptive force of artificial intelligence (AI) is being felt in real-time. While promising efficiency, technology also threatens to displace millions of jobs, with some studies predicting that up to 800 million jobs could be impacted globally by 2030. The concept of job security or steady career growth is already being challenged. For example, layoffs that initially began primarily in the tech industry in 2022 have now become commonplace. This is already forcing professionals to accept the gig economy, thus challenging the idea of a regular monthly income. Gig economies often present fluctuating incomes that swing between windfalls and absolutely zero income in some months. These shifts are currently underway across various industries. Old beliefs, such as "your income will always go up" or "a good degree guarantees a stable career," are becoming outdated. We are entering a world where volatility is the norm, making the cost of lifestyle creep steeper and more detrimental than ever.
Three, like everything else, lifestyle creep is being shaped by comparison and peer pressure, not just comfort and happiness. Peer pressure today is digitised and ever-present. Scrolling through Instagram or LinkedIn can make it feel like everyone else is earning more, living better, and upgrading faster. Where in the non-digital world, peer pressure existed within the immediate circle that you physically met, today that exposure has no boundaries. From friends living in different countries to celebrities, everyone is showcasing a lifestyle that may seem desirable and attractive. Even if financially stable, constant exposure to others" curated lives can stir restlessness, leading to further lifestyle creep, to keep up.
Multiple early warning signs can be red flags suggesting lifestyle creep. For example, your savings rate hasn"t changed despite an increase in income, or you"ve stopped tracking your spending or budgeting, assuming you earn enough. Your credit card balances go up, or you rely more on "Buy Now Pay Later" schemes. Subscriptions, dining out and premium services may have become routine rather than occasional. You might find yourself spending more to match others or feeling socially behind, and using spending as a way to catch up. You find yourself justifying new and expensive purchases with "I deserve this" or "You only live once". Recognising lifestyle creep isn"t about guilt or panic it"s about getting clarity, pausing and stocktaking. The earlier you do this, the easier it is to course-correct, if you need it.
A similar trap lies in housing choices. Moving into a more upscale neighbourhood to be closer to such schools or to match a perceived social standard often brings higher EMIs, maintenance costs, and social expectations, making it equally hard to step back without feeling a sense of loss or perceived failure.
Sonal Chinchwadkar-Shrotriya is a knowledge management, learning, and communications expert specialising in financial services, consulting for a global financial and multilateral institution.Rohan Chinchwadkar is an Assistant Professor (Finance, Entrepreneurship) at IIT Bombay.
First Published: Jul 09, 2025, 14:06
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