Six figures and still broke? How lifestyle creep eats your raises

Lifestyle creep (also called lifestyle inflation) is when your spending goes up every time your income does. The raise comes in, and within a few months it's gone, spread across small upgrades you barely remember choosing.

The most common upgrades I see:

• Clothes
• Dining out
• Takeout and delivery apps
• Self-care, like more frequent salon visits and more expensive treatments
• Housing, like a bigger place or a nicer neighborhood
• Cars, like a more expensive or newer model

These upgrades don't happen all at once. They creep in over weeks or months, until each one is just your new normal.

One client put it best:

"I only have $10K saved after 10 years of working, but I'm making six figures. Why am I so behind??"

Each upgrade feels reasonable on its own. Growing up, I learned that looking the part was important. You wanted people to see that you had it together, and that meant nice clothes, the right car, perfectly manicured nails, and other status symbols. Once you're making real money, that mindset is hard to break.

In the moment, it doesn't feel like a bad decision, either. When it was time for me to buy a new car, my old one was about to die, and now I could afford something nicer. I didn't think twice about it.

Everyone around you is doing it. Peer pressure is real, especially at work. Working in New York City is expensive: a salad at Sweetgreen costs $20, so eating out for lunch every workday adds up to $100 a week, or about $400 a month. When everyone else is doing it, you don't stop to question it.

1. Pull up a month of spending from two or three years ago, and the same month this year.
2. Line them up by category.
3. Mark every category that grew faster than your income.
4. Compare your savings rate (the percent of your take-home pay you save), not just your balance.

Then look at what changed. Are you saving less than you did before your raise? Compare your top three spending categories in both months. Is that what you expected? Does it line up with how you want to spend your money?

If you feel nauseous at how much money you spent in certain categories, take that as a signal. Why are you feeling that way? What does it suggest about how you want to spend your money?

If putting a budget together sounds stressful, you're not alone. My Budget Tracker can help you get a clear picture of your finances without the stress.

1. Set your savings goal first, then build the rest of your budget. If you aren't saving anything yet, aim to save 10% of your take-home pay. If you're already saving 10%, work your way up to 20%, and so on.
2. Watch your fixed costs most. Rent and car payments are hard to undo, so they'll most likely have to stay as they are, unless your lease or car loan ends in the next six months.
3. Pick a few splurges on purpose, and spend on them without guilt. I love spending on travel and dining out. I know these make me happy, so I build them into my budget on purpose. For everything else, I find ways to spend less so I stay within my budget. For example, I drink coffee every day, but I make it at home instead of buying Starbucks.
4. Automate your savings. Once you've hit your savings goal for a few months, set up an automatic transfer from your checking account (or wherever your paycheck lands) to your savings account the day after every payday. That way, you pay yourself first.

When my clients saw how much they were spending on clothes and takeout every month, they were almost embarrassed. But that embarrassment quickly turned into action: meal prepping at home, noticing when their spending triggers came up, and buying fewer things they didn't need.