Spending creep is a phenomenon that occurs when we increase our spending (consciously or subconsciously) as our perceived wealth grows. With every subsequent pay raise and, most recently, the run in the stock market, I’ve noticed spending creep settling into my budget.
Where I would once call my bank to challenge a $10 fee, I now let little things slide. If I buy something that I found cheaper elsewhere, I don’t bother to return it for the difference. I notice myself paying for meals with friends. I buy more luxury goods (wallets, purses, shoes, etc.) than I ever have before. I buy more expensive gifts for birthday and graduation parties than I normally did in the past.
These were things that were inconceivable to me just a few years ago, but this sort of spending creep can wreak havoc on long-term financial planning.
Spending creep can happen to just about anyone. Just look at celebrities who came from nothing, then came across a ton of money, increased their lifestyles to match, and ended up broke. Spending creep is real and should be reined in before it causes any damage to your financial plans.
For us non-celebrities, spending creep happens far too easily. We may order out that extra meal one day a week. We may buy that extra album on iTunes. Some of these purchases are conscious, but many times, they’re not.
How to creep-proof your budget:
- Track your spending habits. I have all my credit card and mortgagee accounts consolidated online, and I monitor them frequently. If you notice spending creep, there are some simple steps you can take to get back on track.
- Set your budget. Include all expenses and prioritize them. Be realistic about your budget and track it frequently
- Revise budget based on spending creep. If you notice spending creep and want to maintain that spend in the long-term, balance it out by reducing spend in other areas or increasing your income. Try to maintain a level of consistency in your budget.
- Maintain your diligence about being thrifty. Have you eased your efforts at coupon clipping, looking for sales, buying used, bargaining or trading? Have you even stopped price-comparing? Do you not challenge unnecessary costs?
- Rein in old habits. Do you find yourself buying more extravagant gifts, eating out more, picking up the tab, going on an extra vacation or weekend getaway? Keep a wary eye out for these old habits that can break a budget.
There’s nothing wrong with enjoying your money, especially if you’ve worked extremely hard to earn more of it. However, in my opinion, this type of creep should be temporary and to satisfy a certain urge. Immediately following that gratification, you should return to your budget. So, enjoy those pay raises, but watch out for spending creep.