Go Ahead, Spend It

Luke Smith

PERSONAL FINANCE gurus and bloggers will tell you that lifestyle creep—the tendency for spending to rise along with income—is one of the greatest barriers to building wealth. While that’s sometimes true, I believe it can also be a source of joy and reward.

After all, while we might work hard to get a pay raise or earn a big year-end bonus, what a lot of people are really striving for is the ability to increase their spending. Consider a fistful of examples:

  • A teenager wants to get his first job so he can take his crush on a date. He’s been planning to ask her to dinner, and he wants to pay for the meal.
  • A young couple wants a bigger place to raise a family. They aspire to have as many kids as they can fit into their home.
  • A guy wants to buy the sports car from the poster that hung on the wall of his room as a kid. It’s one of his life’s ambitions to drive that car with the top down, listening to Springsteen.
  • A woman grew up with her family never ordering appetizers. Success to her means always getting an appetizer when she goes out to eat.
  • A man feels designer coffee is one of life’s greatest joys. Making that drink a part of his morning brings him outsized happiness for $4 a day.
  • A woman wants to see the pyramids of Egypt before it’s too late. Her best friend always wanted to go, but she passed away unexpectedly.
  • A couple wishes to donate enough money so they know their church’s work will live beyond their time. They grew up in the church, and want to give others the same upbringing.
  • A man just wants to enjoy life more now, in exchange for knowing he may have to cut back later. His father died at age 57.

Almost everyone has a reason to increase spending as their income rises. Often, these reasons are rooted in the way we view money. What do we remember about money from childhood? What is our definition of money success? What purchases bring long-term joy to our lives?

Lifestyle creep doesn’t need to be a negative concept. Many of us want to work hard and earn more so we enjoy a better standard of living. That doesn’t sound negative to me.

Of course, lifestyle creep needs to be weighed against saving for the future. How do we find the right balance? I like the 50-30-20 method. The basic premise is to break down your spending into three buckets: 50% for needs, 30% for wants, and 20% for savings or paying down debt.

The reason this method works so well is that lifestyle creep is built right in. As your income climbs, regular savings increase, but so too does spending on your wants and needs. By making your budget based on percentages, you’re allowing for your standard of living to climb with your income.

The more people I talk to about money, the more I find that our views are uniquely individual to each of us. Money success means something different to you than it does to me. One person’s most important purchase is another person’s wasteful spending.

Sometimes, personal finance enthusiasts get caught up in what people should or shouldn’t spend money on. My advice: We should be far more focused on what success with money means to each of us. Figuring that out is the crucial first step to a good financial plan.

Luke Smith is a CFP® professional and practicing financial planner. He creates customized financial plans for each family he works with around the country. Luke pursued financial planning to combine his two favorite passions: finance and people. He spends his free time with his wife Heather and their family in Maryland. Outside of work, Luke enjoys the outdoors, golf, reading and writing. You can reach him at Check out Luke’s earlier articles.

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