Today we talk about the CREEP – this is not a person, but a thing. This creepy thing can slow your path to financial independence, the key is mindfulness and planning.
Read on to learn more!
Michelle Morris, CFP®, EA
BRIO Financial Planning
The first personal finance book I ever read was “Making the Most of your Money” by Jane Bryant Quinn. I read it shortly after it was first published 25 years ago. It was 1991, my husband and I were newly married and both full-time students. We were somehow scraping by on his research assistantship and the “blood money” which was what we called my earnings from drawing blood on weekends.
The next year, I graduated and got my first “real” job. Overnight, our income almost quadrupled. I somehow knew this was an important opportunity and not to squander it. I set out to learn more, hence the book.
One of the quotes in the book that has stuck with me all these years is this: “Need rises with income. What was out of the question when you made $25,000 becomes urgent at $50,000 and indispensable at $80,000.”
This is the essence of the CREEP – it’s called lifestyle creep and it describes our natural tendency to spend the money that comes into our lives. I call this the “vortex of spending”. The dollars that enter this vortex get spent. For many of us, our income rises over time (often faster than general inflation) and our spending rises right along with it.
What can you do about the CREEP?
- Look at your bank/credit card statements! What do you value? Does your spending reflect these values?
- Keep dollars out of the vortex of spending! In other words, have savings taken out of your paycheck before it lands at the bank. Automate it. Contributions to an employer pre-tax retirement plan such as a 401k or 403b will reduce your tax bill while increasing your savings. A twofer that’s even better if you have an employer match.
- Resolve to save half of your next raise. And the one after that. And the one after that. Your savings rate will rise faster than your spending and eventually your savings will snowball. Really.
Save early. Save often. But it’s never too late to start. Mind the CREEP!