Lifestyle Creep. That’s what they call it. The millionaires and billionaires endeavour to keep it at bay and it is quite often one of the differences between them and the rest.
Lifestyle creep is the term used to describe the human weakness for increasing our spending as our income increases.
By the time they’re advanced a decade into their career, the average working guy has a pay check that has been adjusted upward or even multiplied several times from their first ever salary. But even after you consider inflation and the change in the value of money over that ten-year period, many people will admit that they still think their salary is not really so much.
But of course, the problem is not their salary. It is the changes they’ve added to their lifestyle since their first job. When you’re guaranteed a salary, it’s quite easy slipping into that comfortable rhythm, living on your salary month to month while saving just a small portion.
In contrast, some of the wealthiest people in the world learned to delay gratification, maintain their standard of living for a long time and then deploy their finances into something lucrative.
Warren Buffet, the third wealthiest man on earth, lives in a house that is worth just 0.001% of his entire wealth. He calls it his “third best investment.” Most people wouldn’t live in this simple house if they were a billionaire of his kind. I probably wouldn’t.
You would buy a Lamborghini if you had some of Warren Buffet’s billions, wouldn’t you? I probably would. But he likely won’t. That’s one of the differences between the very rich and the rest of us.
But before you get it wrong, lifestyle creep is not about being a miser. It’s about avoiding high and unnecessary spending when there are other options that will do. It takes discipline of a very high order.
Avoiding lifestyle creep is not the one factor for making wealth, but it is definitely an important factor. And for the many who are not very wealthy, it is quite often an important factor for why they’re not.