In the last series, we talked about the obstacles caused by debt. But how did the American consumer get into this mess in the first place?
In the finance world, you and I have been told to avoid a little thing called \”lifestyle creep\” as we progress further into our careers and expand our families. However, it has become increasingly difficult to prevent it.
Most of us justify lifestyle creep and even condone it today.
It\’s easy to say that we are willing to spend more for a certain neighborhood or home to have a safe place for our kids or buy that luxury SUV to ensure that our families are secure or even justifying spending on trips for \”educational purposes.\” Sometimes as consumers, we can seemingly give grounds for just about any purchase.
Now over ten years past the Great Recession, you see little sign of the lasting impacts of this correction and the consumerism leading up to it, primarily as most benchmarks of that time have since been surpassed. But why is it that history seems to repeat itself when it comes to our need to feel like we are always progressing?
Lifestyle creep is usually caused by an increase in income that causes us to upsize our lifestyle.
This increase could be due to things like a spouse returning to work or a recent promotion. Lifestyle creep could also result from an increase in internal or external pressure to expand our lifestyles to match the norm of those around us. It is as though we allow family, friends, or social media (most likely all of the above) to force us to open our wallets and live beyond our means. This creep often refers to non-essential and frivolous spending associated with creating a \”higher quality of life.\” Obviously, higher quality of life is not a negative thing—unless, of course, you can\’t afford it.
Although I\’m able to operate well in a delayed gratification mindset, I\’ve also succumbed to social norms. A couple of years ago, I purchased a property to live in, this time doubling the square footage of my previous residence. We have all heard that buying a house is a great investment and that renting is simply throwing away your money. As a result, it\’s easy to justify those big purchases—like I did for that home.
When we buy that bigger house, move to that perfect neighborhood, or even drive that luxury vehicle, we don\’t realize that these decisions often have a compound effect.
That larger house requires higher utility costs and more furnishings, that perfect neighborhood has higher property taxes, and that luxury vehicle requires that you replace the tires every 8,000 miles.
So, why am I bringing up lifestyle creep related to unsecured debt? We don\’t count the costs associated with our decisions more often than not, and many of those unexpected costs can end up on various types of unsecured debt.
I probably lean towards financial minimalism (or maybe just full-on minimalism) with my lifestyle and personal finances, but not just to own less or to speed up the process to retire early: my true motivation comes down to [Margin]. Building [Margin] into life allows me to own very little and have very little to maintain. I like having either purpose or meaning behind the things I own.
Lifestyle creep may very well be your reason for having no [Margin] in your personal finances, but how did we as a society get here? What\’s at play in the system we participate in that pushes for this overconsumption?
