Each week, Ellevest hosts Office Hours, an Instagram Live session in which our coaches answer your burning money and career questions with data, expertise, and strategies to help you get where you want to go, financially and professionally. But not everyone can make a livestream in the middle of the day! That’s why we’re publishing the Office Hours transcripts (edited for clarity) here on the Ellevest Magazine.
Last week, Senior Social Media Manager Kirstyn Hippe spoke to Money Coach Victoria Ferguson about lifestyle creep — what it is, how to avoid it, and more. Take a peek at their chat below. (FYI: You can still hear / watch it for yourself here, too, if you want!)
Avoiding lifestyle creep: A conversation with Victoria Ferguson
Kirstyn Hippe, Ellevest Senior Social Media Manager: Hi, everyone. Thank you so much for joining us today. My name is Kirstyn Hippe. I'm our Senior Social Media Manager here at Ellevest, and we are going to talk today about how to prevent lifestyle creep. One of our money coaches here at Ellevest is joining me in just a second. Her name is Victoria Ferguson, and it is her very first Instagram Live. So I'm super excited to have her jump on here and talk to us today. Hi!
Victoria Ferguson, Ellevest Money Coach: Hi, how are you?
I'm great. Coming at you from in front of my couch on the floor.
Very official. So excited to have you on today. This is your very first Instagram Live with Ellevest.
Hello everyone. I'm very excited to be here.
Would love for you to give an overview of who you are and what you do here at Ellevest, and why you think it's important to talk about how to prevent lifestyle creep, which is the topic of our [Instagram] Live today.
Yes, definitely. Well, hello again, everyone, my name is Victoria Ferguson. I use she/her pronouns. I'm a money coach here at Ellevest, so I work one-on-one with folks in coaching sessions. You might have seen me do a live workshop. I run some of those, but mostly I help folks with budgets, debt pay down strategies, some retirement planning. And part of the reason this came about is recently in a lot of client interactions, I've heard a lot about lifestyle creep. Sounds like folks generally know about it. So I thought it'd be a really great idea to talk and discuss some of these ideas with our Instagram community, because it's so important.
Yeah. When I heard that you had had this idea for a live, I definitely felt personally attacked. I was like, oh, she wants to talk to me. But, no, I think it's something that so many people experience and don't really think about as they grow in their careers and their salary grows, and they're suddenly like, "Why am I still not saving like I thought I would be able to? Why am I spending so much still?" So yeah. I'm personally excited to talk about this.
So we already have a question in the chat I'm sure. Just start really high level: What is lifestyle creep, and how does it happen?
Yes, very good question. Great place to start. I think it's been thrown around out there. So let's just start this discussion with a baseline definition, but essentially, lifestyle creep — or you might have heard it also called lifestyle inflation — is just the pattern that we tend to see when folks' income rises, their expenses do, as well. And sometimes expenses will rise at a higher [rate] than income does. So how it tends to happen is, for a lot of people, when they don't make as much money, they're forced to have to be really good with their money. There's not as much room in the checking account. Maybe your emergency fund isn't as fully funded as where you'd like it to be. So you're put in the situation where you have to be better with your money.
So how it happens is over time, as the income increases; the checking account starts to get a little more comfortable. You're not necessarily forced to be so vigilant with your money. I hear it all the time, where folks will say, "I used to be so good with my money and I don't know what happened." So it's really easy to see that over time, as the checking account grows, savings accounts grow, you're just not forced to have to do that. And so over time with this, we see people just not check it as much, not visit the budget as regularly. And it just gets out of hand in more extreme situations.
Absolutely. I continue to feel personally attacked.
I don't mean to!
And I see people in the chat also feeling like this is definitely speaking to them. So, very glad we're having this conversation. All right. Let's see. Can you give us some examples? I know you touched [on] this in your explanation, but what can lifestyle creep really look like in real life? What are the practical examples of this and how can you recognize it?
Yeah, I've got a couple that are running through my head. So the classic example — if you google it, this is probably the first one that comes to mind — is the college graduate. So for those who went to college, it's a probably common scenario where you had lots of roommates. Maybe you were enjoying, maybe not so much enjoying, that Top Ramen diet, maybe working in a housing office, or your income was just a lot lower. Maybe it was a few thousand a year, $10,000 a year, max. You're really focused on classes. So when you graduate, you get that maybe $40,000 salary, $50,000 salary. And you're like, "I've hit the jackpot. This is amazing. I'm making lots of money for the first time in my life." And yes, that's so exciting, absolutely celebrate, but you do need to be a little careful because as we'll talk about more, lifestyle creep can really affect that.
So an example would be, instead of having nine roommates, you're like, "Oh, I can finally afford a studio apartment." Maybe you have to move for your job. Maybe you need to buy a car. So you're quickly incorporating monthly expenses that maybe you didn't take the time to see if [they] comfortably fit in your budget. So that's the classic example: You have your own apartment, maybe you've bought a car, maybe you go to an office and you're having work lunches with friends and drinks. I know a lot of people are probably nodding their heads here. It certainly happened to me. I don't claim to be not a victim to this! I think we do fall prey to it at some point in our lives. So that's the classic example you hear.
The other one that I tend to see more of, that I think is not as talked about as much, is when you're 10, 20 years [into] your career. I've heard a lot of people say, “I was really good with my money right out of college because I had to be.” And, “I remember the days where I only had $20 at the grocery store and I made it work.” And then down the line, “I'm making all this money, but I'm still living paycheck to paycheck. I don't know where my money's going.”
So I've heard a lot of that a lot more lately. Also during promotion season, raise season, bonus season. I think that's probably why I've been hearing it more so, because I've worked with a lot of folks who are like, "I don't know why I'm still living paycheck to paycheck." And these are folks who've been in their careers for years and years. So it's certainly not just the college graduate; it can happen to anyone at any point. It can definitely happen to retirees, as well. You're not making income anymore. You don't have a job that you're attending regularly, so you're all in spend mode. So really there's lots of examples to it. It's not just young people. It's folks from any age, any background, any situation, it can definitely happen.
Absolutely. I see a lot of questions coming through in the chat and also have planned to talk about that: How do you prevent this? How can you prevent it from happening if you're starting out in your career, if you are that new college grad? Let's start there, and then we can get into, I see a lot of people being like, “How do you reverse it?” So we can start with how to have a healthy mindset going into those situations. And then we'll get into that as well.
Yeah, absolutely. So what is very crucial for anyone at any point in their life, doesn't matter the income that you have, it is very important to make some sort of spending plan or map out your expenses. I'm trying to avoid “the B word,” the budget word. A lot of people don't like the budget word. So call it your spending system, or your spending plan, but really, truly, mapping out your expenses can be very powerful because you can see in front of you: “Are my expenses going where I want it to go?”
So that's always a really great place to start, especially if you're in the situation where you got a significant raise or a bonus. You want to take the time to understand where the cash flows fall, what the expenses are, so that you can make a decision that is best for you. So that's always the first place I recommend starting, whether you want to do that on your own — there's lots of providers out there with different budgeting apps — or here at Ellevest. That's really my bread and butter. I work with folks one-on-one with their budgets and help them sort those out. So that's always the best place to start.
And really, from there, it's a great idea to just check the pulse on retirement. Am I on track? Have I even thought about it? And it's OK if you haven't thought about it. I know it's very hard to conceptualize a version of yourself that's 20 years, 30 years older, but really taking the time to see what present day looks like, see if there needs to be any extra funds going toward retirement. And then that way, the present day and the future day are taken care of.
And then you can really make an intentional decision around your money and really where you want it to go. Because otherwise, if you don't get ahead of it, folks will tend to experience [that lifestyle creep]. We live in a consumeristic society. I'm sure that people on here have seen dozens of ads even before hopping on this Live today. So it's really easy to spend your money. Society tells you how you spend your money. Maybe your friends like to do different activities and things. So really if you don't get ahead of it and map it out and take that time to what I call “take yourself on a money date,” you can fall prey to it.
So those are my best ideas for how to prevent it: Map it out. See if you like where everything is. Adjust anything first. Take a pulse on retirement. We also offer Retirement Checkups at Ellevest. It is exactly what it sounds like. We identify if you're on track or off track for retirement. And then from there, figure out where you really want your money to go, and what you want your money to do for you.
That's great. The being-targeted-by-Instagram-ads is a little surreal. I'm looking at my apartment and seeing everything that I bought from Instagram ads.
But that's great. And I think it's something that really hits home for me, is something that I struggle with, knowing where that money is going actively and where it needs to be going. I think a great way to nip that in the bud, even, is automating those savings and investing. So you know exactly how much you're working with, left over from those. Just from my experience, because I know if it's still in my account, I'm like, “I need…”
Yeah, no, that's a really good point. Because a lot of people, if they see it, they spend it! And I certainly am someone that falls in there. So having different accounts can also help. And you bring up a good point about actually identifying the take-home pay. Just because you get a $12,000 raise does not mean that's a thousand extra dollars per month. The government wants its money. So really, after you get that next actual paycheck, then that's the time to really say, OK, $12,000 isn't really $12,000. So you really know what you're working with, and you can make an intentional decision from there.
Yeah, absolutely. That is awesome. And I saw a couple people in the chat wondering if this will be saved, this Live will be saved. And yes, we'll be posting it to our IGTV after this. And also, we have started transcribing them, actually, on our Magazine, no pressure to us, but those will be available both later in the week. [Ed. note — Wow, so meta!]
So that's how to prevent it. Do you have any tips? I'm sure the advice is similar, just identifying where that money needs to go, et cetera. But do you have any specific tips on how, if you've already adjusted to this higher cost-of-living lifestyle, how to reverse that and be more realistic with what you can actually spend?
Yes, definitely. We work with lots of folks who are on that side of things, and if that's you, you're not alone. Lots of people are in this situation, especially after the pandemic. A lot of expenses had to get rearranged. So you're not alone. I do want to say that first. So if this is you, there's something that we like to call intentional spending. And basically what you do is you first map out the expenses — again, the budget word. So you lay out your expenses, and then you run through some iterations of being able to cut things out. You'd be surprised in my budgeting sessions with folks just how many people are like, "I had no idea I had this subscription,” or, “I need to cancel that." Some folks might have subscriptions that they just didn't realize were still there.
So all that to say, the first run-through, as you look through your statements, your bank account, things like that, is seeing: What is the low-hanging fruit? If you have a gym membership, but you're not going as much, maybe you can decrease that membership level. Maybe you don't need the massage chairs, or something like that. So that first run-through is, what's the low-hanging fruit here? What doesn't really feel like a compromise to me and my lifestyle? And then run through that.
Next, after that, you'll want to see what you feel OK cutting, or maybe finding some sort of alternative. The gym membership example, or a cheaper cell phone plan, things like that. But if, say, that weekly or daily latte — I know we use that example a lot [here] — but really if that's something that's important to you, it really touches a core value of yours, it helps you feel connected to your community, then don't cut it. That's OK! Run through some other things first, and see what really fits there. And what we love to do at Ellevest is anchor our spending in our core values, really taking the time to understand what really matters to you can be so, so powerful with your spending.
The way we do this in some of our workshops, we list out a bunch of values. You can google a bunch of values, write down all the ones that stick out to you. And then from there, shimmy it down to three to five. And from there, if you still need to make some adjustments or trade-offs in your budget, you can just map out each item. Daily latte, this fits this real core value, so keep it. And if something you notice about yourself that you're spending on isn't touching that core value, maybe that's a place that you could start, or at least finding an alternative.
So I love to recommend taking yourself on a money date. Whether that's 30 minutes, an hour, go to your favorite coffee shop, reflect on what's important to you. For me for example, I love, love, love adventure. And I love being outdoors. I'm from Salt Lake City, so I'm up in those mountains all the time. So I spend all my money at camping stores and things like that. I just bought new boots this weekend, but that's what's important to me. I don't care as much about other things, so I don't spend there. So find out what's important to you and just shift your spending there, and in that exercise, you might find that it's easier for you to cut other things that you've found aren't maybe as important to you as you thought.
So that can definitely help make some trade-offs if you are in the situation where lifestyle inflation has affected you. So that's where I'd start at least with more present day cash flows, if you will.
Yeah. That's awesome. Something I love so much about our coaches' advice across both money and career here at Ellevest is that: tying it back to those core values, which is so important.
OK, I saw a great question come through the chat earlier that I think hits on something that is very prominent, especially with people who work in the corporate world, who are climbing that career ladder. It's the people you surround yourself with also having those inflated lifestyles. How do you mentally just handle the peer pressure that comes with that? The pressure to spend, the pressure to have the nicest things, the pressure to have all of those things from the Instagram ads, stuff like that. I'm curious to know if you have any advice or how to curb that feeling.
Yeah. This is such an important aspect of lifestyle creep: the social pressures. There's a lot of research done out there that you tend to emulate your closest social network. So if your friend buys a Peloton, you're a lot more likely to buy a Peloton. Or if your friends do a certain activity, that becomes the norm for the social group. So it's totally understandable how this happens. I've heard lots of folks say, "My friends love to go out and do this, but I can't keep up, I feel uncomfortable saying no." So, it's OK. Lots and lots of people experience this.
So, a couple things that I have for that. First, if you're comfortable sharing your money goals and you're in that friend group where you are open and you could do that, I definitely recommend it. At least in my personal life, yes, my friends love to go out, love to get drinks and stuff, but I've had to say no and set that boundary a lot of times because I'll just tell them, "Hey, I'm saving up for a wedding. So I can't really do this. See you at the wedding," type of thing.
Or another example that you could share: "Hey, y'all like, I'm really trying to max out the Roth IRA this year. This is really important to me." An example like that and being open about it — and the other pro to that is maybe it gets your friends thinking about doing things like that. Like, "Oh, what is a Roth IRA? Tell us more." So you could be that friend to introduce that and get everybody in a good place.
So being open about your money goals, I think makes it easier. It helps folks understand maybe why. And also then they probably can't pressure you as hard because they don't want you to not do good things for your future self. So that puts you in a good position. But also suggesting alternative activities. The one that I always go to: If friends want to do, say, a physical activity, like a class, like a yoga class or something, or a yoga membership, you could say, "Hey, there's actually free yoga at this park. You want to go do some goat yoga?” or something like that. You definitely could suggest alternative activities.
I was a really scrappy college student, and I had to really figure out my way. So I'm really good at finding those free events in the community. I'm just lucky that Salt Lake is a very engaged, outdoorsy community, so you can easily find those, but suggesting something that's just as fun, especially if you've been open about your money goals. And of course, if they're your friends, they're going to want to support you. So those are the couple ideas that I have for that.
Yeah. That's great. My mother introduced me to this concept of goat yoga recently. So that is something on the bucket list, for sure.
That's great. And the solution is always just to talk more about money. Break those taboos and talk to your friends and everyone. Everyone is better off.
So a difference then, on this idea: Is it OK to spend a little bit of that extra money? If you get that raise, how much of it is it OK to be like, “OK, I'm celebrating. I want to introduce maybe something a little more high-end into my life” — not “high-end,” that's a weird word, but something more expensive to treat yourself with with that extra money. How do you figure out what that looks like? How much is OK?
Yeah. And this is a really great question. I'm glad you asked it. And I do want to be clear that this Live isn't meant to tell you how to cut your money at all. We are very, very big believers here at Ellevest that trying to find the balance between absolutely working towards your money goals, but enjoying yourself as well, is really important. So yes, please enjoy your money! Don't feel like you have to be super restrictive. There's a lot of research around folks who are in this environment of money deprivation. “I'm not going to spend anything for two weeks.” It doesn't tend to stick over the long term. So we are of the philosophy that let's find something that works for you over the long term, even if it's not the most mathematically correct or tax-advantaged or whatever budget. What matters is consistency, something that you can stick with for the long term.
So please spend some on yourself — if it makes sense to, within reason obviously — if you get a huge bonus. Maybe don't spend it all on some things. Really go back to one: the core values. Again, going back to the budget, just seeing how she's doing, seeing if you need to make any changes there, if everything in the present day looks good. And then also checking on retirement, to see if she needs a little bit of love, as well, because that's the easiest way to avoid lifestyle inflation is you set up that automatic 401(k) deduction, or an automatic saving in the IRA (or individual retirement account), for example. Because if you don't see it, and it's gone, it doesn't hang out in your checking account too long, then you can't spend it.
So after you see that everything's fine in the budget in the present day, retirement's looking good, revisit any other money goals that you do have. Maybe that you want to buy a house in a couple years. Maybe you're saving for grad school. You want to have a baby, things like that. Check to see if the other money goals need some love, and after you've run through all of that, sure, go spend it on yourself, get a better apartment, do what matters to you. If you're somebody that values the perfect apartment, tranquility, everything like that, then yeah, go for it. That's something we work one-on-one with clients and budgeting sessions a lot. We can help you back into “what's a comfortable rent amount,” or “what's a comfortable amount to [contribute to] your having-a-kid-someday” goal. So we can definitely help you back into what's comfortable there.
But yeah, after you've run through everything, retirement looks good and whatnot, then nothing else is at risk. So go get yourself a Peloton or a better apartment, because you've done all your due diligence. And then it's fine! And then that way, when you do increase your spending there, you know you were intentional with it. You can feel better about it. Because I know a lot of folks have lots of feelings around increased spending and things like that. Some folks will do it and then have some negative feelings about that. Maybe it caused you to go into credit card debt. So if you do those steps, you'll feel a lot better about that spending, and you know you did it in the best way possible.
Yeah. We have just a few minutes left. So I have one more question. This one is from personal experience, might be telling on myself a little bit here, but I'm glad you brought up credit card debt, because I feel like such a big part of this can be putting everything on a credit card, feeling you're making all this money and having a credit card, so it's less of, “I have this amount of money in my checking account, so I know how much I can spend,” and more a mindset of, “I'm safe to spend this much money on a credit card.” So I guess, I don't know, tips for getting out of that mindset and stop racking up credit card debt, I guess?
Yeah, no, it's a really good question. And it is very easy to see how folks fall into that cycle. Some credit cards have an insane limit, and if people see the limit, some folks will go crazy with it. And our society's built around making it very easy for you to spend your money, and a lot of times, money that you don't have. So if this has happened to you, know that you are not alone there. It's just all too easy to fall into. So ultimately what you're putting on the credit card, if possible, you want to try to pay that off by the end of the month, because some credit cards have very, very high interest rates that'll end up costing you more than that base price of the item, [more than] the monthly expense that you've incorporated.
So understanding what could be put on the credit cards safely, what we use at Ellevest is something called the one-number approach. If you haven't heard about it, it is fantastic. I came to Ellevest, saw that we use this, and then immediately incorporated it into my life, because the brief explanation of it is, we map out all of your expenses, whether they're monthly, quarterly, annually, any savings goals. So then we back into basically the spending you could do on flexible costs, things like quick money decisions when you're at the grocery store, your friends want to go out for drinks, cup of coffee, things like that. So then you know what you could be spending on a weekly basis. So you know what you could put on the credit card every week and still be fine. So having that understanding where the line is can be really helpful so you can fall in line with it. And then you also know if you happen to go over the line and what that would look like for you, so you can take the necessary steps to ensure that it doesn't continue to build.
But we do have a couple of really, really great resources around this. If you're an Ellevest member, you actually have free access to our Budget How-To workshop, where we go into much, much more depth about the one number and we also have how to pay off debt. So those are two workshops I definitely recommend. We go into a lot more discussion around those. And like I said, they are free for members, so definitely check those out.
Totally. I realize I threw a very big question at you. But there is so much more to be talked about when it comes to paying off debt! So yes, and that leads us into our closer, which is: Where can people learn more about this topic and other relevant money topics, money and career topics through coaching at Ellevest?
Yeah, definitely. So Ellevest has just so many resources. I've been using Ellevest resources since long before I was at Ellevest. For one, the Ellevest Magazine, amazing content around money topics, career topics. I'm biased, but I really like our articles because we break down complex financial topics in a way that's very understandable. We try to be as inclusive as we can with our content. So if you haven't seen our Magazine, really, really great place to start. Those are free for everyone, not just members, so definitely check that out. Our workshops are fantastic. Again, we really try to be as inclusive as we can with that, for all people of all levels. So we'll break complex topics down and go into as much depth as we can. So the workshops are also money as well as career topics. They're fantastic.
And then lastly, 1:1 coaching. If you've watched this today and you realize, “Maybe I'm somebody that just needs a little push,” or, “I just need someone to sit down with me and map all this out,” we're so here for you! We love our one-on-one coaching sessions. I love working with clients. All of us really, really enjoy that part of our jobs. It's our bread and butter. So there's lots and lots of different types of coaching sessions. If you hop on the website, you can see all of them. And also, we do offer complementary 15-minute calls. If you're like, "Ah, there's lots of sessions, where in the world do I start?" We can hop on a call, lay out a roadmap of sessions that would work for you. But those are the main three there, and I would love to see any one of you through those mediums. It'd be great!
Awesome. Well, it has been so, so wonderful to have you on. I look forward to bringing you on Instagram Live many more times in the future. This has been so much fun getting to chat with you, so I really appreciate your time today.
And to everyone just tuning in, like I said a little earlier, this will be up on our IGTV in just a few minutes and also transcribed on our magazine later this week. [Ed. Note: Hi!] So if you missed it, don't worry. It'll be out there for you. All right, I super appreciate it, Victoria!
Yeah, thank you so much for having me. Thanks, all. Take care!
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