Lifestyle Creep

The most addictive things in life are heroin and a monthly salary

One of the most dangerous patterns in the world is what’s called ‘lifestyle creep’. As your monthly salary or take-home income goes up, you increase your needs and keep upgrading your life. And generally, as your career progress, the monthly salary drip keeps intensifying, which further increases the risk of lifestyle creep. 

And it’s a vicious cycle - as you keep making more, the number where you feel financially comfortable will always move. This is unsurprising and dangerous. 

If you ask someone how much they need to have before the feel ‘safe’ and ‘free’, they’ll give a number and say: “once I have a million dollars, I’ll stop working and do things I enjoy.” But if you ask that same question once they hit a million, they’ll want to wait until they get $2 million and then $3 and $4 and so on. As we experience more freedom and can buy whatever we want, we don’t become more satisfied. We just increase the bar for the things we can afford. This is human nature, it’s been around for thousands of years

“It is not the man who has too little, but the man who craves more, that is poor.” 

-Seneca

The obvious danger here is that this lifestyle creep takes away the ultimate reward wealth is supposed to provide: freedom. But I think there’s a more subtle danger at play as well. This vicious cycle also creates an identity problem - the reason why this cycle keeps going is in part because people don’t develop other gears or other interests. The only thing they know how to do well, and have their self worth wrapped up in, is ‘putting points on the scoreboard’ in the form of money. 

To break out of this, we need a different metric for success. As Morgan Housel (author of Psychology of Money) puts it:

“Savings is the gap between your ego and your income.”

That’s why identity diversification - trying other things where you can feel good about yourself and show progress - is very important. Whether that’s hobbies, learning new skills, playing sports, being a great parent. 

Choose something else to give you an exit ramp from the cycle - it’s like an insurance policy against having a “fixed-gear” psychology. When you find satisfaction in things that don't require a transaction, you finally stop the creep and start the freedom