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Lifestyle creep and discretionary budgeting

Started by whitetail, March 05, 2019, 08:58:23 PM

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How do you guys think about what amounts are reasonable to spend on lifestyle?

Is it a percentage? Is it entirely about future goals? What if you're on a solid path, should you save it all? Spend all the extra?


I start with a savings percentage first. Once I hit the savings percentage, then I feel guilt-free in spending everything after.

If I want to spend more, then I will take action to earn more while still maintaining my savings rate.

The darndest thing is that even after I left work in 2012, and had much lower income the first couple years, I still maintained my savings rate.



As long as I'm above a minimum savings rate that will see me through to a comfortable retirement and allow me to help my children with college, I try not to stress about spending, but also live a simple life. I don't actively withhold purchases to maximize savings, but I also don't spend more just because I can.


I would start with "spend all the extra" being a problem.  I don't budget, but I have a frame of mind of "save all the extra" so I don't need to.

If you are reducing your costs on everything you reasonably can - how much you spend on food, cars, insurance, etc. etc. etc.  Then there is only so much more you can do.  I know this method doesn't work for a lot of people - as they'll have a way too expensive house or car and think it's reasonable.  Or spend $10 on a jar of pasta sauce and not realize they can make their own for 85 cents. So it's up to you to figure out what works best for you.

I don't think there is a reasonable amount to spend on a lifestyle that works for everyone.  It's just a frame of mind.  If you are in a "I need to buy this or vacation there" to be happy frame of mind, you'll probably spend too much.  If you change your frame of mind to enjoy saving money more than spending, and enjoy cheaper trips more than expensive, you'll save a lot more and reach your financial goals a lot faster - and probably be happier, too.

Money Ronin

Here are my guidelines:

1. Take care of the basics (food, shelter, well-being, etc.).  An example might be the cost of eating healthy meals at home.  Eating at a restaurant would be an "extra".
2. Establish saving and investing goals for retirement, college, marriage, etc.
3. What you have left is discretionary funds which you can choose to spend on the extras (aka lifestyle spending) or put more into saving and investing

I think some people are predispositioned for #2.  They get a kick out of saving, investing and monitoring the progress (that would be me).  Relative to my wealth, income, and peers I don't spend a lot on extras.

The only deviation from that tendency is a "deal".  I'm the type of person who can't pass up a good deal.  Conversely, I will delay gratification indefinitely if I can't find a good deal.  This deal driven approach has worked tremendously for my younger self.  As grow older and wealthier, however, I'd like to be less deal driven and be more lavish in my lifestyle spending--it's a tough change.


Thanks guys.

I like the point about 'deal seeking' and the general feel of trying to provide for a certain retirement or security and meet some life goals like weddings, college, private education, etc. Whatever suits your philosophy.

I think about it pretty similarly.

I think my "deal" equivalent is that I'm a sucker for spending money on things that kill two birds with one stone. I'm apt to spend more on a hobby that keeps me fit, for example.


We budget around $200 for each of us (Andrea and I) to spend whatever we want. We also have some goals set up that if she hits those in a certain time frame, she gets a few hundred dollar bonus.

But we are coming out of a phase in paying a massive amount of debt and building our emergency fund, so this might end up changing. Our issue is that if we have cash to spend in a category, chances are we will end up spending it all regardless of how much it is. So this provides a way for us to keep accountable and limit wasteful spending. If we decide on "discretionary" spending we both want, we will usually budget that outside of our normal allowance category.

Next year we might change how this works, but it seems to work well for us without making us feel like we are too limited. Both of us lean more towards being "spenders", so this has worked out well.


It is well-known that lifestyle creep occurs when our standard of living improves as the discretionary income rises and former luxuries become new necessities. The main issue of lifestyle creep is a change in thinking and behaviour. People start seeing buying nonessential and expensive items as a right rather than a choice usually referring such purchases to something they deserve it. This allows them to feel more satisfied and self-confident.

From my own experience, I'd say that everything should be in moderation. Yes, I understand that you can afford yourself a more comfort vacation, a better car and it is understandable because one of the reasons why people work is affordable and comfortable living that brings positive emotions. But I don't think that buying a third car or a second house is a real necessity for people who perfectly got along without these luxuries (it could be a great investment, but it is already another discussion). I'd rather set that money apart for something more reasonable.