Is “lifestyle creep” affecting your savings? How little luxuries can become big expenses

What’s the first thing you do when you get a pay rise? There’s a good chance you’ll splash out on something to celebrate, which is perfectly understandable. But there’s also a good chance that you’ll continue to spend a little more here, and a lot more there, now that you “can”.

This is where “lifestyle creep” begins to sneak in. Your expenses start going up in line with your salary, and any material gains are swiftly offset by your outgoings.

It can start to become stressful trying to keep up with yourself. Plus, if you’re mid-career, this way of spending could even affect your progress towards your long-term savings goals, including for your retirement.

Read on to find out more about lifestyle creep and how to prevent it.

Lifestyle creep is slow but can seriously start to dent your ability to save

While lifestyle creep might sound like something you can easily quash, the reality is that it can be pretty hard to spot. The clue is in the word “creep”. It might start small, with an extra takeaway a week or buying lunch every day instead of making your own.

But gradually, these stop being treats and start to turn into everyday essentials.

The temptation to spend more can also see you splashing out more on socialising, often without realising. In fact, research from Aqua reveals that 89% of Brits say they exceed their social budgets each month.

A little extra expenditure here and there doesn’t feel like it makes much of a dent. But when you add it all up, it can be quite startling. A £4 cup of coffee a day becomes £28 on coffee a week, which becomes £1,456 a year. And that’s just coffee.

Inflation can be another big factor in lifestyle creep. If you get a pay increase, for example, it can feel as if your purchasing power has been given a big boost.

But according to the Office for National Statistics (ONS), in June 2025:

• Annual growth in employees’ average earnings was 5.2% for regular earnings (excluding bonuses) and 5.3% for total earnings (including bonuses).
• Annual growth in real terms, adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), was 1.4% for regular pay and 1.5% for total pay.

Essentially, this means that a pay rise you thought gave you 5.2% more purchasing power actually only gave you 1.4% extra due to increased costs of goods and services.

Add in your other expense increases and your extra expenditure could be running to literally thousands of pounds a year. That might make you more likely to put a smaller proportion of your income into your long-term savings for goals such as retirement.

All of this could mean that you’re working longer and longer, harder and harder. Yet somehow, you’re still not saving as much as you’ll need to enjoy the lifestyle you want in future, or may even find yourself in debt – an ironic outcome of promotion and success in your professional life.

Financial planning can help you achieve a happy balance between living for now and your retirement

Most people want to maintain their standard of living when they finish working. So, an expensive and extravagant lifestyle before retirement will be harder to keep up with a pension income calculated during more frugal times.

So, what’s the answer? Financial planning. Looking at how to enjoy your wealth, while saving enough to meet your future goals.

Ask yourself: what makes you happy? There’s no point in spending on things just for the sake of it, or to prove to the outside world that you’re a high earner.

Buying fresh flowers once a week might fill you with joy and brighten your home, or you might never see them because you’re never at home. Your daily coffee might be a beautiful treat or just become a mindless habit. It’s about considering and choosing how to spend your money, not just flashing the cash.

Having a strong financial plan in place can help you spend, and save, intentionally – enjoying the here and now with confidence that you’re not falling foul of lifestyle creep.

Get in touch

If you think lifestyle creep could be affecting you, or you’d like to talk to us about cashflow planning, we’ll be happy to help. Email us at info@andersonfinancialltd.com or call us on 020 8943 0065.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.