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Keeping Up With The Joneses

Updated: Jun 17, 2022

How Lifestyle Creep Can Derail Your Financial Plans…….And What To Do About It



When you had friends round to your house in your twenties, you probably offered them bog standard crisps as snacks. Salt and vinegar, cheese and onion, maybe prawn cocktail if you were feeling adventurous.

But now we’ve grown up, with our comfortable lifestyles and successful appearances to uphold, it’s Himalayan rock salt and chardonnay vinegar in one bowl, mature cheddar and caramelised red onion hand fried potato chips in the other.

Ok, it’s only crisps, so it doesn’t really matter in the grand scheme of things.

BIGGER, BETTER, FASTER


But if you’re not careful it can be pretty much everything. Houses, cars, holidays, schools, patios, driveways, kitchens, furniture, food, restaurants, mobile phones. Bigger, better, faster…….and more expensive.

We’re all to some degree guilty of it. We earn more, we spend more, our expectations increase.

It can be the silent killer of your retirement.

WHY IS IT SO BAD?


Put simply, as your expectation of “enough” increases, the cost of your future retirement also increases. You’re probably not going to want to downsize your expectations too much when you eventually decide to stop earning. That would be too painful.

And at the same time as the cost of our retirement increases, if we spend our pay rises on patios and posh prawn cocktail crisps our ability to save for that good retirement quickly reduces.

It’s a double whammy.

SO, WHAT'S THE SOLUTION?


Saving more versus spending more. It’s a tough but essential trade-off that will help shape your future.

One step is to be careful who you compare yourself with - there will always be someone with more money and, in any event, the guy with the new car next door might have bought it on credit. Keeping up with the Joneses is an endlessly expensive business.

Another is to get into the habit of automating increases to your savings rate – as you benefit from pay rises you can aim to save a larger percentage of that new income. It will help you stay on track.

And finally, we can all remind ourselves of the age-old mantra that the best things in life are free - if you can derive similar pleasure from a picnic in the countryside as you do from a meal in a top restaurant, you can avoid the dangerous lifestyle creep trap and find yourself on track to a successful retirement.


To learn more about common-sense investing, click here.



The value of your investments can go down as well as up, so you could get back less

than you invested.

Tax and Estate planning is not regulated by the Financial Conduct Authority.


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