Have You Experienced Lifestyle Creep? 3 Steps to Help You Begin the Journey toward Financial Freedom

Lifestyle Creep

A situation where people’s lifestyle or standard of living improves as their discretionary income rises either through an increase or decrease in costs. As lifestyle creep occurs, and more money is spent on lifestyle, former luxuries are now considered necessities. (Investopedia.com)

When we first moved to Guam, I was a SAHM for the first four months. When God blessed me with a job, we thought we were handling our money well until  we got an epiphany a few months ago. Around June, I resigned from my job and became a SAHM…again. My family of three would be living on my husband’s income and that immediately made me panic…just a little bit. Our bills were the same as before, but we had grown accustomed to living off of 2 incomes so we must have needed both checks coming in every 2 weeks, right?  He said (very calculated), “We can live on my income for three months and then you should start looking for a job.” “Ok,” I said. At first, I was leery of everything. Can we afford to take our three year old to Chuck E. Cheese? Can we afford to stop for lunch when we’re on-the-go and our schedules are chaotic? And, after the first month of realizing everything was getting paid and there was extra, I began to loosen up the purse strings. And, even after giving in to a few chicken McNugget happy meal requests from my daughter, I realized, “Hmmm…we’re still not over-spending or feeling any financial stress.” That’s when it hit me. We can live off of ONE income. So, WHAT THE HECK have we been spending the extra money on? I was so disappointed that we had been “lifestyle creeping” BUT I was also relieved that I had realized it AND we could now do something about it. (When you pray for God to give you wisdom, He will.) 

Since November, we’ve paid off 2 bills and are close to paying off the 3rd (which is quite large). Here’s how:

Step 1: 

Write down ALL of your bills. 

We wrote down every bill we had. Yes, even student loans. It was painful to look at, but we did it. It’s easy to spend frivolously when aren’t thinking about those daunting balances. <—THE PROBLEM. 

Step 2: 

Eliminate. 

Because I resigned from my job, perks we got through the job were eliminated: discounted gym memberships, etc. And, thank God because we didn’t need them. We popped in our workout DVD’s, purchased a pull-up bar, workout mat, headed to a park to run a few laps and voila… We started losing weight without getting our account debited $70/month. We were already living pretty lean so there wasn’t much to eliminate, but I would suggest:

• Downgrade your cable/internet/phone packages.

Check to see if you really need all the minutes you pay for each month. Or, if you’re paying overages every month, inquire on the next plan up. Do you really need all 20 of the cable channels? Would Netflix/Hulu Plus/or Apple TV be a better deal for you?

• Start making lunches! 

We tried this before and we ended up eating out due to boredom. Monday – Sandwich & apple slices / Tuesday – Sandwich & Chips / Wednesday – Grilled Chicken & Corn / Thursday – Sandwich & apple slices <–This menu makes me die a slow death.  Buy things you enjoy eating! We like to throw in nachos & salsa, chicken quesadillas, yogurt parfaits, wings, our favorite fruits and lately my husband and daughter have been fighting over mozarella cheesesticks. We try to make lunches that we look foward to eating.

• Be mindful of electricity.

Guam is HOT! And, we have individual units in each room. Read: Expensive Power Bills  So, when we’re home during the day I keep the fan on, the lights off, TV off if I’m not watching it. It’s small, but it helps.

• Shop sales/Couponing

This goes 2 ways…..I love to good sale! Whenever mandarin oranges are $0.89/can, I rack up! (We love mandarin oranges!) But, just because something is on sale doesn’t mean you need to buy it. Sometimes you spend waaaay more than you would have normally.

• Get creative with food in your cupboards.

Sometimes I buy food and then I eat around it. My favorite beans are green beans so the kidney beans kept getting shuffled around the cabinet. One day I said, “That’s enough! I’m using these kidney beans!!!” I looked up recipes with kidney beans and found one that my family loved!

• Sell anything of value you’re not using or don’t need.

Grab a box and go through each room. Throw anything in you’re not using or don’t need. Have a garage sale. Put it on Craigslist. Or, give it away. If nothing else, you’ll have a cleaner home! 😉

Step 3: Financial Peace University by Dave Ramsey

• The Envelope System

I can’t say enough good things about the envelope system! You cash your check and divide your money among the envelopes: grocery/eating out/date night. And, the idea is that you don’t spend what you don’t have. Ahem! Credit Cards. Every dime should be accounted for. It’s hard to budget $250 for eating out up front. But, it’s easy to swipe $250 worth every month. Out of sight, out of mind.

Also, the little things ADD up. No, they don’t add up, they MULTIPLY! Guam is the home of the potluck! Every weekend we’re meeting for cookouts and church dinners and women’s luncheons, etc. This can put a hurtin’ on your wallet IF you don’t budget for it. We have an envelope just for potlucks. We put $40 aside every month. So, when it’s time to pick up a pizza or some sodas, we have the money to do so. And, if that month isn’t as festive and we have some left over, that’s even better! We never keep more than $40 in that envelope so that next month we’ll only add enough to get to $40. There are other envelopes like our “gas” envelope where we’ll keep adding even if we didn’t spend the budgeted amount the month before. We let it grow because we pull car repair/oil change money from there, as well.

We also have an envelope for Christmas (in order to save $1000 for Christmas, we need to put back $90/month), new luggage, vacation, date night, the Arden fund (she’s always asking us to stop by the playport, the American Cookie Co., or a visit to Chuck E. Cheese on a whim), etc.  Some months, the luggage, date night or vacation envelopes are neglected. Paying off debt is the most important. So, having date night at home is a sacrifice we’re willing to make to pay off the debt.

The envelope system is just a very small part of Financial Peace University.

• The Debt Snowball

The debt snowball requires you to pay the minimum balance on all of your bills and add any extra money to the smallest debt you have. Find a five dollar bill? Add it to your smallest debt. Got 3 TV’s in the house? Sell 2 and add the money to the smallest debt you have. Now, what do most people do once they pay off a bill? They celebrate!
“Now, I got extra play money!!! Whoo-hoo!!” Dave Ramsey says instead of celebrating, act like you’re still paying that bill by putting that minimum balance toward your next smallest bill. So, you’re paying the minimum balance on the new bill, the minimum balance from the bill you just paid off, AND don’t forget to add any extra pennies to that debt as well. Get the picture? Instead of the 5 years it’d take you to pay off that bill, you’re doubling and tripling payments each month and cutting the time in half or more! WARNING: This can be addicting!  I write down our new balances each month and seeing that number go down is a feeling I can’t even describe. And, if the new balance is $1532.88. I’ll even forgo something that month: pedicure, eating out as much, etc. just to get it down to an even $1500.00. <–It’s the little things. Find your motivation and get out of debt!

• Modify! Modify! Modify!

Dave Ramsey suggests a cash only system. We tried this. We never stuck to it. We gave up. And, we started lifestyle creepin’. Don’t throw the baby out with the bath water. Modify the plan so that it works for you.

Uncle Dave would probably scold us for this, but we still use our credit card. On the island of Guam, all the perk programs are air miles! Why? Because flying is the ONLY way to get off this island! So, having a credit card that racks up on air miles saves everyone big money. We also get $20/month everytime we pay off our monthly balance in full. That’s $240/year. So, we do a couple of things our own way.

1. We pay everything with our credit card.
2. We examine our spending every week or every 2 weeks. Ex: $10.50 at Pizza Hut
3. We go to the designated envelope. In this case, that would be the “eating out” envelope.
4. We transfer $10.50 to the “deposit” envelope.

We do this for every transaction. Then we go to the bank, deposit the money we spent that week and pay off our credit card balance.

Also, we don’t bring home cash for reoccuring bills (power, tithes, credit card bills, phone, etc.). We keep that money in the account because we pay it with our credit card and then pay off our credit card with the money already set aside in the account.

Our credit card helps us gain air miles to fly home ($1500/plane ticket), gives us money ($20/mth.), and helps our credit score because we’re paying it off every 2 weeks. WISDOM! When we were in college, we swiped because we didn’t have the money! Now we’re swiping with the money already set aside. Like I said, don’t throw out the baby with the bath water. Credit cards are only bad if you lack financial wisdom.

*Financial Peace University has additional steps that I have left out. Please visit the website for the entire program.*

I’m so glad we realized that we were using our money poorly. It’s truly changed our lives and given us hope. Before the Dave Ramsey Financial Peace system, we would cringe at our debt.. Now, we enjoy watching the balance drop! 

What are you doing to put yourself in a better financial position this year? 

With Love,