Just to be clear, this is not about that guy in 8th grade algebra who kept staring at you for no good reason. When we say “creep”, we’re talking about the gradual increase in expenses that just seems to happen as one moves through life. Creep is neither good nor bad. It’s more like a force of nature. A cool breeze on a hot day is pleasant. Tornados, on the other hand, wreak havoc. What really matters is the degree of influence that creep has on our lives.
It’s interesting. Webster defines creep in the verb form as “to move slowly and quietly, especially in order to not be noticed”. Isn’t that the truth? Creep is real, but it is sneaky. Most of the time, we don’t even realize it is happening.
As a young person, you probably didn’t spend too much time thinking about bone density and muscle mass. A 20-something can exercise sporadically and still maintain a healthy-looking body. As we get older, it takes more effort and discipline to maintain strength and tone. You can build muscle at any age, but it’s certainly easier to start early and develop good habits.
The same can be said about our personal finances. For most young people, income is pretty basic (basically non-existent, some might say) and so are expenses. We run a tight ship due to circumstance, not necessarily due to any great financial discipline, aside from staying out of credit card trouble. As we grow older and cash flow is not quite as tight, we face additional choices. How should a new raise or bonus be allocated? How do we keep increases in income from automatically increasing our expenses? This is where a little discipline and planning can make a huge difference.
Once your career (and income) starts to take off, creep is always right there. The old saying about “money burning a hole in my pocket” is so true. There’s nothing inherently wrong with wanting nice things, but the problem with creep is that it only moves in one direction. Once we graduate from Toyota to Lexus, we rarely go back to the Toyota. And so it goes. Over time, this “lifestyle inflation” gets baked in, and so-called discretionary items become necessities (at least in our minds).
As long as income is growing, creep seems benign. The problem with creep is that the higher your expenses, the bigger the nest egg needed in order to maintain that lifestyle in retirement. In meeting with clients preparing to retire, the one common goal we always hear is: I want to maintain my current standard of living. Of course! Who wants to worry about money when the calendar is suddenly a blank slate just waiting for inspiration?
Knowing that creep can have long-term consequences, what can we do today in order to keep it in check, and to improve the odds of achieving a comfortable retirement? The answer is actually quite simple, and no radical change is required. Beginning today, in addition to your regular monthly savings, make a commitment to save a healthy percentage of each and every future salary increase and bonus. This will benefit you in two ways:
- Increased savings today equals increased security and enjoyment in the future.
- Money saved is money not spent. This helps to keep creep in check, providing you with the opportunity to retire sooner rather than later.
Set a goal to save 50% of every increase. If you receive a 3% raise, save 1.5%. If your bonus is $20,000, save $10,000. Fifty percent might sound like a big number, but give it a try. We bet you won’t miss it. You’ll still have more to spend than you did before. Do yourself a favor—get control of creep before it gets control of you.
Lastly, do make sure and celebrate raises and bonuses. Enjoy the fruits of your labor. And when you reward yourself or your family, consider spending more on experiences versus “stuff”. As time goes by, memories will be what we treasure most.