Get Shameless About Money

Replay: The Dangers of Lifestyle Creep on Growing Your Wealth

September 29, 2022 Brunch & Budget Season 2 Episode 8
Get Shameless About Money
Replay: The Dangers of Lifestyle Creep on Growing Your Wealth
Show Notes Transcript

Am oldie but goodie from 2016 we are talking about Lifestyle Creep and  growing your wealth! 

Do you feel like you’re always living paycheck to paycheck, even though your income goes up every year? Do you wonder where you money goes every month? You may be experiencing Lifestyle Creep. We make more money so we can live better lives. The trouble is, sometimes the money controls us more than we control […]


Dyalekt:

Good afternoon and welcome to brunch and budget on bonfire radio with your host Pamela Capalad, a certified financial planner here to help take the bite out of your budget brunch and budget.com on your sound provider dialect. And here's your host, I'm looking palette.

Pamela Capalad, CFP, AFC:

Thank you, Dyalekt. And thank you everybody for tuning in. We are super excited about our show today. It is a continuation I feel like of the conversation we had last week about travel being a status symbol. Today we're going to be talking about lifestyle creep.

Dyalekt:

Lifestyle creeps, man, they said that sounds so creepy.

Pamela Capalad, CFP, AFC:

It does sound so creepy. They're lurking in every corner, these lifestyle creep lifestyles just creeping around the corner. It's so true. Wonder what TLC to say about this? No, that's a different type of lifestyle creep. I laughed. So hard. I made myself cough Dyalekt.

Dyalekt:

I've never heard of that. Maybe you should see a doctor,

Pamela Capalad, CFP, AFC:

maybe I should see a doctor. That's what happens when you laugh at your own jokes, people. So before we jump into lifestyle creep and what it is, and we are it all happens to all of us honestly, just think back to how I used to live in college versus how you live now. And if it's even a little different, then you probably have experienced lifestyle creep in your life. Well, after

Dyalekt:

we get to the investment advertiser, we should probably talk about what lifestyle creep is yes, the guy with the cheap condoms is trying to

Pamela Capalad, CFP, AFC:

definitely not Oh, that's a different kind of creep to. Okay, so today's investment appetizer is FDIC insured. Yes, I actually get a lot of people asked me if their stuff is insured, like if they put money in a bank, or if they put money in a certain account does it if something were to happen is there like some kind of guarantee and this is where FDIC comes in? An FDIC stands for the Federal Deposit Insurance Corporation. It was actually created during the Great Depression, like many things were like Social Security and all that stuff. But it was created because before the FDIC existed, there were in the Great Depression, a ton of bank runs a ton of banks going out of business, a ton of banks who couldn't actually give, give their depositors all the money they were asking for, right? Because banks don't actually keep every single dollar that someone saves in their account. That's not how banks work, banks will turn around and lend it to somebody else. So if every single person went and tried to withdraw all their money, that's pretty much what happened. And that's kind of what caused the Great Depression and the big crash in 1929. So FDR said, okay, we can have this happen again. So how do we prevent this bank run situation from happening? How do we get people to feel safe about keeping their money in these banks, and this is where the FDIC was created. And the FDIC insures you people's bank deposit. So if a bank were to go bankrupt, and were to go under than the FDIC would take over, and actually be able to supplement any withdrawals that were to happen from that bank. And so the way that that works, basically, is the FDIC is something that every bank takes, it's an insurance company. So a bank basically takes out an insurance policy from the FDIC, they pay member dues is what they're called to actually be FDIC insured. And the Federal Deposit Insurance Corporation says, okay, for every single account there, for every single owner, you're allowed to, we will insure up to$250,000. Now, this is an important number to remember, because if you as an individual or as a joint owner have more than $250,000 in one bank, they only insure up to $250,000. And the rest of it is just kind of lost if something were to happen.

Dyalekt:

So once you hit 250, you should start spreading it around. Yeah. And

Pamela Capalad, CFP, AFC:

you can't just open another individual account at the same bank, either, because they count that as the same thing. That makes sense. Yeah. So you have to go to another bank and open another individual account. I mean, the reality is that big banks aren't really, you know, we're not in a place right now, where big banks are going to necessarily crash or go under or need to tap into the FDIC, but knowing that number, that$250,000 number, and actually increased from 100,000, before 2008 to $250,000, post our recession post our big crash. So you can actually keep more money in the same bank, which is great. And the FDIC is not owned by the Federal federal government. It is an Insurance Corporation. The way that it mostly funds itself is actually through banks paying these insurance premiums basically they're calling the members Use but and the other thing is that they also have a $100 billion line of credit from the US Treasury. So the FDIC is very heavily backed by the government, even though it is not a government entity. And it's basically to give people peace of mind. Now, the types of accounts that are covered by by the FDIC are accounts that really aren't invested. So if you have your money invested in the stock market, even if it's being invested through a bank, like Chase, like if your IRA is held at Chase, or Wells Fargo, they those accounts are not insured by the FDIC, it's only cash that's insured by the FDIC. So that's a really important distinction to make. Anytime you put your money into an investment, there is the immediate risk that you could lose it, and no one is insuring you on the other end, in terms of in terms of losing money through just market changes. So the FDIC only insures cash deposits.

Dyalekt:

That makes sense. Now, considering that the FDIC holds you down in case the banks were to go under, oh, why is it that folks felt that banks were too big to fail, because the FDIC taking care of that?

Pamela Capalad, CFP, AFC:

Well, it doesn't matter if you fail, it wasn't just banks, it was insurance companies, too. So AIG was also too big to fail. So the FDIC was going to cover the banks, but it wasn't going to cover insurance companies or investment banks, because the FDIC only insures cash deposit. So investment bank like Lehman Brothers, for instance, we're not going to be insured by the FDIC, because they were making risky, risky investment

Dyalekt:

moves. Okay, so that makes sense. So it wasn't just the banks and their savings accounts that were at risk. It was a whole lot of other things that weren't covered.

Pamela Capalad, CFP, AFC:

Yes, exactly. The FDIC only covers cash deposits in banks. That's it. That's your investment appetizer people. Now let's talk about creeps. creep in. Okay, so lifestyle creep. And this is something that actually comes up a lot, especially as you know, we are in our, in our growth, potential income potential earning years right now is 20 and 30, and 40 year old, right. And so with an increase in income, especially from our college days, you know, like leaps and bounds away from our college days, we tend to spend what we have and what we see in our bank account, it's like, okay, I have this now there's like this, this feeling of like relief or a little bit of freedom to be able to do a little bit more of what you want. And this is kind of where lifestyle creep comes in. So it's kind of an someone actually put a name to the thing that we do is, as we make more money, we find that things that were once luxuries or things that felt like treats have now become necessities we've upgraded, we may have upgraded our bigger ticket items, we may have added expenses to our lives that we feel we can't live without anymore. And we tend to say things like, I'm willing to spend more money on quality or if it's for my health, it's worth it to buy better groceries or, you know what, I'm so busy, I'll just hire out my laundry or my cleaning. Or I'll take cabs more often than the subway because I because I need to now, now that I'm busier now that I make more money now that I can.

Dyalekt:

Well, yeah, I mean, as soon as you started getting more money you start thinking about the more things you can be responsible for. I mean, think your college days, but um, you think you have to go to college, to understand about when you reach that next year in getting money. There's so many more things that come matches.

Pamela Capalad, CFP, AFC:

Yeah. Yeah, absolutely. Absolutely. And you feel like, you know, there's, there's comes a certain point where, you know, clients will even tell me, like, I'm gonna be 30 I feel like I shouldn't be living with roommates anymore, you know, and you're gonna want that nicer apartment for yourself, or you're gonna want your apartment to look nice and feel nice. And that's totally okay. It's really just a matter of like, figuring out what is actually a necessity for you, or what you want your lifestyle to look like, versus kind of just letting it happen to you. Um, that's what lifestyle creep I feel like is is, it's suddenly you look, you look at your stuff one day, and you're like, How did this even happen? When did I feel like I needed to have X all the time?

Dyalekt:

You know, it's funny, because we were talking about, you know, last week was status zones, I feel a lot of it can be chalked up to advertisement and peer pressure and stuff. Because, you know, I've met a number of 30 year olds who live with roommates. And exactly, I beat to failures in life. I think that they're savvy, and they're not listening to the people who are trying to game them into spending a whole bunch of money on that tiny, cramped studio space, just so you could say live by yourself, especially your big city people. I mean, if you live in big cities, and you want to have a place that has some kind of room, it still works out best for you to share it. And you know, when couples start to move in together, I mean, we had to look at that. Yeah. See, did we want to spend more than double what we were each spending with roommates in our Yeah, in our own places? Yeah, just to live together and to get a place that was way smaller and maybe not in location we were looking for

Pamela Capalad, CFP, AFC:

Yeah, yeah, exactly. So it's these kinds of detention decisions that we tend to let other people decide for us sometimes. And that is also our lifestyle creep comes in. And the thing is, spending more as you earn more is not a bad thing. That's why we earn more money. It's, it's not like you have to live a certain way, or just like live on the bare necessities, even though you're making more money.

Dyalekt:

Well, you feel like you should spend more when you earn more, because that's the whole point of capitalism, right is to keep that whole thing rolling. If you get money, and then you just start putting it all away, and you're hoarding?

Pamela Capalad, CFP, AFC:

Well, it's not even the capitalism thing. It's just like, why are you earning more? Or why are you kind of reaching that next level, if you don't want to change something about your current lifestyle, right. And if you are just earning more for the sake of money, that's one thing. But I feel like for most of us, that's not the case, we want to make more money so that we can have a certain lifestyle, and we can get some of the things that we actually do want. The trouble is trying to figure out what you actually do want, versus what other people are telling you you should want, or even just not realizing it like not realizing like, hey, why don't I start buying coffee every day? Or when did I start eating at nicer restaurants? So regularly?

Dyalekt:

Yeah, you know, a lot of it can be the culture of the thing you're doing and socialization with your jobs. I've spoken to a lot of people who are in service industries and other industries, where you tend to threaten with your people, and who do what you do, like bartenders, a lot of bartenders have that, yeah, I'll make a ton of money. And then I'll go hang out with my other bartender friend and end up spending a bunch of money because you're tipping high, because they're bartenders, and you're a bartender. And, of course, yeah. And you're like, wait, I just made a ton of money. How come? I don't have any money left?

Pamela Capalad, CFP, AFC:

Yeah, how did that happen? I'm making more money than it was before. And I think that happens on on every level, like, especially when even in an office, like when you go to work somewhere, and everyone wants to go out for happy hour, or everyone's buying a certain kind of clothing or everyone, there's like a certain level of like niceness you feel like you have to present yourself in, especially in an office setting, especially in some of the industries that people are working in. It's like, I have to look a certain way I have to present myself a certain way. And so what does that mean?

Dyalekt:

Right? Yeah, there are certain jobs that kind of require a whole new wardrobe, right?

Pamela Capalad, CFP, AFC:

Exactly. Like when I remember when I first got into finance, and I was like, Oh, my gosh, I have to buy Office clothes for the first time. I remember the first time I spent $50 on a skirt. And I was like, what just happened? Did I really just do that. And then it suddenly became like, of course, a skirt cost $50. You know, and I think that's what tends to happen is you're just you get kind of used to a certain way of life and it's hard to go back that the other side of lifestyle creep is it creeps up to the point where you find yourself at this place, and it might be more than what you actually wanted to do. But now going backwards, is really not easy. And it's not easy for a lot of reasons. It's not easy on a practical level, because you've kind of already maybe put some of these maybe made some of these expenses fixed in your life. And on the other side of it's kind of this ego blow so we're going to explore a lot of the different aspects of lifestyle creep, how to avoid it, how to go backwards from it, why it's important to monitor it and why it's okay to let some of your lifestyle wants actually become part of your lifestyle. Right after the song dialect. Yeah,

Dyalekt:

well first of all I'm gonna go to is from Minneapolis, Minnesota is Christoph crane featuring the Canadian Buck 65 with infectious and we'll check you in a minute but your budget already

Unknown:

in with the new me with the old me before you say you knew me you should get to know me hold me in the palm of your hand what's on your fingers like a river through the land snakes Lindemann said you told me who I was in hopes that I become what you want me to be but I know who I am and I know what I'm doing so the brackets he was saying get back on free at no charge if you pay attention to the blood around the scar that spills out into fixing and don't think that you're sick Don't get mad at your float and your chips on sink. Not that I want you to drown Trump like you've been talking to the clowns too much. Claiming you can walk across the sea but you're not grounded enough to get around so when we touch teeth to the sky vivid Oh crap, if you will may sound that Mama's gonna be what she set out to be before she dies the sun asleep Pavan Sotheby's behind us you better learn how to invest investing a message to spark interest insurance in less connection is a there's no need to pump any more feelings in saying this is infectious. This is the moment that you wouldn't let fear unwind itself so what that leads to a vicious cycle cycle. By the pressure on the two prisoners made up their mind to make the home better for them. in the mud, hard working hustler Jesus Centaur 5000 muscular genius, beat merchant customer fiendish lone wolf boy crepuscular team lives he the trees preferred the returns 33 And a third degree burns to Slippery snake a cobra more slithers unbridled hybrid codename horse where there's old flame goat killer see where they both go they're not just my cousin but my teeth my throat silver. Read the thesis defender of d&d says the original no remakes of releases, and through the Technical Support Center, short tempered wrappers despite appetite for instruction, the mentor Stonehenge to magnesium Revenge of the Centaur. This is infectious. This is the moment that you wouldn't let unwind itself so what tell us about this cycle cycle, apply the pressure on the the prisoners made up their minds and make the home better off in the mud.

Dyalekt:

And we're back bunch of budget bonfire radio that was Christoph Cain be drum Buck 65 with infectious

Pamela Capalad, CFP, AFC:

and today we're talking about lifestyle creep, which can be infectious.

Dyalekt:

Well, yeah, it's good can infect your brain it can you know, you were talking before

Unknown:

you catch it from your friends. Do you? Definitely.

Dyalekt:

That's also different Creek thing. But you know, you're talking a little bit about, you know, the ego that comes in. Yeah. And one thing that I find interesting is, I mean, I guess this might be related tangentially to ego, but it becomes a method of practicality as well. Because when you're talking about, you know, skirt costs $50. And that's crazy. And then you get to a point where like, no skirts now cost $50, you begin to rationalize what makes a good skirt. Right? And that $15 skirt, now seems like it's a poor purchase, because Oh, it's going to fall apart, it's

Pamela Capalad, CFP, AFC:

going to shrink in the wash. Yeah, all of these all these reasons that you have to do this. Or even just like getting a regular like cleaning person to come to the house, right? It's just like, oh, wow, I've just like saved so much time I've gotten my time back, I'm able to do so much more

Dyalekt:

creative artists who like to buy clothing that are costumes for things that they do. And those pieces are often more expensive. I know I have at times went and going to buy some regular pants, and then like, Oh, I'm gonna buy some like, you know, cheap and kind of regular jeans. And then I think to myself, I'm gonna wear those on stage. So what am I gonna do? What's the point of those? I should probably just find the expensive ones and wear them in regular life and wear them went up.

Pamela Capalad, CFP, AFC:

Right? Right. So you Yeah, you gave yourself like this rational reason to spend more money on something.

Dyalekt:

It's crazy idea in mind that I'm straight. I'm saying that you're

Pamela Capalad, CFP, AFC:

saving money. Yes, you're spending on quality, right? You're spending for reason Obama like is all about that. Oh, yeah. Oh, yeah. And again, going backwards, is as much like something that you've, that doesn't rationally make sense to you anymore. And also very much like, wow, if I'm going backwards in my spending, does that mean that I'm doing worse? Does that mean I'm not moving forward? Does that mean I'm not growing? Does that mean that I'm going backwards? In my I'm not investing in myself? Yeah, exactly. Oh, yeah. That's a that's a whole other show. So that's the that's, I think that's the hardest part about getting to the point of lifestyle creep and trying to dial down. But I want to, I want to go back to some interesting facts that we found out and one of them I feel like debunks one of the biggest myths that have been going around, even in financial planning is that as you as you get older, your higher earning years are in your later years, right? So you make no money in your 20s. You get little bumps in your 30s. And then the 40s and 50s are those years where you just like really make a ton of money. Yeah, and they've even used it. I've seen, I've seen income projected that way. So income is actually projected to be consistently growing throughout your years until you retire. I've seen people make insurance sales off of them. I've seen people get convinced to invest because of that fact. And it turns out, it's not a fact. It turns out that there's been studies that have been done. Michael Kitsis wrote an article about the fact that there were two studies from the Federal Reserve of New York and Department of Labor, showing that the continuous growth throughout your years throughout your between your like 20s and your 60s, is not true. You don't continuously increase your income every single year. Throughout your earning years.

Dyalekt:

Are you telling me that the current in sync Backstreet Boys joint tour is making less money than they did? 90s Come on, now. They they're making way more money now. They're older

Pamela Capalad, CFP, AFC:

I can't say exactly, but I could make some I can make some assumptions that they are probably not making more money. But even if you are not a Backstreet Boy or an NSYNC member, the average the average income earner, actually their peak earning years or they're like peak growth earning years, I should say are in their 20s and 30s. And this is a study that was adjusted for inflation. So basically, technically, you're making more money every single year, but you're not making enough, you're not making the same amount of money keeping up with inflation that you would have been. So what they found was in your 20s, and 30s, that's where you see your biggest spikes in income, right, where you're significantly more than keeping up with inflation. That's where you see the big raises. That's where you see yourself double your salary. And then you get into your 40s and 50s. And in the 40s, in your 40s, they found that your income growth drops, and in your 50s, they found that your income growth based on inflation actually can go negative. And so there's a lot of people I know who will say, I will save more when I make more money.

Dyalekt:

Well, I mean, part of this is the a bit of the lottery or the I'm going to do better than the pack mentality, the idea that when you're in your 20s, you are worker bee, yeah, in your 30s, you have a better position. And then when you're in your 40s and 50s, that's when you're being made partner or

Pamela Capalad, CFP, AFC:

right that's when you're at the top right, you put in your dues for 20 years, and now you're you're going to be in the executive board, or whatever it is,

Dyalekt:

once again, everybody you're not, you all can't be CEO,

Pamela Capalad, CFP, AFC:

you all can't be CEO. And well, the other thing too, is like we've talked about this a lot on the show, the face of just the workforce in general is changing the trajectory and the career path that people have is changing. There isn't that like climbing the corporate ladder situation that we all were aspiring to, or our parents may have been aspiring to that doesn't really exist anymore. And what's interesting is that the studies have proven that maybe it never really existed in the first place that the one caveat that this study had was for upper middle class and higher income earners is this trajectory was the case, you know, you did make more money in your 40s and 50s, than you did in your 20s and 30s. But that was only for that specific demographic of people for the average income earner, that wasn't necessarily the case. And so planning for your future earnings, and saving for your future earnings is just not practical, it's not a matter of I will make more money in the future. So that's what I'm going to save. Because, again, lifestyle creep as you make more money, if you're not paying attention to it, you don't end up saving that money, you actually ended up upgrading all of your other things, upgrading your stuff, upgrading your vacations, upgrading your TVs, upgrading your cars, your houses, things like that, yeah, and

Dyalekt:

I guess it would add, the thing is you can't be an imaginary jump in salary. If you work at a place that doesn't have you on a track to be going to a certain place, right? Because those of you who are like future CEOs and stuff like that, that's kind of in the cards at an early place, you you kind of know that right? You do what you're supposed to do that you're going to be going towards the part or going towards the high level position. You can't just be working in a given thing or thing where you're not very supported. Or I think that doesn't have a next year of making money and think that, Oh, I'm just gonna be making more money magically.

Pamela Capalad, CFP, AFC:

Right, exactly. It's, if you're, and that's the thing, too, is that's what's so frustrating about this myth is this idea of like, oh, well, when I'm in my 40s, and 50s, that's really when I'm going to be earning my money. So I'm going to just do what I want in my 20s and 30s. And save later, I'll save for retirement later, I'll save for the future later. And it's again, this disconnect that we talked about between our present self and our future self. And eventually those two selves are going to collide. And at the end of the day, they're actually the same person. And that's something that we kind of have to, we kind of have to say to ourselves all the time. And the thing about saving and the thing about waiting to save when you have more money is saving is not about the amount it's about the habit. So if you think of it that way, if you think of saving as something that you make a part of your regular lifestyle, no matter what, then it becomes a habit and it's not about how much you can save today, it's about the fact that you are saving in the first place. And then when you do make more money, then you already have that savings have in place and that just becomes a natural part of your lifestyle. That is

Dyalekt:

such a real thing. I remember times when I've been like oh, I just got this big huge deal. I made this giant gig or this one thing happened. I'm gonna put away most of it to save right? I saved this big chunk and next time I get a big chunk thing I'm gonna put away and I don't you know, make it a habit and make it a thing right and not only do I not end up saving on the regular, but I'm more more likely to dip into that savings when I feel the need to, then times when I put together just, I'm gonna put away some kind of money every single month, it's always gonna happen. Even if it's not a lot, even if I'm straight up putting$10 away, I'm gonna straight up with that you could get stopped out with single digits, put in single digits away and put the single digits away. And those are the times I'm more likely to hold on to my savings and do a better job when the big chunks come in, of putting a realistic amount of ways if I don't feel that I have to get into it.

Pamela Capalad, CFP, AFC:

Right, right. Exactly, exactly. Because you're already like, Okay, I've already been saving, when I do get a big chunk, I don't feel compelled to have to put as much away. Because this is just like, oh, I have, I'm able to put away a little bit more. So I'm going to put away a little bit more, there isn't that pressure to put away all of it because you haven't been saving. And that and that cumulative savings just means more, you've spent more time with it, you've put more time into it,

Dyalekt:

I got a word for your vocab word supposed to bolster, bolster, its spell sposta you know how to spell an apostrophe somewhere. Anyway, the big thing about sposta is, there's a difference between doing something because it feels right to you and doing something because you're supposed to do it. And I think that creating, I mean, many habits are like this. But definitely creating saving habits are so different when you do it because you do it and it feels good. And you feel like this is the thing that you do and whether you do it because you're supposed to do it.

Pamela Capalad, CFP, AFC:

Right. No, it's so true. And I feel like that's what happens when people get windfalls is they're like, Oh, I'm supposed to save this. Not Oh, of course. I'm gonna save this, because that's what I've been doing this whole time.

Dyalekt:

Exactly. Yeah. Don't think about oh, you should. If you win the lottery, if you get a big new raise this is when you get a financial planner. Yeah, even planning for that.

Pamela Capalad, CFP, AFC:

Yeah, exactly, exactly. It's like no, don't wait for that. That doesn't make any sense. And I think the thing was lifestyle creep, too. We talked a lot about the ego and the peer pressure and things like that. And I think that a lot of lifestyle creep does have to do with not really being sure what you actually want, you're making more money suddenly. And now you can buy more things. But what are the things that are actually important to you to buy. And so this is where the Keeping Up with the Joneses comes in, this is where the you know, I deserve to take a trip language comes in or I deserve to have this right deserve to be able to do that I you know, I should be able to get my nails done or my hair done regularly, I should be able to buy these kinds of clothes or drink this kind of coffee. It's It's this idea and this image that you have in your head of what your what you should be able to afford because you have this money now, how do we separate

Dyalekt:

in our head from the things that other people are doing that we think we should be able to do? And the stuff that we just kind of always wanted? I know, right? That's the hardest part. That's really difficult. I mean, I guess that's the problem with advertising is that advertising preys on, you know, your psychological needs and wants. Yeah. And then makes you think you need stuff when you don't necessarily need it,

Pamela Capalad, CFP, AFC:

or that you don't even want it. And then suddenly you're like, oh, wait, I don't only just want that I need that in my life, right? But there's some

Dyalekt:

stuff like even from little babies we've been wishing and dreaming to have and get a certain amount of money. And we're like, Yep, it's time to do that.

Pamela Capalad, CFP, AFC:

Let me get my case, Swiss, right. dialect.

Dyalekt:

I got a pair case, I got I also got a cross colored hoodie because I couldn't afford that when I was a kid. And now they're back cross colors is back, you know that go to their website.

Pamela Capalad, CFP, AFC:

I love that. I love that you have the most like inexpensive luxuries from a kid and happening right now.

Dyalekt:

Expensive luxuries that should be my next read.

Pamela Capalad, CFP, AFC:

Yes, I love it. Well, and that's the tough part too. Because, you know, obviously we've evolved and changed what our wants and needs were from when we were kids or even from when we are college kids. So it's not like we can necessarily look back all the way back that far and say, Oh, well, I've always wanted to be able to buy coffee every single day since I was five years old. So I of course want to be able to do it now.

Dyalekt:

I mean, if we look too far back then we'll all just have ponies.

Unknown:

The pony industry will be booming right

Dyalekt:

now. The poultry industry is doing fine. They probably

Pamela Capalad, CFP, AFC:

are. You're right. You're right. But that's that's the other crazy thing is just part of it is just always doing a self examination. And it's not easy to do and it's not necessarily easy to remember to do and we have to do it ourselves when we think back like one of our big vices and I think the big lifestyle creep for us has been fancy groceries. Right? Eat.

Dyalekt:

You know, I remember moving to New York, and everybody was vegan ate this fried At this next thing, and it was, you know very much in the artistic community, and there was a lot of talk of connections, spirituality and food and achievement and food. And not that I disagree with all of those things. But there are a lot of important person markers, right, attributed to eating the right kind of foods, not to mention moral ones. Because, yeah, started talking about people were saying, oh, yeah, this comes from the factory farms sweatshop check in that, you know, all these terrible things that you don't want to be a part of. So, in between all of those things, it makes you feel much better as a person but a part of the world. Better to yourself to get more expensive food.

Pamela Capalad, CFP, AFC:

Yeah. It's true. You're like, Okay, well, this is, this is from my health. That's probably the that's probably the biggest reason I've heard. It's like, you know, if I'm going to spend money on anything, it's going to be on food. Right?

Dyalekt:

I definitely said that. And I agree with

Pamela Capalad, CFP, AFC:

that. Yeah, I agree with that, too. That is actually something that I have as a value. I love food. I love eating good food, I love eating food. That's good for me. And so I will spend money on food. The thing is that because I've kind of given myself that leeway. I also have found myself just not paying attention to how much food I've been buying how much money I've been spending on food, but types of foods that I've allowed myself to buy, like going into a fancy grocery store and buying like a $9 box of crackers, because it's gluten free and organic. Like, is that really what I want? Or is that? Is that just following my, my my wants to the letter of the law? You know? Yeah, we've had plenty of conversations about that. Yeah. Where we've had to, like, look in our shopping cart and be like, Wait, how much? How much is that thing that we're about to buy that? That? Do we really even want it? Do? We need that to be a regular thing in our life? And

Dyalekt:

when it comes on the health and world tip? Oftentimes we're like, well, actually, how informed are we about how much better this thing is, is it really just being marked up and it's coming from a really similar place?

Pamela Capalad, CFP, AFC:

Right, that's the other thing too. And that's, I think that's where advertising comes in. Because it knows that a lot of people will make allowances for food, if it feels like it's good for you. If it feels like it is healthy. And I know that's where our lifestyle creep has really come in, is watching our grocery bill just like kind of creep up every single year as we make more money. It's like, oh, well, now we can afford this thing. Or now we don't really have to pay attention to how much how big the bill is or how much that rings up to. And we've recently started really paying attention to it to the point where we're like, oh, man, we have to we have to shop at Trader Joe's we have to cut back on certain things like

Dyalekt:

did you hear that? That was a first world problem behind talking. We Oh, no, we got to shop at Trader Joe's like that's not still really expensive food

Pamela Capalad, CFP, AFC:

I know. But it's versus like getting food delivered from Fresh Direct or going around the corner to our local grocery store where all the organic stuff is marked up twice as much. You know, it's it's it's I know, that sounds silly. Oh, my gosh, I caught myself but are you caught me I guess. But it's just this idea of actually paying attention to the thing that you said that you want versus what you're actually doing, right? Because if the goal is to spend money on food that's good for me, and I'm willing to spend the money on food that's good for me. And that's healthy. Does that mean that I can just spend whatever I want on food? Because I've given myself that permission?

Dyalekt:

Exactly. And for the food? Are we still getting the benefits that we think that we're getting from it? And that's something that needs to be reevaluated? Yes,

Pamela Capalad, CFP, AFC:

exactly. So it is a process and all of it is an experiment and an adjustment. But I feel like when you think about what you really want, and then go back and look at exactly how that's playing out in your life, then you can start to figure out, Is this actually in line with the values that I have? Or did my lifestyle just creep up on me? Did I just allow myself to do this because I had the money in the bank to do it. And I didn't put as much thought into it as I thought I as I thought I did. Well, you know,

Dyalekt:

the lifestyle, the term lifestyle creep implies not a conscious decision. Yeah, absolutely. And well, I guess what I want to know, what do you think? How much does it matter? Whether the decision was conscious or whether it was an accident?

Unknown:

Oh, I see. Yeah.

Dyalekt:

Because you know, if you find yourself in that position, you find yourself in that position, whether you rationalize your way into it or accidentally your way into it, you kind of still are at that point.

Pamela Capalad, CFP, AFC:

Right. Right. Well, and I that that is a good point. And I think that what tends to happen is I think the biggest marker of lifestyle creep is even if you've thought about it, even if you've rationalized it, even if it wasn't an or even if it doesn't feel like an accident on your part. Like is it what you really want? Like did you just allow yourself to get the bigger house the bigger car the nicer groceries like did you just allow yourself to do all of those things without really thinking about? Hey, is this what I really want my life to look like?

Dyalekt:

I think the phrase that might be useful is worth it. Is it worth it? Has it been worth it to be at this point? And have my acute trauma at this level? While my savings are at another level? Right? And what's the balance going on

Pamela Capalad, CFP, AFC:

there? Yeah, definitely. And, and understanding what you're giving up by buying these things, or having these things I think, is really important, too. Because the thing that you are, when you tie yourself up, and especially big ticket items, you are giving up a level of freedom that you that you had before you have these things, if you subject yourself to a car payment, and a big mortgage payment, and, you know, a fancy cellphone plan, and you know, needing to eat at this level, then we talked about going backwards, but it's not just about going backwards, it's about it's about is this what you want your future life to look like is this what you want your retirement years to look like, you know, and knowing that, even if you're spent, at the same time that you're spending more now, that also means that you're somehow going to have to figure out how to save more, or work more. Because you've you've put your lifestyle to this level that you don't want to go backwards on. Which means that if you stop working, you're still going to have to spend this level of money. So it's this cycle that you've put yourself in. And the question really is like dialect said, is it worth it? Is it worth it that you've put yourself in this cycle where you're, you're not able to save as much, you have to spend more your cost of living? has, has grown? And now you're like, Okay, so if I want to retire, then can I go backwards? If I don't want to go backwards? How much longer is it gonna take for me to do this?

Dyalekt:

Yeah, I think that's the thing that I think about the most, this type of lifestyle that I have now. I don't want to have to go back on it when I'm older. Yeah. I don't want to have to live like I did when I was 21. Right. Like that makes life seemed like a really sad bell curve.

Pamela Capalad, CFP, AFC:

Yeah. Yeah, exactly. So that's another thing to think about. And we get used to things really fast. You know, we get used to having a, having a certain level of car and having a certain level of house, you know, at some, the other thing that I thought was interesting that Michael Kitsis pointed out in his article was, at some point, when you surpass a certain price point for a car, you are buying more for luxury and choice than you are for the purpose of buying the car. But when you get to that point where you're spending money on that level of luxury, you can't go back. You feel like you can't go back or you feel like it's a fail if you go back.

Dyalekt:

Yeah, I mean, I guess once you get to the point where you buy a new car and not a used one. Yeah, you are that is the threshold of having something reliable to get around. That can be fixed easily.

Pamela Capalad, CFP, AFC:

Right? Exactly. You're like, oh, well, it should be new because it's safer.

Dyalekt:

Regardless of how, like from there on, it's only new and fancier.

Pamela Capalad, CFP, AFC:

Yeah, exactly. Exactly. So we all do this. We all have it. What do we do about it? We will talk about it after this. What are we gonna do

Dyalekt:

what we want to do about prepping and lifestyle? Is it a bad is it a bad thing? It's a good thing. I'm not entirely sure but we're gonna go to a song first I think let me see let's go to Yeah, I want to go to I'm going to Hawaii Yeah, yeah, we got in a way we got the homie big mocks with freestyle my life away. And we'll check you in a minute. What's your budget?

Unknown:

Yo man, which one do today? I don't know man this freestyle when you want to freestyle, I know I'm an MC. What I do because when I do that I can see what I like to say around the shillings just freestyle my life away but you could come and chill ROM and display because I just like to just freestyle my life away. And when I do I could save what I like to say Come with me and you can freestyle your life away and you can come to you can do it today and shoot with me and watch me freestyle my life was way because when I do you know my mind zone I take the time and you know got my bombs on. I can pre sell every day in my life because every day I got to trouble strikes but I was shut off when I let my mind loose. I could disappear and nobody finds you. I like it. Oh, when I'm on the microphone you know that it's like a holiday that I could live on. Nothing else that I could spit on you could find a beat you to you could get on and just exercise the freedom of speech makes up speak to the beat the facade in the song using your mind that you can lose and find everything if you use it wrong. If you only learn one lesson a day, it will be just the priests them and Go to Pennsylvania. Wait, listen, because when I do, I can save what I want to say. Come with me and watch me freestyle my life away. And you can come and you can bomb and just chill. Watch me freestyle my life away. And when we do when I say what I want to say, come along and you could freestyle your life away. You can chill and you can do it today and watch me the freestyle my life away. Nobody understands really what happens Nisa DuBois. It's just the synapses that happens in the brain that you could just saw. And everybody shilling they saw, because you rap about the things that around you, and then they look at you like you're such a profound dude. Like, how do you do that? Really, man, it's magical. But really, it's just something this man practice. I like to think in ROM because it takes a time that you can perceive while the words that I defined, it's like I'm looking at and saw you could be hard and I can make sure that I can recall. Plus, I got a good vocabulary. Since day one. I've been looking at the dictionary never spelled well, but I can speak. Make sure that in the English class, I can see Jeff say what you want if you want because I'm the best kid freestyles can write a song dog, you're watching. Nanny. Now, when I do I can say what I want to say. And you could watch me as a freestyle my life away. You could steal a nuclear bomb and display but I'm just chilling. Watch me as a freestyle my life away. And you can come through you can do it today and you can chill and maybe just freestyle your life away. Because when I knew I could say what I want to say. And you can chill once we freestyle my life way back to the freestyle track, again, because I felt like it and that's what you do when you freestyle. You feel it? You don't write a PhD. Probably get paid for this for my stylish treat. Or wait for like right now. I'm gonna do it. Because it's blowing your nose at a magic when I pursue it. I just come through and I'm spitting a bomb but you could smoke a lot of shit but you and get into battle. That's another pot of an MC. You can spit bombs even though your brain is empty as some people like to get away with Beats over the beat. Okay, that's it. He can't rap and there's no beat so wait. Yes, you can. Like Shut up. The bologna sandwich. Yeah, yummy.

Dyalekt:

And we're back. Brunch budget bomb by radio that was big mocks with freestyle your life way. But budget, Fabiola radio, we hear lifestyle creep in our lives away, or at least our savings away? Lifestyle creep? What happens when you make more money and spend more money? Do you just keep it all even? Or are you going negative?

Pamela Capalad, CFP, AFC:

Yeah. Are you going negative? Well, and we talked a lot about what causes lifestyle creep, a lot of it is a combination of peer pressure, advertising, feeling like you need to keep up with somebody, something possibly fulfilling some wants that you had in the past. And also just it kind of creeps up on you. You suddenly have some money and you start allowing things that were once luxuries and treats to become necessities in your life.

Dyalekt:

Well, and some things do become necessities as we get older. Absolutely. Who have a need for more health for more fitness type of thing. Yeah. Then we did when we were younger. Yeah, we sometimes if we end up with back issues and stuff like that, we may need to travel differently. I know a lot of older folks who they like to travel business and first class, not because they like feeling fancy, but because otherwise they're not going to be able to travel.

Pamela Capalad, CFP, AFC:

Right? Absolutely. And so there are those considerations to keep in mind. The thing is, if you don't keep those considerations in mind, and you just kind of let the lifestyle creep happen, then when you do have to take those into account, do you actually have the money to do it? What if you're, what if you're certain level of living has gotten to the point where you do suddenly have those back issues and you do have to fly business or first class, but you don't actually have the money to do it, because your baseline expenses are so high. And so that's the those are the kind of trade offs that we it's good to think about. Every time you get a bump in your salary, every time you raise your rates every time you're killing it on the freelance tip is, okay, now that I have this bump in salary, it all just shouldn't go to the same place, where should it go? And so I want to talk a little bit about strategies not to avoid lifestyle creep, but to do lifestyle creep on your own terms, to increase your lifestyle consciously in a way that you actually want to increase it to. Because at the end of the day, it's going to happen, and we all kind of want it to happen. Like we are working for more money so that we're able to make some of these luxuries and treats be necessities, you know, and so, some strategies To keep lifestyle creep and check our, you know, pretty basic tracking your spending, if you haven't already, increasing your savings, we talked about starting to build your savings habits early. And, you know, spend less and save more is like the most annoying advice I've ever heard. And that's basically what I told you. So we actually found some really specific strategies for how other people have done this. And, again, going back to another Michael Kitsis blog, one of the strategies that he had that I thought was genius was, a lot of people try and tell you this number, like, just save 10% of everything you make, right? Because if you save a percentage of what you make, then you're automatically saving more when you make more. Right, right savings creep. Yeah, savings creep, exactly the other kind of creep. It really doesn't, it really doesn't. So that's a strategy that people have employed, it's something where you know, your 401k allows you to save a certain percentage, and then increases the actual amount increases as your income increases. But one thing that I thought was really interesting is instead of focusing on what you have to save, to focus on what you get to spend, and so that, instead of focusing on what you have to save, focus on what you get to spend. And so if you're like, Okay, so I'm making$1,000 more a month, instead of saying, I'm gonna save all of it, or I'm gonna save some of it, allow yourself to spend half of it, Michael Kitsis tip is to spend 50% of your raises. So you've basically given yourself permission to say, I am going to increase my lifestyle by another X amount based on the raise that I got. And then that way, you get to focus on how much more you get to spend. But the automatic other side of it is if you're spending only 50% of your raises, that means you're saving the other 50% of your raises,

Dyalekt:

you know, hilariously that is also mama Lex theory on gambling. Ah, once you when you gamble, if you'd like you win in the beginning, then you take half of what you want, and put it away. And the other half you gamble with.

Unknown:

I love it. I love it. So

Dyalekt:

once again, finance, gambling,

Pamela Capalad, CFP, AFC:

all the same thing. Yes. So if you focus on the part that you're actually going to enjoy the spending part, then the savings part kind of just happens by default. If you're like, oh my god, I'm allowing myself to spend half of all the raises that I get, that's amazing. On the flip side, I know we have a lot of freelancers and entrepreneurs listening as well. And I was thinking about this because we don't make consistent income, our income is in flux all the time. And so the way to create and modify this is if especially if you've been freelancing or doing entrepreneur work for a bit of time, you probably have a good idea. And if you don't have a good idea of this, then 12 month cash flow projections, email me Pam at brunch and budget.com about it, please, I will send you a template. But you probably have a good idea of how much money you make on average every single month, or how much money you need to make to actually cover all of your living expenses. And so when you make more than that in a certain month, allow yourself to spend 50% of the extra and then save 50% of the extra. So let's say you on average as a freelancer make $4,000 a month, and the next month you some you get a big gig, you hustle super hard, whatever it is, your payments actually come through from some of these places, and you end up spending, you end up making$6,000 a month instead of $4,000 a month. Give yourself an extra$1,000 to spend and save the other $1,000

Dyalekt:

That's gravy money. Yeah,

Pamela Capalad, CFP, AFC:

that's that gravy money. Exactly. And the thing is, you know, people like gravy. So have some gravy now and save some gravy for later.

Dyalekt:

What I want to ask you because I have thoughts about this myself, but yeah, do you have advice for folks who are all you know, especially by entrepreneurs and small business owners, who are very about their business and about the growth of their business? To the point where you I don't know if you'd call it lifestyle people to get this like lifestyle people when they get more money. The first thought isn't to spend like I'm gonna you know, blow it on. Yeah, whatever. But it is to reinvest in the business or spend more money on the business, right? How do you regulate that?

Pamela Capalad, CFP, AFC:

Yes, because what will happen eventually, and I've actually seen this happen in real life is you will burn out on your business, you will burn out in your business, you'll be tired of it, you'll find yourself hating it, or,

Dyalekt:

I mean, you'll also can just be inconsistent about the way you do with things because I've you know, been there and seeing things where people are like, Oh, I just made this big windfall, like as musicians. Now I'm gonna go to this more well known engineer to go and mix down my record and spend way oh, just made a bunch more on that.

Pamela Capalad, CFP, AFC:

Oh, yes, I see what you mean, I see what you mean, when you get a big windfall and you're like, Okay, I'm going to do the fancier thing, you're going to lifestyle creep your business,

Dyalekt:

I'm going to do the more quote unquote, more professional thing.

Pamela Capalad, CFP, AFC:

Right? Right. What I say to that is, unless it's consistent, then don't do it. Because the same thing will happen with lifestyle creep is business creep, which is another creep, I guess, there we go. But you're gonna go to that fancy engineer, and this windfall might not be consistent, but you're, you're really not going to be able to go back from the fancy engineer, you're gonna feel like this is the new standard. This is instead of just like a thing you've treated yourself to. And well, actually, when it comes to business,

Dyalekt:

I guess this is the thing that I want to say on my end, when you go to the fancy engineer, when you go to the bigger gallery, the different distributor, the nicer printmaker? Is that something that will increase your revenue at a similar rate? And I think that because sometimes it's not going to be consistent, but it will be worth it to you to go to that next level of proportionality, because it will give you an opportunity to reach audiences or to reach sponsors, who wouldn't normally have looked at

Pamela Capalad, CFP, AFC:

what you're doing? Absolutely. Well, if it's a strategic decision to be doing that, and you, you have an idea of what the outcome could potentially be, then that's a business decision. If it's you wanting to feel like you're more professional, or fancier or like you leveled up for a second, then that's completely different.

Dyalekt:

That's what it is, if you have the outcome in mind,

Pamela Capalad, CFP, AFC:

yes. And the outcome is it is more towards business growth and towards your personal feeling of success. I think that's the big difference is, I when you when you do it, because you got a windfall, and it's just a personal win for you, then, then you're doing it for the wrong reason. For those

Dyalekt:

of y'all who really do my music friends who just desperately want to put out a limited edition vinyl record, just to have that thing. If you don't have a plan for that that's going to work out for you. Right, maybe hold off on that until you can be more consistent in the type of income you get from your art.

Pamela Capalad, CFP, AFC:

Yeah, exactly. Think backwards to why you actually want to do it. And it's not just to have some kind of thing to memorialize the album. Right?

Dyalekt:

It can't be. That sounds so sad. It's like, Oh, my God,

Pamela Capalad, CFP, AFC:

I know, well, it's just, you know, it's, it's, it's a reason why people do it. It's like, oh, well, now I have the souvenir from this album I made. So with the, with the strategy, I think the biggest thing is to really, is to really give yourself a balance, it is about balance. And it kind of always comes back to that is to acknowledge the fact that you are working harder, and you want to make more money to be able to afford different things and, and you know, in your head, better things, whatever that means to you. So, give yourself that leeway, but just do it consciously. And one of the things what I one of the things I want to end with is this question from this bill fold this bill fold article. This woman who wrote about what was it she wrote about this this cat game Neko Atsume a and lifestyle creep. And I guess this cat game allows you to build up like this cat playground. And as you have more stuff in

Dyalekt:

a video game, are you playing with cats?

Pamela Capalad, CFP, AFC:

It's you will you're playing with video game cat, okay, okay.

Dyalekt:

It's a video going out in the yard. No,

Pamela Capalad, CFP, AFC:

no, no, no, it's video game cats. And you build up this video game cat playground. It's kind of like Farmville, it sounds like but with cat. And so you build up this cat playground and more cats are attracted to visit your playground, when you have more stuff built up. And it was like a cautionary tale. I know. Right. And she equated it to lifestyle creep, she equated it to, you know, wanting to go on to the next to figure out on to the next and what the next thing is, what the next level is, how am I going to level up? How am I gonna get to the next stage? You know, and one of the things that she asked me that was really profound was, how do I stay grateful for what I have while working as hard as possible for what I want. And I think that's the constant tug of war that we tend to have with ourselves is being grateful for what you've been able to have now. But also still striving for the things that you want. And I think part of it is one really understanding what it is that you want, and what it is that you personally want. Like I had a client who I met with recently who we are talking about, like what you like to spend her money on and one of the things that she said was she was like, you know, I'm the kind of person who prefers to just have a spa membership versus saving up money to travel big once a year. I want to be able to go to the spy every day, and just chill out every day and have these little nice things in my life. Then to like to deny I myself have this so that I can travel, that's more important to me than traveling, I'm willing to say no to travel so that I can have this instead.

Dyalekt:

Once again, where you spend your money, the representation of what you value. Yes. And I guess that's, we're gonna just set this at the beginning. That's the whole overall with it and how you can define whether something is lifestyle creep, or whether you're just bending the thing that you should be because this is what you wanted to do, is, does this line up with your actual values? Yeah. Or are other people or other thoughts goading you into this?

Pamela Capalad, CFP, AFC:

Right, right. And figuring out what your values are, it's not an easy task. It's something that you do, figure out through trial and error, figure out as you go, there's no formula for it, everyone is different. Everyone cares about different things. And the hardest part is to cut away all the noise. And sit down and think about what you actually want your life to look like. And that's why lifestyle creep is so dangerous, because it allows you to build a lifestyle that isn't even necessarily what you want, or made up of things that you actually care about. So that's the question that I want to leave you with, is think about how to stay grateful for what you have, while working as hard as possible for what you want. I think the I think the best thing, the best thing there is to kind of remind yourself what you actually want and remind yourself of the things that you are really happy about to be able to enjoy the things that you are actually that you've actually put in your life, like, enjoy that cup of coffee every day, enjoy that new outfit that you bought, like really, really savor the ability to be able to have these things in your life. And I think that when you do that, and when you put value to the things that you actually value, and remind yourself how much you value them every single day. And remind yourself how much better it makes your life. Then it changes how you think about spending things and it changes your spending habits. Just by default in a way you know it. It gives you the ability to really examine yourself and cut away all the noise cut away all the advertising, cut away all the things your friends are telling you. So that's kind of where I want to leave you guys lifestyle creep is a real thing.

Dyalekt:

Yeah, in other words, only spend real money on what's real to you. Ooh, yes, that sounds great. And we only spend money only spend real money spend real money on what's real to you. And we're gonna leave you off in Oxford. Get educated Oxford, UK we have rappers from there. His name is Gauri gang, and he's got life freestyle. We'll check you out next week. Once your budget Wi Fi radio spend real money on real things don't let it creep up on you

Unknown:

sit back and reflect back on my setbacks and how I lost my mind but now I've got my head back It's all behind me in my head but Africa when my dreams vision for the day when I head back to you does this whatever one I don't say that. I just want to have a fair chance while I'm here I've got student shouts his Kindle yes said that so I am worried my music is where my head's at. What you were ahead that that respects unexpected. I'm just too busy pumping my blood into this dress dress you man the piste everything that Spirit just said checks down next snap and end up in the depths of town for UBS or you're dead to me Are you mad? I don't care to wrap Fuck you man. Can't touch this like safe sex to bed and I was speeding you go. Yeah, he respects all the bricks will help more than he showed me consoled me. I will never forget when I'm feeling like a champion, glorious ambience, what chama curry spit straight bullets and not only then carry guns but no premature celebrations. You might have rung on the Champs you and I can like you're done you are bombing you and Gutten life is what you don't expect the other day of glass look after me fresh craps and put money in my hand like respect. Now that's love you touch me brother so that's love and so when that shine we shine together now I'm on my way up we come together so remember you always have an option you boys who do them you do you you don't have to do crammed together two times. That's my young term for real I just spit how I feel let's build so love and don't conceal my love is everything on the air that I breathe with when I'm reminiscing all the fine women that I've been with but I'm still the one with a cane in one lesson with asking for forgiveness so I'm not doing the physical that I sin mixed emotions this one is crappy seasons.