Avoid the Lifestyle Creep: Social Media and the Impact on our Personal Financial Goals

Damian Winther, CFP®
Jan 30, 2020 5:58:37 PM

lifestyle creepSocial media outlets can have the tendency to cause us to create what can be unreasonable comparisons between ourselves and our lifestyle and those around us. We all have individualized goals, values, needs and wants, which we want to measure ourselves and our progress against. How can we help prevent social media from negatively impacting our thoughts, opinions and financial decisions?

How Social Media May Be Impacting You

Social media is still a relatively new phenomenon, and it’s something almost every person on this planet is exposed to on a daily basis. It can create positivity or negativity for each and every one of us. It’s for this reason we all need to challenge and question what we read and pay attention to, whether that be social media, news or those we surround ourselves with.

How often do you open your social media apps and see how wonderful life is for those around you? Whether it be the new car they just purchased, the new lake home they’re building in northern Minnesota, or the fact that all of their kids are straight-A students that will be earning athletic scholarships to top Universities. You don’t often read about the layoff that just happened, the divorce filing that took place yesterday, or the bankruptcy or foreclosed home. You can see where I’m headed with these examples.  

What is Lifestyle Creep?

At the end of the day, social media is an outlet we choose to use because it gives us the ability to showcase our lives however we see fit. It’s important that we take what we read with a grain of salt and bring things back into perspective as it relates to our own lives and situations. From a purely financial standpoint, it’s very easy to get caught up in the social media frenzy of comparing ourselves to those around us. It’s human nature to do so. This can be called Lifestyle Creep. Investopedia refers to this phenomenon as a change in thinking and behavior that sees spending on nonessential items as a right rather than a choice, and can be seen in the spending decision attitude of “you deserve it.”

How to Avoid Lifestyle Creep

As a financial advisor, I encourage our clients not to get caught up in the purchasing/lifestyle decisions of those around them. Instead, focus on what they have control over and then make decisions that align with their values and beliefs.  

I’m often asked by clients, “How much should I have in my portfolio today based on my age.” Or “Is this level of monthly spending the same as your other clients?”  Well, as you can imagine, the answer is always…it depends. At the end of the day, the answer to these questions depends on the goals and values associated with each and every person. Financial planning doesn’t happen in a vacuum and there is no one-size fits all approach to ensuring we all live happy financial lives forever. Each individual and couple are unique in their own way.  

Take for instance, the example of a couple that earns $150,000 per year, but doesn’t save a penny towards their long-term goals. These individuals may often be seen on social media platforms as “living the good life.” Constant pings and alerts so that their friends can see their new cars, houses, cabins, boats, etc. What about the debt levels that may be associated with these purchases? What about the lack of a long-term game plan to ensure this level of spending can continue beyond retirement? These are variables that don’t often get talked about and are generally hidden underneath the surface.  

Without taking these additional variables into account, it’s easy for each of us to compare ourselves to this couple and ask the question, “Why can’t I have that much fun?” Or “Where did I go wrong in my financial situation”?  

The reality is, we each have our own goals, values and personal motivations. If you have the ability to save and invest for the long-term while also living the good life today, more power to you. If you have to live within your means so that you can save and invest to maintain this standard of living throughout your retirement years, again…more power to you.  

Financial situations vary from person to person and family to family. Comparing ourselves to others around us is a function of human nature and is not going away anytime soon. It’s important that we stay grounded and not get caught up in the noise of what’s happening around us. I encourage my clients to focus on the things they can control. 

Living a meaningful financial life can mean different things to each of us and it's our core values and beliefs that should form the foundational benchmark to which we make comparisons. Contrast that with comparing our financials lives to those around us and the conclusion you draw should hopefully be more meaningful.

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