Can You Avoid Lifestyle Creep?

Summary

Ramsey Everyday Millionaires Episode: Can You Avoid Lifestyle Creep?
Release Date: January 24, 2025
Host/Authors: Ramsey Network (Dave Ramsey, Ken Coleman, Rachel Cruze, George Kamel, Jade Warshaw, Dr. John Delony)

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Introduction

In the episode titled "Can You Avoid Lifestyle Creep?", the Ramsey Network delves into the common financial challenge of lifestyle creep—where increasing expenses outpace income growth, potentially undermining financial stability. With insights from hosts Dave Ramsey and Jade Warshaw, alongside real-life listener interactions, the episode offers strategies to maintain financial discipline while enjoying the fruits of one’s labor.

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Caller's Story: Sarah’s Financial Journey

The episode centers around a listener named Sarah from Phoenix, Arizona, who shares her financial journey and concerns:

• Background: At 40 years old and married for 15 years, Sarah and her husband have successfully paid off $150,000 in student loans early in their marriage.
• Current Situation: With three children, Sarah observes that their expenses are steadily increasing due to factors like inflation and the natural growth associated with raising a family.
• Primary Concern: Sarah is grappling with balancing the intensity of their early financial efforts with a more intentional approach to spending, fearing that unchecked lifestyle increases might jeopardize their financial future.

Sarah’s Quote: "I’m looking at how our expenses keep growing every year... balancing that in a way that's honoring the hard work and being mindful of the future, if that makes sense."
(00:20)

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Expert Advice: Transitioning from Intensity to Intentionality

The co-host responds by contextualizing Sarah’s situation within the framework of Dave Ramsey's Baby Steps:

1. Assessing Progress: Sarah is approximately on Baby Steps 4, 5, and 6, managing their mortgage and saving for their children’s college education.
2. Defining Lifestyle Creep: The co-host explains that lifestyle creep isn't inherently negative but becomes problematic when it overshadows financial responsibility. As long as foundational financial practices are maintained, it's acceptable to enhance one’s lifestyle commensurate with increased income.

Key Points:

• Five Pillars of Personal Finance:
  1. Budgeting: Consistently adhering to a monthly budget.
  2. Debt-Free Living: Eliminating consumer debt and avoiding future debt.
  3. Insurance: Maintaining appropriate insurance coverage.
  4. Savings and Investing: Building emergency funds and investing for the future.
  5. Generosity: Prioritizing charitable giving.

Co-host’s Insight: "If I'm doing all of the things that would cause me to be a financially responsible adult, it's okay for me to increase my income and therefore increase my lifestyle."
(02:20)

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Practical Framework: Could, Should, Must

Jade Warshaw introduces a simple yet effective decision-making framework to help listeners navigate potential expenses without falling into lifestyle creep:

1. Could I Do It?
   Assessing whether the purchase is feasible within the current financial situation.

2. Should I Do It?
   Evaluating the alignment of the purchase with personal values and financial goals.

3. Must I Do It?
   Determining if the expense is essential or driven by deeper values and necessities.

Jade’s Explanation: "If it's in the must category, well, then we've got some values that are driving that decision. If I'm doing my research and ensuring it's a wise expenditure, it aligns with our financial responsibilities."
(04:36)

Example Provided: Jade discusses the consideration of purchasing an outdoor dry sauna, weighing its health benefits, space availability, and affordability before making the decision.

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Analogies: Tight Jeans and Flexibility

To illustrate the transition from stringent budgeting to more relaxed financial practices, Jade and the co-host use relatable analogies:

• Tight Jeans Analogy:
  Compares the initial strict financial discipline (Baby Step 1) to wearing tight jeans—restrictive and uncomfortable. As one progresses financially (reaching Baby Step 4), there's room to "let the zipper down a little bit," symbolizing increased financial flexibility without compromising core values.

• Rubber Band on Wrist Analogy:
  Represents tightening financial constraints, which leave temporary marks—akin to the discomfort felt during stringent budgeting phases.

Key Takeaway: As individuals move through the Baby Steps, they gain the ability to enjoy increased financial freedoms without falling into irresponsible spending.

Co-host’s Commentary: "When you’re on baby step one, it's like you're squeezing into a tight pair of jeans. By baby step four, you can just let the zipper down a little bit and enjoy some breathing room."
(07:30)

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Conclusion: Aligning Values to Prevent Lifestyle Creep

The episode concludes with a reinforcement of the importance of aligning spending with personal values to effectively avoid lifestyle creep. By maintaining financial discipline through established pillars and employing practical decision-making frameworks, listeners can enjoy a balanced and sustainable increase in their lifestyle without compromising their financial health.

Final Insight: "If your values are aligned with how you spend your money, lifestyle increases won't derail your financial stability."
Jade Warshaw
(07:07)

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Notable Quotes

• Jade Warshaw (03:29):
  "Here are three questions: Could I do it? Should I do it? Must I do it?"

• Co-host (07:56):
  "Have you ever... you're like in the tight jeans, and then you get in baby step four... you just let it."

• Jade Warshaw (08:20):
  "Eat through the pain."

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Final Thoughts

"Can You Avoid Lifestyle Creep?" offers valuable insights for anyone striving to build and maintain wealth without succumbing to the temptations of increased spending. By sharing real-life scenarios and practical advice, the Ramsey Network empowers listeners to make intentional financial decisions that honor their past efforts and secure their future.

Transcript

[Dave Ramsey]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Sarah's up in Phoenix, Arizona.

[Jade Warshaw]

Sarah, how can we help today?

[Sarah]

Thank you so much for taking my call.

[Jade Warshaw]

You bet. What's going on?

[Sarah]

So I am curious on your thoughts on once you've paid off your consumer debt. My husband and I are 40. We've been married 15 years. Paid off about 150,000 doll in student loans when we first got married. Wow. Now we've got three kids, and I'm just sort of looking at how our expenses keep growing every year. Combination of kids inflation and lifestyle creep. And just sort of curious on that balance of, you know, the intensity from where we started our marriage to the intentionality and how you balance that in a way that's honoring the hard work and being mindful of the future, if that makes sense.

[Unknown]

I think that's a great question. So would you consider yourself on baby step five, baby step six? What's the plan?

[Sarah]

Where are you four or five and six? We still have a balance on our mortgage.

[Unknown]

Okay. And you're still putting aside for kids college.

[Sarah]

Yes. And putting aside for kids college.

[Unknown]

Yeah. I think there's you. You said all the right buzzwords, which is at this point, you're moving from intensity to intentionality. What? You're right. And, and the way that intentionality balances with the idea of I still want to enjoy my life, at what point does it become, quote, unquote, lifestyle creep? Because lifestyle creep kind of has this negative connotation that if I'm increasing my lifestyle too much, I'm putting myself kind of in a, in a, in a red zone or in a. In a place where I'm not being financially smart. Right. And so the way I like to think of it is, first off, the reason that we do the baby steps is so that. And you get to fill in the blank on what the. So that is so that I can live in a nicer house, so that I can travel more, so that I can go to more of my kids sports games, whatever the. So that is, chances are it does cost more because this is a whole money thing. Right. And so for me, where the barrier lies is as long as I'm doing all of the things that would. Would cause me to be a financially responsible adult, it's okay for me to increase my income and therefore increase my lifestyle. Right. So for you, you're a baby steps walker. I kind of like to filter this through. Just a general kind of five pillars of personal finance. Am I a person who keeps and sticks to a budget monthly? Yes. Okay, great. Check that box. Am I a person who is out of debt and values never going into debt again? And I'm putting that. And have put that into practice? Yes. Am I a person who carries the proper insurances? I've checked all the boxes. I've done all the stuff. I check my cover yearly. I carry what I need to. Okay, I do that. Check. Am I a person who has valued savings and investing for the future, whether that's emergency funds, whether I'm contributing the right amounts to my investing for the future? Right. Check that box. And am I a person who prioritizes generosity? If I'm doing those five things, I'm also working on my baby step. Yeah. Increase your lifestyle, knock yourself out, have a good time. That's what it's about. It's not about I have to limit myself like this all the time. All the time. Otherwise, what was the purpose? What was the point?

[Jade Warshaw]

Yeah, I agree. The only thing I would add to this, Sarah, is I think there's three questions that even now I'm constantly asking myself. Because we got. We've got three teens, one's in college. I got two drivers. I got a third one on the way. I mean, I feel like I'm running a garage service. I got so many cars at my house. And. And I think there's three simple little questions. And. And this is about intentionality, so maybe this will help. Here's three questions. I could do it. I should do it. I must do it. So it's like, could I do it? Question mark. Yes. Should I do it? Oh, I got. I got the M on the other end of the phone. And then. And then, must I do it? So when I think about things, if it's in the must category, well, then we've got some values that are driving that decision. Right? This is the important stuff. If I'm in the. Should I do this? Well, we still got values driving that question, but it's not apparent that it is fundamental. It's just, okay, do I do this? Like, you know, I'll tell you, I got one of those right now. It's a dry sauna. Outdoor dry sauna.

[Unknown]

Okay, that's good.

[Jade Warshaw]

Should I. I'm in the. Should I. Should I do this? And I'm doing my research, and I don't want to go down the rabbit trail and waste everybody.

[Unknown]

Walk us through it. Walk us through it. I like this.

[Jade Warshaw]

Well, it's. It's an expensive purchase. I mean, it's not a 500 purchase. That's an expensive purchase. So I'm looking at it going, should we. Stacy and I, should we do this? I've got. I got to get a car for Josie, who turns 16 in a couple weeks. So we're doing the homework on that. And, you know, she's not going to be ready to drive right away, but she's going to be close. You start looking through other things. I got a college kid. Okay. We're. We're cash flowing, a lot of that. So I start walking through. Okay, that's a. That's a. A sizable purchase. So I'm going, should I do this? So I start to wait. It's got a lot of health benefits, and I've already gone down that. Yeah, it's really good for Stacy and I and our health. You know, it has all of those positive benefits. We've got space for it. I got a space for an outdoor space. As you know, you've been over the house. And I go, okay, it's not going to cramp anything. It's a check. I've got the cash for it.

[Unknown]

Check.

[Jade Warshaw]

It's not going to hurt me.

[Unknown]

And you're still doing all the other things, though.

[Jade Warshaw]

Still doing all the other things. So I'm in that place of going. I'm walking through that. Even at this stage where I've got the money, it's not. I'm not going to feel it, but I do feel it. I still go, that's a sizable purchase.

[Unknown]

Yes, it's.

[Jade Warshaw]

And do we do it now? So then did Stacy and I change our Christmas plans for each other and go, this is what we're going to do? I mean, all I'm saying is I'm using a super simple thing that I like to walk through. Could I do it? Yes. Should I do it? Well, we got to wrestle with that. And then the must I do it? And I think maybe that'll help, Sarah, with staying in view of your values so that, you know, if your values are right, your money's going to be right.

[Unknown]

Yeah. And the truth is, your values change and get to change throughout this process. Something that.

[Jade Warshaw]

That's right.

[Unknown]

Would not have been important to you maybe three baby steps ago could become important to you now. And that's also. Okay. So just a little permission to.

[Jade Warshaw]

Let's say you and Sam call us up and go, hey, let's go on this trip. I'm going right to. Should I?

[Unknown]

Oh, okay. Yeah.

[Jade Warshaw]

Because we have margin in our Life.

[Unknown]

That's right. That's right.

[Jade Warshaw]

The could is there, so. But there are times in life where it's going, hey, I. No. Could.

[Unknown]

Yeah.

[Jade Warshaw]

Nope.

[Unknown]

Private jet.

[Jade Warshaw]

No. Can't do it. No. No. Yeah. Could I. No. The answer is no. So, you know, Sarah, I hope that helps you. I think you need to give yourself permission. I thought Jay did a wonderful job of setting it up, but I hope those little questions. That just keeps you. I think you're worried about you're doing something dumb. And I just don't see that if you've got values aligned with how you spend your money.

[Sarah]

Thank you. I appreciate it.

[Jade Warshaw]

Yeah.

[Unknown]

Good, good, good.

[Jade Warshaw]

I mean, and we see this a lot. Jade, I want you to share with our audience that's on the front end of this.

[Unknown]

Okay.

[Jade Warshaw]

Of why we got that phone call there. Because there are a lot of people who are just in baby step one or they're in baby step two, and they're just like, rice and beans. Beans and rice. It's gazelle. Well, now Sarah's on the other side of that and still dealing with some of that. I'm going to call it leftover intensity.

[Unknown]

Yeah. You put the rubber band on tight. When you're on baby step one, it's like, oh, my gosh. It's like you're squeezing into a tight pair of jeans.

[Jade Warshaw]

I like that. If you put a rubber band on your wrist, it'll leave a mark.

[Unknown]

It'll leave a mark.

[Jade Warshaw]

You got to let some time for that skin to heal.

[Unknown]

Yeah.

[Jade Warshaw]

That's interesting.

[Unknown]

And it's like, okay. Have you ever. This is a horror. I'm not going to use this analogy. I was going to say it's a horrible analogy, but you're like in the tight jeans, and then you get in baby step four. You know, when no one's looking, you can let the zipper down a little bit and you can just listen.

[Jade Warshaw]

I think every man in America identifies with being in the jeans. And you went to the buffet one too many trips, and you get underneath the table and no one's looking. You just let it.

[Unknown]

Just a little area, a little out. Just a little. A little breathing room.

[Jade Warshaw]

That top button, just so we go back and get a little more stuffing and gravy.

[Unknown]

A little bit more.

[Jade Warshaw]

You know what my theme is during Thanksgiving and Christmas, folks? This is bonus. Eat through the pain.

[Unknown]

You want to know what mine is? What if it's brown? It's going down.

[Jade Warshaw]

There it is, folks. That's why you come to the Ramsey Show.

[Dave Ramsey]

Thanks for tuning in. To Ramsey Everyday millionaires Need help with your investments? Connect with a SmartVestor [e-mail] SmartVestor or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.