Rich Habits Podcast: Episode 142
Title: You Just Got a Raise! Don't Let Lifestyle Creep Steal It
Date: November 3, 2025
Hosts: Austin Hankwitz & Robert Croak
Episode Overview
The main theme of this episode centers on the phenomenon of lifestyle creep—how pay raises can disappear due to increased spending rather than building real, lasting wealth. Austin and Robert break down why lifestyle creep happens, how to spot it, and, most importantly, how to make sure every raise is an opportunity to secure your financial future, not just fund a nicer lifestyle. They provide practical steps and real-world examples, digging into personal experiences and actionable strategies to help listeners avoid common traps.
Key Discussion Points & Insights
1. What Is Lifestyle Creep? (01:08)
- Definition: Lifestyle creep is when your spending increases as your income rises, leaving you no better off financially—even after a raise.
- Why it matters: It prevents people from building wealth, keeps high earners living paycheck to paycheck, and is a primary reason higher income doesn’t always mean higher net worth.
- Example from Robert: “You get a $10,000 raise...and you tell yourself, I'm going to save it. But guess what happens? You move into a nicer apartment...You update your car lease. You start eating out more because 'I deserve it.'...Suddenly that entire raise is gone.” (01:26)
2. Why Don’t Raises Make Us Wealthier? (04:06)
- Psychological Traps: The human brain recalibrates its baseline quickly after a raise, so new money is seen as justification for upgrades rather than wealth building.
- Typical Upgrades: Housing, transportation, and small daily habits are the primary ways people let raises slip away.
Austin:
“Your brain does something interesting. It recalibrates your baseline...Each decision feels small...But here's what you're not seeing: those small decisions add up to exactly the amount of your raise, if not more.” (04:16)
3. The Hedonic Treadmill and the Vicious Cycle (05:23)
- Robert:
“Once people upgrade their lifestyle, it’s incredibly hard to downgrade. Psychologists call this the hedonic treadmill. You adapt to your new lifestyle really quickly and then you need the next upgrade to even feel that same boost. And it's never enough.” - Cycle: “Most people think, if I just made more money, all my problems will go away. But the reality is, if you don’t fix your spending habits, more money just means more spending.” (05:50)
4. Three Main Categories of Lifestyle Creep
a) Housing (06:13)
- Housing is the largest expense and the first target for upgrades after a raise.
- Tip: Limit housing cost increases to only 20-30% of your raise if you must upgrade.
b) Transportation (06:50)
- “Transportation is a wealth killer if you’re not careful...If you upgrade your car every time you get a raise, you’re throwing money away. Not to mention, these are depreciating assets.” – Austin (07:23)
- Upgrading to a flashier car after a raise is common—and dangerous.
c) Daily Habits (07:47)
- Daily luxuries (coffee, take-out, subscriptions, clothing) quickly become routine and add up, often unnoticed.
- Robert: “It’s not just one purchase. It’s the hundred small purchases that add up to thousands of dollars a year.” (08:48)
- Austin: “It’s death by a thousand cuts… you look back and you’re like, whoa, did I really spend $2,000 last year on coffee and DoorDash?” (09:51)
Transition: From Awareness to Action
Robert:
“Every dollar you make needs to have a job...the more you automate your money and investments, the less money you’re going to have sitting around idly by that you feel you can waste because it doesn’t have a purpose.” (10:35)
Practical Five-Step Blueprint: How To Actually Capture Your Raise
[Timestamps throughout section: 11:09–16:46]
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Automate It Before You Spend It
- As soon as your raise hits your account, automatically transfer a set portion to investments or savings.
- Austin: “Do this before you get used to it. Do it before your brain recalibrates into that new baseline.” (11:27)
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Use the 50/50 Rule
- Save/invest at least 50% of your raise; allow up to 50% for lifestyle upgrades if you must.
- “You have to hit the 50% threshold…You’re not giving away all your financial progress. It is a balance and a very important one.” – Robert (12:15)
- When early in your career, consider saving 70–80% of each raise.
-
Increase Retirement Contributions
- Bump your 401(k), IRA, or retirement savings percentage every time you get a raise.
- Austin: “If you’re making more money, you should be saving more money. Simultaneously you’re increasing your retirement savings, which lowers your taxable income.” (13:34)
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Avoid New Recurring Expenses
- Don’t immediately add new subscriptions, car leases, or higher rent after a raise.
- Robert: “Recurring expenses are wealth killers because they lock you in. You can't go back once you sign on that new lease or that new car payment.” (14:36)
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Track Your Lifestyle Inflation
- Review all spending quarterly; compare to previous quarters or prior year to spot and stop creeping expenses.
- “Most people never look at their spending and they have no idea where their money goes. Don't be that person. Be intentional.” – Robert (15:44)
Memorable Quotes & Highlights
- Robert: “The people that build real wealth aren't the people who make the most money. They're the people who keep their lifestyle in check as their income grows.” (16:46)
- Austin: “Raises are opportunities, their chances to level up financially. But most people waste them. They let lifestyle creep steal every dollar and they end up no better off than they were before.” (16:05)
- Robert: “It’s not about what you spend. It’s about what you keep and what you invest in. Automate.” (16:46)
Notable Listener Questions & Answers
1. Cost of Living When Moving States (18:17–22:30)
Question: Beth M. wonders about assessing the cost of moving from Texas to Massachusetts.
Advice:
- Contact a CPA or lawyer familiar with state laws.
- Use relocation calculators (NerdWallet, BestPlaces, Tax Foundation).
- Try ChatGPT or similar AIs for a tailored overview.
- Consider discreet local differences in expenses to avoid “shock.”
2. 403b Rollover and Investment (22:30–24:42)
Question: Tandra is 51, retiring soon, and asks where to roll over her $200k 403b. Advice:
- Roll funds into a traditional IRA via a platform like Public.com to access broader investment options and a 1% match.
- Consider stock market index funds (VOO, VTI, QQQ), with potential for some bonds or alternative assets (crypto, metals).
- Maintain autonomy over funds for long-term growth.
3. Investing in a Friend's Restaurant (24:42–31:34)
Question: Fred, 29, debating risking $10,000 (from emergency savings) for a 5% stake in a restaurant reopening. Key Discussion:
- Robert: “For me, this is a pass because we don't have full information...Something just isn't adding up in the numbers to me.” (26:55)
- Both hosts advise caution: get full details (why it closed, plans, realistic profit outlook) before investing, and be wary of sacrificing your emergency fund for risky illiquid investments.
- Austin: “If all the flags were green, I'd be like, yeah, the math makes sense…but from that perspective you need to ensure that all these things…aren’t big red flags.” (28:26)
Takeaways & Action Steps
- Use raises to build wealth, not just a better lifestyle.
- Automate savings and investments as soon as possible after a raise.
- Be intentional about every dollar: know where it's going and why.
- Regularly review and adjust spending to minimize lifestyle creep.
- Enjoy life, but make upgrades only after securing your financial future.
Links and Community
- Follow the hosts on Blossom Social: For sharing and learning from real investment portfolios (18:17–19:22).
- Newsletter: Free Rich Habits newsletter every Thursday morning.
- Community: Rich Habits Network for weekly livestreams and member perks.
- Investment opportunities: Chance to co-invest alongside the hosts via Republic.
Tone and Style
Friendly, direct, and supportive, with an emphasis on learning from past mistakes and making smart, automated, and intentional financial decisions. The discussion is energetic, motivational, and practical, with personal anecdotes and clear, no-nonsense advice.