The Lifestyle Creep's
Posted in: Matthew's Blog
In July 2022, Luke Smith wrote a blog post, encouraging people to work out the minimum amount of outgoing spending (or as he put it, “liabilities”) that they can get away with. Someone who is “making it” is someone who earns significantly more money than they spend and whose savings are significantly larger than their debt.
However, the crux of Luke Smith’s argument is that people are working more hours than even Medieval serfs to fund an unnecessary lifestyle with every new penny going towards “lifestyle creep” (and more than “richer” people take on far more debt).
However well, Luke Smith’s message is. There needed to be more written about so-called “small” purchases and subscriptions that any but poorest waste money on. Even if they think they are following a frugal lifestyle.
The “small” costs that truly bloat personal spending. Perhaps even by more than their spending on groceries. The western problem of more than enough money to go around but spending being mis-allocated.
But how are people in the west feeling so-“poor”?
There is the concept of lifestyle creep. You know when someone gets a pay raise then straight away upgrades their lifestyle to match their newfound wealth (think; a bigger house, more holidays abroad and a higher end car).
However, many don’t know that they spend more on “small”-ticket intangible items than on their groceries. That might surprise many, but over a year, even small daily costs add up quickly. The “small” spending people engage with include; spending on food and drinks (takeaways and restaurants), streaming services (both music and video content), expensive smartphones and buying brand names.
Let’s go through each of these “small” wastes of money;
(Almost) Everyone enjoys a takeaway, however the average person in Britain spends £507 yearly on takeaway, rising to £895 for 18 to 34-year-old’s. However, Luke Smith’s article showed that people in this age group are poorer than average.
Gen-z and millennials are not known for good financial management, which is why you see them spending so-highly on takeaways. As many don’t in that age-group don’t understand that small amounts spent can quickly add-up to a massive amount of spending over a year, for example.
As an example, you guess that a millennial works 210 days a year (working days, minus a month of holiday leave). A millennial will often get a takeaway, rather than brewing their own coffee or having a packed launch.
For Coffee, a “Frappuccino” from Starbucks costs £4.28. If ordered twice a day (on commute and at launch), over a working year, that would be £1,797,60. That is just for drinks.
Now consider the cost of food. In London a sandwich in pret-a-manger costs on average £4.99. Add on a tiny dessert (a Cookie) for another £2.75. In total £7.74 a day or £1,625.40.
That means an officer working in London would spend £3,423 (or $4,243 for the Americans) yearly on takeaways. Not including delivery fees or any takeaways that order at home.
That is expensive.
Another avoidable expense is streaming services. It used to be someone could subscribe to Netflix for like £7 a month and enjoy all the movies and TV shows they wanted. However, media production companies wanted a larger “slice” of streaming revenue than Netflix was providing, thus created their own streaming services.
That means paying £7.99 for Disney+ (for censored Disney owned content), £6.99 for Paramount+, £3.99 (Entrainment only) or £6.99 (Including sports) for discovery+ or £8.99 for Amazon Price (Including video).
The Amazon video also having a bunch of content behind additional paywalls, Including; SHORTSTV (short movies) for £3.99, Horse & Country for £5.99 and Nautical Channel (Boat related sports and lifestyle) for £3.99 and many more upsells.
That might be “worth-it” if you are replacing your satellite or cable television services (Costs between £30 to £70 monthly). However, the majority will subscribe to streaming service besides traditional television services.
It used to be that when someone could not afford a top-of-the-range brand new car, they would be an old banger (old car) for between £500 and £1,000. In recent years, the British have imported “Keeping Up with the Joneses” culture from America.
Nowadays, everyone thinks they need a high-specced BMW (preferably an SUV). Not for going off the road, but for dropping their children off at school, less than a mile away.
Those people are not in the income bracket to afford a brand new BMW. In the past, that would have been the end of their aspirations for a new BMW, however the rise of “PCP” financing that allows someone to lease a car for a set number of months with an optional final (balloon) payment to purchase the car.
Unless the person has £10,000 to £20,000+ or can borrow the money, the car will need to be handed back at the end of the PCP lease. Even worse, you also have to pay an upfront deposit on top of your monthly payment.
For example, a 3-series BMW, a £4,500 deposit, is required on top of the £625.11 monthly payment. That £4,500 could buy a decent second hand “city” car outright without spending £7,500 yearly, that could pay for your energy and food bills.
Don’t let “Keeping Up with the Joneses” lead you to a food bank or to homelessness.
Drinking out and Nightclubbing
Another utterly common waste of money is expensive nights out with friends. The stupidest being partying at nightclubs almost every weekend that has become common for youth in large cities. Even in 2019, the BBC reported that a average “night out” cost £69.64 each time (expect that figure to be much higher today.
Of course, not everyone will party out with friends every week, but even if they went 40 weeks of the year, that would still be £2,785.60 yearly. Maybe instead, buy a few beers and hang out at your friend’s house or maybe visit a cheaper pub (such as Wetherspoon) instead.
Published: 28th of January 2023