I had a lovely morning walk in the snow with one of my best friends through a trail of Mont Royal in Montreal (yes, Montreal is named after this mountain) where a few insights emerged, as they usually do with him; he’s a great listener and intellectual sparring partner.
He and his partner are going through big transitions in life, which means shifts in both how much money they will have and how they interact with money.
He noticed there was tension created because they felt very tight on money with some big expenses coming up. They could afford everything, but they lacked the breathing room to not feel stressed about every dollar.
That’s when he caught himself being a victim of lifestyle creep: where your spending grows linearly with your income. But instead of the usual interpretation, his savings grew in proportion to the increase in their annual salaries.
That’s when I noticed that lifestyle creep is a real thing for big savers just as much as it is for big spenders. It affects savers through the same mechanism behind lifestyle creep: focusing on money going into your bank account as the problem when it’s actually money leaving your account that causes your financial stress.
The psychological consequence of feeling tight on money remains the same for big spenders and big savers alike. The only difference is where the money is going; whether it’s on luxurious spending or intense saving.
Their worries about affording life evaporated once he realized the financial constraint they were feeling was due to a self-imposed savings schedule that was in fact creating the very life they were worried about not affording.
Within a few moments, what was a leading cause of stress for my friend and his partner now became a source of confidence in their future.
