The simple answer is (if you are in your 20’s or 30’s) is, of course. I make more than I did 5 years ago, however, do you really? Has your lifestyle changed to consume that increase in income ?

Lifestyle creep is a very dangerous problem for young folks, who start making good money, and decide that their lifestyle needs to expand so they can “enjoy their new life”. Speaking as someone who fell into that trap, I can assure you that it is much harder to simply keep living like you did when you were “poor” (or a student) than to give into your Impulses and “spend, Spend, SPEND!!!”. I borrow this idea from the concept of Feature Creep, where your customers (or worse your management) want to add more and more things to a project, “because they are small”, however all these small add-ons become a big expense (in terms of time, money and resources).

The question really should be, “Do you net as much as you did 5 years ago?”, and that question is a lot harder to answer.

While your income may have increased a whopping 25% (gross) over the past 8 years (or so), the problems you run into are the following:

• If you crossed the magic line and jumped into the 2nd Canadian Federal Tax Bracket, your new income is now no longer being taxed at 15% and now it is being taxed at 22%, so you aren’t actually having a linear growth on your income. If you live in Ontario your provincial tax rate jumps from 5% to 9% too, isn’t that fun?
• That crappy apartment that you shared with your annoying roommate that cost you only $400 a month is now gone and you have a great apartment of your own that you are now paying $1500 a month.
• You have worked hard, so instead of camping in Algonquin park with your buddies and having your major cost being 3 cases of beer, you decided that you deserve a cool vacation to one of those all you can drink (and eat I hear) in Cuba, and it only cost $900 with the air fare.
• That death trap of a car that you drove into the ground at school, that you did most of your own service on is gone, and you are now leasing a nifty new Studebaker SuckTheMoneyOutOfYou, but your girlfriend really likes it (and it only costs $600 a month on the lease, then more for insurance, and gas).

Are You Getting Ahead ?

You really think you are 25% ahead? If you look closely you might actually be 8% behind (that is a guess on my part it might be more, or less).

Lifestyle Creep is a real danger for young folks, almost as dangerous as belly droop for old guys like me.

Image courtesy of  foto76 / FreeDigitalPhotos.net