High-Income Earners: Avoid Lifestyle Creep

Written By Mason Stockham

Matt Stockham

Reaching a high-income level is a significant financial milestone, but it can come with a hidden risk: lifestyle creep. Also known as lifestyle inflation, this can occur when an individual's discretionary spending rises alongside their income, leaving little room for wealth accumulation despite earning more.

Without careful planning, even six-figure earners can find themselves living paycheck to paycheck or falling short of their long-term financial goals. Avoiding lifestyle creep and adopting smart financial habits can help high earners build lasting wealth while still enjoying the benefits of their success.

What Is Lifestyle Creep?

Lifestyle creep happens when increased income leads to higher spending on non-essential items. While upgrading certain aspects of life is normal, problems arise when spending escalates to the point where it absorbs all additional earnings. Over time, this can lead to financial instability, making it difficult to invest, save, or handle unexpected expenses.

Common Signs of Lifestyle Creep

  • Increasing fixed expenses (e.g., upgrading to a luxury home or car without increasing savings proportionally)

  • Relying on bonuses or commissions for everyday expenses rather than wealth-building

  • Spending more on discretionary purchases without long-term financial planning

  • Feeling financially stretched despite earning a high income

By recognizing these behaviors, high-income earners can take proactive steps to prevent unnecessary financial strain and focus on wealth-building strategies.

Strategies to Help Avoid Lifestyle Creep

1. Prioritize Saving and Investing First

A simple rule to follow: "Pay yourself first." Before increasing discretionary spending, allocate a portion of any income increase to:

  • Retirement accounts (401k, IRA, Roth IRA)

  • Taxable brokerage accounts for long-term wealth-building

  • Emergency fund contributions to ensure liquidity for unexpected expenses (Click here to read the importance of emergency funds)

By treating savings as a mandatory "expense," individuals can work to ensure they are consistently growing their wealth before allocating funds elsewhere.

2. Establish and Adhere to a Target Savings Rate

Rather than increasing savings only when convenient, high-income earners should set a fixed savings percentage of their income. A common benchmark is saving at least 20% to 30% of gross income, with higher earners often aiming for 40% or more.

For those already maxing out tax-advantaged accounts, excess savings can be directed toward brokerage accounts, high-yield savings, or other investment opportunities.

3. Live Below Your Means – Even as Income Grows

A high salary does not automatically translate to financial freedom. Living below one’s means can ensure that wealth continues to grow while still allowing for enjoyable experiences. Some practical ways to achieve this include:

  • Delaying major lifestyle upgrades (e.g., keeping a car longer instead of upgrading every few years)

  • Setting spending limits for discretionary categories (entertainment, travel, luxury purchases)

  • Using bonuses and raises for wealth-building rather than increasing fixed expenses

4. Automate Investments to Lower Temptation

One of the easiest ways to stay disciplined is to automate savings and investments. Directing a portion of every paycheck into brokerage accounts, retirement funds, or high-yield savings removes the temptation to spend surplus income.

5. Be Intentional with Lifestyle Upgrades

Earning more should allow for increased comfort and experiences—but upgrades should be deliberate, not impulsive. Before making a major financial decision, consider:

  • Does this align with long-term goals?

  • Will this decision limit future financial flexibility?

  • Am I increasing savings at the same rate as lifestyle upgrades?

By planning intentional upgrades, high earners can enjoy their success without sacrificing financial security.

6. Maintain a Strong Emergency Fund (Click here to read the importance of emergency funds)

Despite earning a high income, professionals should always maintain an adequate emergency fund. Our recommendation is at least 3 months of living expenses, depending on job stability and personal financial obligations.

For optimal liquidity and returns, consider diversifying an emergency fund across:

  • High-yield savings accounts (for immediate access)

  • Money market mutual funds (for better returns with liquidity)

  • Ultra-short-term Treasuries (as a stable, low-risk investment)

This layered approach ensures funds remain accessible while still earning a competitive return.

 

Long-Term Wealth-Building Strategies for High Earners

1. Invest Beyond Retirement Accounts

While maxing out 401(k) and IRA contributions is essential, high-income earners often need additional investment vehicles. Taxable brokerage accounts can provide flexibility and liquidity, allowing for long-term capital growth.

2. Leverage Tax-Efficient Strategies

High-income individuals can reduce tax burdens through:

  • Tax-loss harvesting (offsetting gains with investment losses)

  • Backdoor Roth IRAs (converting traditional IRA funds to Roth for tax-free growth)

  • Donor-advised funds (using charitable contributions for tax deductions)

  • Municipal bonds (offering tax-free interest for high earners)

3. Diversify Income Streams

Building lasting wealth often involves multiple income streams beyond a salary. Strategies include:

  • Real estate investments (rental properties, REITs)

  • Dividend stocks for passive income

  • Side businesses or equity investments

Multiple income sources can provide greater financial security and help offset market fluctuations.

4. Work with a Financial Advisor for Advanced Planning

As income grows, financial decisions become more complex. High earners benefit from working with a fiduciary financial advisor like us who can help with:

  • Investment management

  • Tax-efficient strategies

  • Estate and legacy planning

Professional guidance ensures that high-income does not go to waste, setting the stage for long-term financial success.

Final Thoughts

Earning a high income is an incredible opportunity—but without careful financial planning, lifestyle creep can erode wealth. By prioritizing savings, automating investments, and being intentional with spending, high earners can secure long-term financial independence.

Building wealth is not about deprivation—it is about making smart financial choices that can work to ensure long-term financial security while still enjoying life.

 

Disclosure

Advisory services offered through Meridian Wealth Management, LLC, a SEC Registered Investment Advisor. The information and opinions voiced in this material are strictly for general information only and are not intended to provide any security recommendations, specific advice, or recommendations. Any views or opinions presented in this material are solely those of the Author and do not necessarily represent those of Meridian Wealth Management, LLC. Securities and insurance products are not insured by the FDIC or any federal government agency, are not a deposit of or guaranteed by a bank or any bank affiliate and may lose value. No one connected with Meridian Wealth Management, LLC, can ensure the tax consequences of any transaction. Seek tax, legal, insurance, and investment advice from a licensed professional relative to your situation. All investing involves risk, including loss of principal. Past performance does not guarantee future results. No strategy ensures success or protects against loss. Further, readers should be aware that websites or sources listed in this work may have changed or disappeared between when this work was written and when it was read.

MLA Citations

 

Mason Stockham
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