April 29, 2025 • 21 mins
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Episode Transcript
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Speaker 1 (00:01):
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:33):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
I am joined by Ryan, my co-hostand the brains of this
operation.
I would say and Ryan, welcometo the 70th episode of the
Fiscal Physical Podcast.
Ryan Nelson (00:47):
How does that make you feel, yeah, time flies.
That's crazy.
Aaron Hoisington (00:50):
Yeah, I think we mentioned on it.
We've always mentioned on thecouple of ones like, or previous
ones about.
You know, oh my gosh, we'vebeen doing this over a year or
whatever, and you know, nowwe're at a year and a half,
pretty much like doing this, andI think that you know it's
every month when we you know,every, every episode, every time
that we record these things andand these episodes come out, I
(01:10):
always listen to them and I'mjust like one.
I want to see if I messed upanything with the editing.
I think that's always somethingI'm like okay, did I mess
anything?
up and uh so far, so good.
So far, so good, so far.
Yeah, I I almost messed up one,but I had to go back and I was
like, oh man, I caught it, like,but I just happened to like
re-listen to it a little bit, sogood on me.
But 70 episodes in, I feel likeI'm learning something new
(01:31):
every episode too.
And it's been great to kind ofbuild on the different episodes
that we've done, harken back tothem and talk about like hey, go
listen to this one because itreally applies or it's really
going to talk about.
We're going to really dive intothat.
They're going to be themes andelements, so, um, 70 in.
Hopefully we get 70 more,that'd be cool.
(01:52):
But yeah, um, anyway, todaywe're going to talk about a um
one that is very applicable tomyself, I could say, and, uh,
probably to everybody in general.
It's called lifestyle creep and, uh, you mentioned in your book
as well, the your physical,physical seven keys to becoming
financially fit.
But I'm curious, ryan, whatyour thoughts on lifestyle creep
is.
Maybe break it down foreverybody and just kind of kind
(02:12):
of go through it.
Ryan Nelson (02:13):
Yeah, absolutely, let's do it.
So yeah, at first glance.
What are your thoughts onlifestyle?
Oh, it's got me.
Aaron Hoisington (02:22):
Yeah, I would say that, like over the years,
like, uh, um, I would say that,well, let me back up a second
here, one I don't know if it's abad or a good thing.
I would say that would, thatwould.
This is kind of how I look atit, because you know, as you,
you know, depending on thepeople that you hang out with,
maybe you want to do certainthings that they're doing.
(02:43):
You kind of try to keep up withthe Joneses or these other
things.
And I would say that it issomething that I've seen in my
life that as I get older, maybeI make a little bit more money.
I see my friends doing certainthings, or my family members,
whatever it might be.
You kind of want to do thosethings as well, and
unfortunately, those things kindof get expensive sometimes.
(03:05):
So I feel like I've been a Idon't want to call it a victim,
because I've been knowingly doit, I suppose.
But you kind of just start tolive outside your means a little
bit yeah absolutely, and sothat's kind of my personal
experience with it, I suppose.
Ryan Nelson (03:21):
Yeah, perfect, I like it.
Aaron Hoisington (03:22):
So yeah, I think I don't.
Ryan Nelson (03:24):
So lifestyle creep is real right.
We all fall victim to it.
I think I will preface this,though, by saying I don't think
lifestyle creep is bad.
So lifestyle creep isn't bad.
What I would argue isuncontrolled lifestyle creep is
bad.
So it's okay to increase thequality of your life if you're
doing it in a controlled manner,and I'll explain, kind of, what
(03:46):
I mean by that.
But really, what it comes downto is living within your means
and your lifestyle can creep upover time, and you can increase
the quality of your lifestylewhile still living within your
means, and in that sense, Ithink it's very good.
I think the majority of time wetalk about lifestyle creep, it's
sort of in reference to ithappening outside of your means
and it being uncontrolled andgetting to a place where you're
(04:07):
not living outside of your means, and so you mentioned keeping
up with the Joneses.
I think that term just explainsthis perfectly.
Right, and I love Jim Rome'squote you are the average of the
five people you spend the mosttime with, right, it's a great
quote Very accurate.
Yeah, absolutely.
And so you know if, if your fivebest friends all have boats and
everything you do is, like youknow, every weekend it's like
(04:29):
boat life and you're going up tothe lake and like you're going
to want to buy a boat, right.
If every single time you go todinner, your friends are all
buying bottles of wine for thetable, you're going to want to
buy a bottle of wine for thetable, right, bottle of wine for
the table, right.
If every single time you wantto even just go to dinner, your
friends want to go to the nicerestaurants, you're going to
want to go to the nicerestaurants, right?
And so you can see how yourexpenses sort of are, like the
(04:54):
way I just explained them, atleast your expenses are
increasing or almost beingcontrolled by something out of
your control.
Is being controlled by yourfriends, like almost right.
And of course that's not thecase.
But it's easy to kind of startfalling into that where your
habits are becoming the habitsof your friends and the expense
aspect of that may be secondary,right, you may be thinking
(05:17):
about the bottle of wine andcontributing and participating
in the group and then not reallythinking about the expense.
Or can you afford that untilyou get the credit card bill or
the credit card invoice a monthlater oh
yeah, you got to pay the piper,yeah, so first let's talk about
(05:37):
so lifestyle creep is just thateffect, when your lifestyle you
slowly start spending more andmore every um, every day, week,
month, year, and usually I thinkit refers to like almost not
even realizing it's there, soit's maybe.
You get a small raise at workand you're like, man, this is
cool, my paychecks are a littlebigger, right.
(05:57):
And then you go to dinner andyou're like, okay, you know,
I've never really got alcoholicbeverages at dinner, but I'm
going to start, I'm going to geta beer, like I deserve a beer,
and then you just kind of make ahabit of that.
And then all of a sudden you'relike, oh, I'm going to get two
(06:21):
beers and you kind of make ahabit of that and an entree.
Now I'm the guy that gets anentree or an appetizer, an
entree and an entire bottle ofwine.
Aaron Hoisington (06:31):
Sure, maybe a dessert, who knows?
Yeah, and a dessert right, yeahexactly.
Ryan Nelson (06:36):
And so it's this very slow process.
It's not just like one dayyou're the guy that only orders
an entree and then the next dayyou're the guy that orders
everything.
Right, usually it's a slow,gradual process and you don't
even notice it happening.
And again it happens over overyears.
Um, but then you reflect backand you're like God, how am I
spending so much money?
Right, and it's this, thissmall again creep.
(06:57):
It's a slow sort of like, um, aincrease to the standard of
life, but again.
So let's talk about how we coulddo this in like a controlled
manner and how lifestyle creepwouldn't be so bad.
So I'm going to take an example.
I'm going to say somebody I'mgoing to ignore taxes for this
example I'm going to saysomebody earned $50,000 and they
(07:17):
had a healthy savings rate, sothey were saving $20,000.
I mean, sorry, it's 20%, 20%,okay.
So they were saving 20% of50,000.
That means they were saving 10grand.
So they were living on 40 grand.
Again, we're going to ignoretaxes for this example.
So they earn 50 grand, they'resaving 20% or 10 grand of that
and that means they're living on40 grand.
(07:38):
Now, this individual, ifeverything stays the same and
they just start spending moremoney, so they start spending 45
grand.
That means by default they canonly save five, right?
So their lifestyle creep haseaten away at their ability to
save for retirement.
That'd be a negative.
That's the negative connotationof lifestyle creep, right?
So that's not good.
We'd want to keep their savingsrate in this case at 20%.
(07:58):
But let's say this individualgets a raise to 100 grand.
Now this can be dangerous in acouple of ways.
So if they don't start savinganymore, so they were saving 10
grand before and so they justsay, cool, I, I, I earn more
money.
Now I'm going to keep saving my10 grand.
Um, and now they'd be used toliving a lifestyle of 90, they'd
have $90,000.
If they just let lifestylecreep eat up that, all that
(08:21):
90,000.
Now again, they're used toliving a lifestyle of 90,000,
right, they need, compared towhere they were before, where
they were only used to alifestyle of 80,000, they need
more than twice as much forretirement because, they became
accustomed to a more expensivelifestyle right.
So their savings rate 10,000 to50,000 used to be 20%.
(08:41):
Now it dropped.
They got a pay raise at workbut their savings rate went from
10,000 of 100,000.
It dropped to 10%.
So their savings rate, theirprogress towards their
retirement goal, actually gotfurther away.
So you see this all the timeSomebody will get a raise and
they actually, by getting thatraise, you would think
intuitively like that's great,they're going to be more, that
sets them up better financially.
(09:02):
But if they didn't take theproper steps initially, what you
actually can find is thisperson, actually it hurts their
retirement.
They're saving the same amount,but now they became used to a
higher quality of life and sothey're actually further away
from a potential retirementright, so that does happen a lot
.
What I see more happen issomething more in the middle
where maybe they get that raiseto a hundred grand and they say
(09:24):
cool, I'm going to save more forretirement.
So they start saving, you know,15 grand, five grand more than
they were before.
They were saving 10 grandbefore.
Now they're saving 15 grand Ifwe look at that as a percentage
15 grand of their new $100,000salary they're saving 15%.
Again, they were saving 20%before.
So they've still.
Actually, they think in theirmind they're like, yeah, I'm
saving more.
I'm, you know, I'm saving 50%more.
(09:46):
I went from 10 grand all theway up to 15 grand.
That's a 50% increase in mysavings rate.
Like that's a pretty bigsavings jump.
And then they increase theirquality of life to fulfill the
rest.
So, in this case, 85,000, again,they'd actually be further away
from reaching their retirementgoal.
So they got a raise at work andit was actually detrimental to
their long-term retirementsuccess, which is
counterintuitive, but it happensall the time.
(10:07):
So that would all be examplesof negative lifestyle creep,
your quality of life increasingfaster than you can afford.
Now, though, let's look at thesame individual and let's say
that they were a little moreresponsible, and so they earned
$100 thousand dollars.
So they went from earning50,000 to saving 10 of it, so
(10:29):
they were living on 40,000.
Now they get a pay raise to ahundred thousand and they say,
okay, they could increase theirquality of life still from
40,000, let's say, all the wayup to 60,000.
And what that would mean isthere's now saving 40 grand.
Well, 40 grand of 100,000,their savings rate's 40%.
Sure, so they doubled theirsavings rate.
Their savings rate went from20% all the way up to 40%.
(10:50):
So now they're saving more,they're actually getting to
their retirement goal faster andthey still increase their
quality of their life.
Their spending went from 40grand to 60 grand, so there is
ways to do this where, as youget raises this is an extreme
example I mean a tall orderright.
But my point is even when yourincome goes from 60 grand to 65,
(11:11):
or 100 to 120, or 200 to230,000, right, anytime you get
one of these pay increases,there's a way for you to
increase your savings rate.
Also, it's reasonable and fairto increase your quality of life
a little bit, right.
But again, it's about doing itin a controlled manner, not
doing it in an unsustainable wayor then living outside your
(11:32):
means.
And again, if you want to do alittle bit of math or talk to a
financial advisor or somethingbut we gave that example even
that person who was saving 10grand a year increased it to 15
grand still got further awayfrom their savings goal right.
So you want to make sure you'reincreasing your savings
basically percentage or rate atan appropriate amount.
And then again, if you're doingit in that controlled manner,
(11:55):
it's completely appropriate tostart increasing the quality of
your life.
So, if you're working hard,you're getting pay raises, you
should be able to reap some ofthose rewards, and so there's a
way to reap those rewards but doit in a responsible way,
(12:22):
setting yourself up for futuresuccessful retirement as well.
Aaron Hoisington (12:26):
There's this saying about I think it was Dana
White, who's like the owner ofthe UFC, and he mentioned that
one of their fighters.
He made like a ton of money inlike a different promotion and
he was like, oh, it's reallyhard to go back to the grind
when you're sleeping in silkpajamas, yeah, thing that I'm
(12:46):
just like, wow, you know to toto have the same savings rate,
or maybe like ideal of like cool, I'm just going to live on 50
grand if I'm making 200 grand ayear.
Like is very hard to do andit's it's it just it creeps up
on you, but I think there areways to be able to do it in a
sustainable manner, to whereyou're like cool, I'm going to
reward myself for this and, andit's just figuring out the best
(13:08):
way to do that and before youknow it, you're just like wait a
minute, I have to make thisamount of money a month and you
get tied to that almost becauseyou don't want to go backwards,
I suppose in that case, yeah,yeah, absolutely.
Very, very interesting.
It's a tree, it's psychological, almost.
You get wrapped up in that, ifyou will.
Well, 100%.
Ryan Nelson (13:30):
Yeah, I like that way of thinking about it.
Another thing I would say forpeople, if they're trying to
avoid lifestyle creep, I wouldsay one tool to use is just what
I refer to in the book is andlots of people do I didn't coin
this term or anything but it'sjust paying yourself first.
So again, in these examples Iused, if that person is making a
hundred grand, their payincreases to a hundred grand and
(13:51):
they were going to save 40grand of it.
As long as they set up somesystem where they're
systematically saving that 40grand, so that 40 grand is just
going out into savingsautomatically out of the
paycheck or out in the first ofevery month or whatever, then
they can spend whatever theyhave left.
They don't have to be stressedabout it.
They can spend all 60 grand andyou can spend it on different
things every month and you canspend it guilt-free because
(14:13):
you've paid yourself first.
If you just spend what you wantto and then save whatever's left
at the end, then when you goout and you hang out with the
friends and you buy that bottleof wine, all of a sudden you
realize, oh, I spent a littlemore this month, I couldn't save
as much and then you go out thenext month.
Well, you've already made sortof a habit of buying this wine.
You might buy that wine again.
You don't have as much moneyagain, again, you can't save as
(14:35):
much again.
But again, if you reprioritizethat and you said I'm going to
save first, so pay yourselffirst, put into your savings
account first, then when you goout to dinner you're like I
literally don't have the moneyto buy the wine buying wine.
I literally don't have the moneyto buy the boat.
I can't buy the boat.
So paying yourself first is acool tool to help avoid
(14:57):
lifestyle creep.
If you are currentlyexperiencing it or noticing the
first signs of it and you'relike, how do I combat this?
Making sure you're taking careof that savings rate, and paying
yourself first can be a usefultool.
Aaron Hoisington (15:04):
Absolutely, and you called out I don't know
if it was you called out.
Another useful tool that I wasI was reading over like our
outline for this things too, islike you know, don't rush on
purchases too.
There's the idea I'm guiltythis, I see something I'm like,
oh, I want that, I'm gonna buythat.
And it's so easy nowadays too.
It's just like one clickshopping yeah oh wow, done, like
being able to save it for later, and like really think about
(15:27):
okay, cool, maybe I'll take I'lltake a couple of days to think
about this and do I really needthis?
Ryan Nelson (15:32):
And easier said than done, yeah, I'd be super
curious to know what percentageof Amazon orders get delivered
and never used.
Sure Right.
So somebody in the moment waslike I want product A, buy
product A.
Two days later, product A showsup.
They're like, oh cool.
Speaker 1 (15:49):
But they're no longer energy.
It's just like oh.
Ryan Nelson (15:51):
I'll put this in the garage.
It's got to be a decentpercentage of it.
So, similarly to your point,right, if the moment you say I
want product day, go put it inyour shopping cart and then just
say I'll come back to this onFriday or whatever, if this
podcast is coming out on Tuesday, you should give yourself a
two-day rule.
So you'll say come back, okay,I'll come back to this on
Thursday and buy it.
You come back to it on Thursday.
(16:12):
This is when it would have beengetting delivered and you're
like I'm not that interested On.
Speaker 1 (16:16):
Thursday you're looking at it, You're like, oh
yeah, I don't really care aboutthis, Then you just remove it
from your cart and you're goodRight saying just having a
little bit more patience, whichis super hard to do.
Aaron Hoisington (16:34):
We're not giving advice, we're just
talking about maybe you shouldconsider these things, depending
on your situation, obviously,and maybe just thinking things
through and giving you guys sometools to really consider and
get the wheels turning in thebrain.
For sure, absolutely Awesome,ryan, appreciate it.
As always, my man, we'll beright back on the other side of
this.
Everybody hang tight.
Speaker 1 (16:54):
And now to put the personal in personal finance.
Aaron Hoisington (17:00):
Welcome back everybody to this side of the
Fiscal Physical Podcast.
I'm still here with Ryan and,ryan, I got a fun one here for
you that I'm really curious tosee your thoughts, hear your
thoughts on.
So this question is would yourather never be stuck in traffic
again or never wait in a longline again?
Ryan Nelson (17:23):
I mean I think I would go with never waiting in a
long line and does that sort ofif I get in a line of traffic
Right?
Aaron Hoisington (17:32):
It's funny.
When I put this down, I waslike man, he's gonna get me on
this because like a line oftraffic is technically a line, I
mean I don't you know, I Ithink traffic would drive me
crazy.
Ryan Nelson (17:43):
Where we live here, I mean, I don't experience a
ton of traffic either yeah, uh,if I lived, lived in LA and had
a two-hour commute both ways, Iwould probably.
Aaron Hoisington (17:53):
I would just find a new job, yeah, or a new
place to live.
Ryan Nelson (17:58):
Yeah, so the fact that I don't currently, or
personally, really experiencethat much in reality traffic,
definitely it's the line thingfor me.
Aaron Hoisington (18:06):
What about you ?
Yeah, I'm exactly the same.
I feel like when I was puttingthis down, I was like Because
every once in a while I'll pickup my son from my wife and I we
alternate picking up my son fromdaycare and depends on
sometimes what time I get there.
If I get there at 3 30, I'mlike awesome, like there's going
to be really no traffic on theway home.
I get there like four.
It's probably going to take melike 10 or 15 more minutes to
(18:27):
get home and it kind of bothersme a little bit, like I'm just
like okay, I'm just sitting here, not moving.
If there's an accident,something like that, that kind
of bugs me.
But at the same time I thinkabout, like when I go to like a
sporting event or I go todisneyland, yeah, something like
that, at a theme park, waterpark or something like that, not
having to wait in a long lineto use the rides or something
(18:48):
like that or go down the tube.
It would be great and like kindof like you have a private
party at this place too.
So I do think that, overall,like you know, I don't go to the
dmv very often, thankfully, butlike I went there a few months
ago and I I ended up waitinglike an hour and a half and I
was just like okay, like I don't, I don't like this, like I
would like to get this out ofthe way.
(19:09):
So I think it's more applicableto me to choose the no lines or
the lack of lines.
But then again, if for somereason, at the time of this
Reno's closed down one of theirhighways, maybe we'll get more
traffic or something like that.
But I would probably choose thelines myself too, so I like it.
But anyway, hopefully thattriggered you guys to think
(19:29):
about if you enjoy traffic ornot, or lines or whatever it
might be, and hopefully thisepisode overall number 70 in our
repertoire here.
Hopefully you guys learnedsomething here and continue to
tune in Every Tuesday.
Check us out Spotify, applePodcasts wherever you guys get
your podcasts, please check usout.
We appreciate it and Ryan.
(19:49):
Any final thoughts?
Ryan Nelson (19:52):
As always, stay the course.
Speaker 1 (19:54):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
(20:15):
podcast to ensure you never missan episode and consider leaving
us a rating and review on yourfavorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the Book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
(20:35):
just that personal.
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:33):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
I am joined by Ryan, my co-hostand the brains of this
operation.
I would say and Ryan, welcometo the 70th episode of the
Fiscal Physical Podcast.
Ryan Nelson (00:47):
How does that make you feel, yeah, time flies.
That's crazy.
Aaron Hoisington (00:50):
Yeah, I think we mentioned on it.
We've always mentioned on thecouple of ones like, or previous
ones about.
You know, oh my gosh, we'vebeen doing this over a year or
whatever, and you know, nowwe're at a year and a half,
pretty much like doing this, andI think that you know it's
every month when we you know,every, every episode, every time
that we record these things andand these episodes come out, I
(01:10):
always listen to them and I'mjust like one.
I want to see if I messed upanything with the editing.
I think that's always somethingI'm like okay, did I mess
anything?
up and uh so far, so good.
So far, so good, so far.
Yeah, I I almost messed up one,but I had to go back and I was
like, oh man, I caught it, like,but I just happened to like
re-listen to it a little bit, sogood on me.
But 70 episodes in, I feel likeI'm learning something new
(01:31):
every episode too.
And it's been great to kind ofbuild on the different episodes
that we've done, harken back tothem and talk about like hey, go
listen to this one because itreally applies or it's really
going to talk about.
We're going to really dive intothat.
They're going to be themes andelements, so, um, 70 in.
Hopefully we get 70 more,that'd be cool.
(01:52):
But yeah, um, anyway, todaywe're going to talk about a um
one that is very applicable tomyself, I could say, and, uh,
probably to everybody in general.
It's called lifestyle creep and, uh, you mentioned in your book
as well, the your physical,physical seven keys to becoming
financially fit.
But I'm curious, ryan, whatyour thoughts on lifestyle creep
is.
Maybe break it down foreverybody and just kind of kind
(02:12):
of go through it.
Ryan Nelson (02:13):
Yeah, absolutely, let's do it.
So yeah, at first glance.
What are your thoughts onlifestyle?
Oh, it's got me.
Aaron Hoisington (02:22):
Yeah, I would say that, like over the years,
like, uh, um, I would say that,well, let me back up a second
here, one I don't know if it's abad or a good thing.
I would say that would, thatwould.
This is kind of how I look atit, because you know, as you,
you know, depending on thepeople that you hang out with,
maybe you want to do certainthings that they're doing.
(02:43):
You kind of try to keep up withthe Joneses or these other
things.
And I would say that it issomething that I've seen in my
life that as I get older, maybeI make a little bit more money.
I see my friends doing certainthings, or my family members,
whatever it might be.
You kind of want to do thosethings as well, and
unfortunately, those things kindof get expensive sometimes.
(03:05):
So I feel like I've been a Idon't want to call it a victim,
because I've been knowingly doit, I suppose.
But you kind of just start tolive outside your means a little
bit yeah absolutely, and sothat's kind of my personal
experience with it, I suppose.
Ryan Nelson (03:21):
Yeah, perfect, I like it.
Aaron Hoisington (03:22):
So yeah, I think I don't.
Ryan Nelson (03:24):
So lifestyle creep is real right.
We all fall victim to it.
I think I will preface this,though, by saying I don't think
lifestyle creep is bad.
So lifestyle creep isn't bad.
What I would argue isuncontrolled lifestyle creep is
bad.
So it's okay to increase thequality of your life if you're
doing it in a controlled manner,and I'll explain, kind of, what
(03:46):
I mean by that.
But really, what it comes downto is living within your means
and your lifestyle can creep upover time, and you can increase
the quality of your lifestylewhile still living within your
means, and in that sense, Ithink it's very good.
I think the majority of time wetalk about lifestyle creep, it's
sort of in reference to ithappening outside of your means
and it being uncontrolled andgetting to a place where you're
(04:07):
not living outside of your means, and so you mentioned keeping
up with the Joneses.
I think that term just explainsthis perfectly.
Right, and I love Jim Rome'squote you are the average of the
five people you spend the mosttime with, right, it's a great
quote Very accurate.
Yeah, absolutely.
And so you know if, if your fivebest friends all have boats and
everything you do is, like youknow, every weekend it's like
(04:29):
boat life and you're going up tothe lake and like you're going
to want to buy a boat, right.
If every single time you go todinner, your friends are all
buying bottles of wine for thetable, you're going to want to
buy a bottle of wine for thetable, right, bottle of wine for
the table, right.
If every single time you wantto even just go to dinner, your
friends want to go to the nicerestaurants, you're going to
want to go to the nicerestaurants, right?
And so you can see how yourexpenses sort of are, like the
(04:54):
way I just explained them, atleast your expenses are
increasing or almost beingcontrolled by something out of
your control.
Is being controlled by yourfriends, like almost right.
And of course that's not thecase.
But it's easy to kind of startfalling into that where your
habits are becoming the habitsof your friends and the expense
aspect of that may be secondary,right, you may be thinking
(05:17):
about the bottle of wine andcontributing and participating
in the group and then not reallythinking about the expense.
Or can you afford that untilyou get the credit card bill or
the credit card invoice a monthlater oh
yeah, you got to pay the piper,yeah, so first let's talk about
(05:37):
so lifestyle creep is just thateffect, when your lifestyle you
slowly start spending more andmore every um, every day, week,
month, year, and usually I thinkit refers to like almost not
even realizing it's there, soit's maybe.
You get a small raise at workand you're like, man, this is
cool, my paychecks are a littlebigger, right.
(05:57):
And then you go to dinner andyou're like, okay, you know,
I've never really got alcoholicbeverages at dinner, but I'm
going to start, I'm going to geta beer, like I deserve a beer,
and then you just kind of make ahabit of that.
And then all of a sudden you'relike, oh, I'm going to get two
(06:21):
beers and you kind of make ahabit of that and an entree.
Now I'm the guy that gets anentree or an appetizer, an
entree and an entire bottle ofwine.
Aaron Hoisington (06:31):
Sure, maybe a dessert, who knows?
Yeah, and a dessert right, yeahexactly.
Ryan Nelson (06:36):
And so it's this very slow process.
It's not just like one dayyou're the guy that only orders
an entree and then the next dayyou're the guy that orders
everything.
Right, usually it's a slow,gradual process and you don't
even notice it happening.
And again it happens over overyears.
Um, but then you reflect backand you're like God, how am I
spending so much money?
Right, and it's this, thissmall again creep.
(06:57):
It's a slow sort of like, um, aincrease to the standard of
life, but again.
So let's talk about how we coulddo this in like a controlled
manner and how lifestyle creepwouldn't be so bad.
So I'm going to take an example.
I'm going to say somebody I'mgoing to ignore taxes for this
example I'm going to saysomebody earned $50,000 and they
(07:17):
had a healthy savings rate, sothey were saving $20,000.
I mean, sorry, it's 20%, 20%,okay.
So they were saving 20% of50,000.
That means they were saving 10grand.
So they were living on 40 grand.
Again, we're going to ignoretaxes for this example.
So they earn 50 grand, they'resaving 20% or 10 grand of that
and that means they're living on40 grand.
(07:38):
Now, this individual, ifeverything stays the same and
they just start spending moremoney, so they start spending 45
grand.
That means by default they canonly save five, right?
So their lifestyle creep haseaten away at their ability to
save for retirement.
That'd be a negative.
That's the negative connotationof lifestyle creep, right?
So that's not good.
We'd want to keep their savingsrate in this case at 20%.
(07:58):
But let's say this individualgets a raise to 100 grand.
Now this can be dangerous in acouple of ways.
So if they don't start savinganymore, so they were saving 10
grand before and so they justsay, cool, I, I, I earn more
money.
Now I'm going to keep saving my10 grand.
Um, and now they'd be used toliving a lifestyle of 90, they'd
have $90,000.
If they just let lifestylecreep eat up that, all that
(08:21):
90,000.
Now again, they're used toliving a lifestyle of 90,000,
right, they need, compared towhere they were before, where
they were only used to alifestyle of 80,000, they need
more than twice as much forretirement because, they became
accustomed to a more expensivelifestyle right.
So their savings rate 10,000 to50,000 used to be 20%.
(08:41):
Now it dropped.
They got a pay raise at workbut their savings rate went from
10,000 of 100,000.
It dropped to 10%.
So their savings rate, theirprogress towards their
retirement goal, actually gotfurther away.
So you see this all the timeSomebody will get a raise and
they actually, by getting thatraise, you would think
intuitively like that's great,they're going to be more, that
sets them up better financially.
(09:02):
But if they didn't take theproper steps initially, what you
actually can find is thisperson, actually it hurts their
retirement.
They're saving the same amount,but now they became used to a
higher quality of life and sothey're actually further away
from a potential retirementright, so that does happen a lot
.
What I see more happen issomething more in the middle
where maybe they get that raiseto a hundred grand and they say
(09:24):
cool, I'm going to save more forretirement.
So they start saving, you know,15 grand, five grand more than
they were before.
They were saving 10 grandbefore.
Now they're saving 15 grand Ifwe look at that as a percentage
15 grand of their new $100,000salary they're saving 15%.
Again, they were saving 20%before.
So they've still.
Actually, they think in theirmind they're like, yeah, I'm
saving more.
I'm, you know, I'm saving 50%more.
(09:46):
I went from 10 grand all theway up to 15 grand.
That's a 50% increase in mysavings rate.
Like that's a pretty bigsavings jump.
And then they increase theirquality of life to fulfill the
rest.
So, in this case, 85,000, again,they'd actually be further away
from reaching their retirementgoal.
So they got a raise at work andit was actually detrimental to
their long-term retirementsuccess, which is
counterintuitive, but it happensall the time.
(10:07):
So that would all be examplesof negative lifestyle creep,
your quality of life increasingfaster than you can afford.
Now, though, let's look at thesame individual and let's say
that they were a little moreresponsible, and so they earned
$100 thousand dollars.
So they went from earning50,000 to saving 10 of it, so
(10:29):
they were living on 40,000.
Now they get a pay raise to ahundred thousand and they say,
okay, they could increase theirquality of life still from
40,000, let's say, all the wayup to 60,000.
And what that would mean isthere's now saving 40 grand.
Well, 40 grand of 100,000,their savings rate's 40%.
Sure, so they doubled theirsavings rate.
Their savings rate went from20% all the way up to 40%.
(10:50):
So now they're saving more,they're actually getting to
their retirement goal faster andthey still increase their
quality of their life.
Their spending went from 40grand to 60 grand, so there is
ways to do this where, as youget raises this is an extreme
example I mean a tall orderright.
But my point is even when yourincome goes from 60 grand to 65,
(11:11):
or 100 to 120, or 200 to230,000, right, anytime you get
one of these pay increases,there's a way for you to
increase your savings rate.
Also, it's reasonable and fairto increase your quality of life
a little bit, right.
But again, it's about doing itin a controlled manner, not
doing it in an unsustainable wayor then living outside your
(11:32):
means.
And again, if you want to do alittle bit of math or talk to a
financial advisor or somethingbut we gave that example even
that person who was saving 10grand a year increased it to 15
grand still got further awayfrom their savings goal right.
So you want to make sure you'reincreasing your savings
basically percentage or rate atan appropriate amount.
And then again, if you're doingit in that controlled manner,
(11:55):
it's completely appropriate tostart increasing the quality of
your life.
So, if you're working hard,you're getting pay raises, you
should be able to reap some ofthose rewards, and so there's a
way to reap those rewards but doit in a responsible way,
(12:22):
setting yourself up for futuresuccessful retirement as well.
Aaron Hoisington (12:26):
There's this saying about I think it was Dana
White, who's like the owner ofthe UFC, and he mentioned that
one of their fighters.
He made like a ton of money inlike a different promotion and
he was like, oh, it's reallyhard to go back to the grind
when you're sleeping in silkpajamas, yeah, thing that I'm
(12:46):
just like, wow, you know to toto have the same savings rate,
or maybe like ideal of like cool, I'm just going to live on 50
grand if I'm making 200 grand ayear.
Like is very hard to do andit's it's it just it creeps up
on you, but I think there areways to be able to do it in a
sustainable manner, to whereyou're like cool, I'm going to
reward myself for this and, andit's just figuring out the best
(13:08):
way to do that and before youknow it, you're just like wait a
minute, I have to make thisamount of money a month and you
get tied to that almost becauseyou don't want to go backwards,
I suppose in that case, yeah,yeah, absolutely.
Very, very interesting.
It's a tree, it's psychological, almost.
You get wrapped up in that, ifyou will.
Well, 100%.
Ryan Nelson (13:30):
Yeah, I like that way of thinking about it.
Another thing I would say forpeople, if they're trying to
avoid lifestyle creep, I wouldsay one tool to use is just what
I refer to in the book is andlots of people do I didn't coin
this term or anything but it'sjust paying yourself first.
So again, in these examples Iused, if that person is making a
hundred grand, their payincreases to a hundred grand and
(13:51):
they were going to save 40grand of it.
As long as they set up somesystem where they're
systematically saving that 40grand, so that 40 grand is just
going out into savingsautomatically out of the
paycheck or out in the first ofevery month or whatever, then
they can spend whatever theyhave left.
They don't have to be stressedabout it.
They can spend all 60 grand andyou can spend it on different
things every month and you canspend it guilt-free because
(14:13):
you've paid yourself first.
If you just spend what you wantto and then save whatever's left
at the end, then when you goout and you hang out with the
friends and you buy that bottleof wine, all of a sudden you
realize, oh, I spent a littlemore this month, I couldn't save
as much and then you go out thenext month.
Well, you've already made sortof a habit of buying this wine.
You might buy that wine again.
You don't have as much moneyagain, again, you can't save as
(14:35):
much again.
But again, if you reprioritizethat and you said I'm going to
save first, so pay yourselffirst, put into your savings
account first, then when you goout to dinner you're like I
literally don't have the moneyto buy the wine buying wine.
I literally don't have the moneyto buy the boat.
I can't buy the boat.
So paying yourself first is acool tool to help avoid
(14:57):
lifestyle creep.
If you are currentlyexperiencing it or noticing the
first signs of it and you'relike, how do I combat this?
Making sure you're taking careof that savings rate, and paying
yourself first can be a usefultool.
Aaron Hoisington (15:04):
Absolutely, and you called out I don't know
if it was you called out.
Another useful tool that I wasI was reading over like our
outline for this things too, islike you know, don't rush on
purchases too.
There's the idea I'm guiltythis, I see something I'm like,
oh, I want that, I'm gonna buythat.
And it's so easy nowadays too.
It's just like one clickshopping yeah oh wow, done, like
being able to save it for later, and like really think about
(15:27):
okay, cool, maybe I'll take I'lltake a couple of days to think
about this and do I really needthis?
Ryan Nelson (15:32):
And easier said than done, yeah, I'd be super
curious to know what percentageof Amazon orders get delivered
and never used.
Sure Right.
So somebody in the moment waslike I want product A, buy
product A.
Two days later, product A showsup.
They're like, oh cool.
Speaker 1 (15:49):
But they're no longer energy.
It's just like oh.
Ryan Nelson (15:51):
I'll put this in the garage.
It's got to be a decentpercentage of it.
So, similarly to your point,right, if the moment you say I
want product day, go put it inyour shopping cart and then just
say I'll come back to this onFriday or whatever, if this
podcast is coming out on Tuesday, you should give yourself a
two-day rule.
So you'll say come back, okay,I'll come back to this on
Thursday and buy it.
You come back to it on Thursday.
(16:12):
This is when it would have beengetting delivered and you're
like I'm not that interested On.
Speaker 1 (16:16):
Thursday you're looking at it, You're like, oh
yeah, I don't really care aboutthis, Then you just remove it
from your cart and you're goodRight saying just having a
little bit more patience, whichis super hard to do.
Aaron Hoisington (16:34):
We're not giving advice, we're just
talking about maybe you shouldconsider these things, depending
on your situation, obviously,and maybe just thinking things
through and giving you guys sometools to really consider and
get the wheels turning in thebrain.
For sure, absolutely Awesome,ryan, appreciate it.
As always, my man, we'll beright back on the other side of
this.
Everybody hang tight.
Speaker 1 (16:54):
And now to put the personal in personal finance.
Aaron Hoisington (17:00):
Welcome back everybody to this side of the
Fiscal Physical Podcast.
I'm still here with Ryan and,ryan, I got a fun one here for
you that I'm really curious tosee your thoughts, hear your
thoughts on.
So this question is would yourather never be stuck in traffic
again or never wait in a longline again?
Ryan Nelson (17:23):
I mean I think I would go with never waiting in a
long line and does that sort ofif I get in a line of traffic
Right?
Aaron Hoisington (17:32):
It's funny.
When I put this down, I waslike man, he's gonna get me on
this because like a line oftraffic is technically a line, I
mean I don't you know, I Ithink traffic would drive me
crazy.
Ryan Nelson (17:43):
Where we live here, I mean, I don't experience a
ton of traffic either yeah, uh,if I lived, lived in LA and had
a two-hour commute both ways, Iwould probably.
Aaron Hoisington (17:53):
I would just find a new job, yeah, or a new
place to live.
Ryan Nelson (17:58):
Yeah, so the fact that I don't currently, or
personally, really experiencethat much in reality traffic,
definitely it's the line thingfor me.
Aaron Hoisington (18:06):
What about you ?
Yeah, I'm exactly the same.
I feel like when I was puttingthis down, I was like Because
every once in a while I'll pickup my son from my wife and I we
alternate picking up my son fromdaycare and depends on
sometimes what time I get there.
If I get there at 3 30, I'mlike awesome, like there's going
to be really no traffic on theway home.
I get there like four.
It's probably going to take melike 10 or 15 more minutes to
(18:27):
get home and it kind of bothersme a little bit, like I'm just
like okay, I'm just sitting here, not moving.
If there's an accident,something like that, that kind
of bugs me.
But at the same time I thinkabout, like when I go to like a
sporting event or I go todisneyland, yeah, something like
that, at a theme park, waterpark or something like that, not
having to wait in a long lineto use the rides or something
(18:48):
like that or go down the tube.
It would be great and like kindof like you have a private
party at this place too.
So I do think that, overall,like you know, I don't go to the
dmv very often, thankfully, butlike I went there a few months
ago and I I ended up waitinglike an hour and a half and I
was just like okay, like I don't, I don't like this, like I
would like to get this out ofthe way.
(19:09):
So I think it's more applicableto me to choose the no lines or
the lack of lines.
But then again, if for somereason, at the time of this
Reno's closed down one of theirhighways, maybe we'll get more
traffic or something like that.
But I would probably choose thelines myself too, so I like it.
But anyway, hopefully thattriggered you guys to think
(19:29):
about if you enjoy traffic ornot, or lines or whatever it
might be, and hopefully thisepisode overall number 70 in our
repertoire here.
Hopefully you guys learnedsomething here and continue to
tune in Every Tuesday.
Check us out Spotify, applePodcasts wherever you guys get
your podcasts, please check usout.
We appreciate it and Ryan.
(19:49):
Any final thoughts?
Ryan Nelson (19:52):
As always, stay the course.
Speaker 1 (19:54):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
(20:15):
podcast to ensure you never missan episode and consider leaving
us a rating and review on yourfavorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the Book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
(20:35):
just that personal.
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
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