What is the Hedonic Treadmill?
According to Psychology Today, the Hedonic Treadmill is “idea that an individual’s level of happiness, after rising or falling in response to positive or negative life events, ultimately tends to move back toward where it was prior to these experiences.”
This concept purports that usually people return to a baseline level of happiness after a period of a few months. There are several studies and anecdotal evidence to back this up. The miserable lottery winner who goes on a spending spree only to find themselves miserable again. The guy who loses his legs but goes on to live a productive, happy life despite his newfound disability.
What is Lifestyle Creep?
Lifestyle creep is a topic often mentioned within the financial independence community. This is the psychological concept that you’ve seen in real life: keeping up with the Joneses. Most people, when they begin to earn more money, find ways to spend it.
Motivations are varied. Some want to show off wealth for whatever reason. Some feel the peer pressure of coworkers or friends who spend freely on lavish vacations or vehicles as a status symbol. Gotta live that Instagram lifestyle, right? (Insert puke motion here) Escaping this cycle allows you to save and build real wealth instead of accumulating unnecessary junk. Worthy tradeoff, I’d say. Who cares what other people think, right? Easier said than done, for many, but seriously beneficial for your financial future.
What Does This Have To Do With Financial Independence?
Good question. The answer is two-fold. First, if you follow the accepted premise, then will you return to your normal level of happiness, even when blessed with financial independence? Maybe. Hard to say.
The real application is this: avoiding lifestyle creep and inflation, and maintaining spending habits in the face of those formidable foes. Just got a raise? You could buy a new car, enroll in some new expensive subscription service, or start eating out more. You will find yourself in the same level of happiness, however. Instead, consider keeping your spending as is, and bank additional savings and maintain what will likely be an equally happy existence.
This means maintaining spending habits, and the lifestyle creep you avoid when doing so, can become your superpower when used correctly. Let this become your secret weapon. There’s nothing wrong with celebrating a raise, but when you bank the difference you start building real wealth. That is the real superpower here.
Fuck keeping up with the Joneses. Fuck the new car. The new smell and novelty wear off long before the payments end. Financial independence opens up every opportunity you’ve been waiting for. Everything you want is outside of your comfort zone. It is amazing how quickly it builds once you get going. The power of exponential returns will blow your mind.
