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You get the pay rise. Six months later, somehow, it doesn't feel like anything has changed. The mortgage crept up when you upgraded the house. The car repayments crept up when you upgraded the car. Your bank balance looks almost exactly like it did before; just with a bigger number moving through it each month.
There's a name for this, and it isn't a lack of discipline. It's a well-documented psychological pattern called the hedonic treadmill, and understanding it is one of the more useful things you can do for both your financial position and your headspace.
The term was coined by psychologists Philip Brickman and Donald Campbell in 1971. Their theory: people experience a genuine spike in happiness after a positive (or negative) life event, but that feeling fades, and wellbeing drifts back toward a fairly stable personal baseline.
The most cited test of this came in 1978, when Brickman and colleagues studied a group of lottery winners alongside a group of people who had become paraplegic following accidents. Within a relatively short period, both groups had drifted back toward roughly their pre-event happiness levels. The lottery winners weren't dramatically happier than everyone else, and, perhaps more strikingly, they reported getting less enjoyment out of small, everyday pleasures than the comparison group did.
The mechanism is adaptation. Whatever your circumstances are, you get used to them, and your expectations quietly reset around your new normal. The treadmill keeps moving; you just keep having to run a bit faster to feel like you're getting anywhere.
In a financial planning context, this shows up as lifestyle inflation, sometimes called lifestyle creep. Income rises, and spending rises to meet it almost automatically: a nicer car, a bigger house, more takeaway, a subscription here and there. None of it feels reckless in the moment. Each individual upgrade feels earned and reasonable.
The problem is what it does to your savings rate, the actual engine of wealth building. If every dollar of a pay rise gets absorbed into lifestyle, your savings rate as a percentage of income can stay flat or even shrink over a career, even as your income climbs substantially. You end up earning considerably more than you did a decade ago while banking almost exactly the same amount. All that additional income has been converted into stuff that, per the treadmill, isn't even making you meaningfully happier.
It also pushes people toward chasing the next purchase for the next hit, rather than building toward the things that actually move the needle, debt reduction, superannuation, an investment portfolio, or simply the breathing room of a healthy cash buffer. The treadmill rewards spending that feels good for a moment and quietly punishes the compounding that only shows up years later.
The financial side is only half of it. Chronic hedonic adaptation means you're rarely satisfied with what you have for very long, which tends to fuel a low-grade sense of "not quite there yet", regardless of how objectively well things are going. Comparison makes it worse: it's very easy to reset your baseline against someone else's newer car or bigger renovation, rather than against your own life five years ago.
This is a genuinely exhausting way to live, and it's not really about willpower. You're working against a well-established psychological default, not a personal failing.
You can't switch adaptation off entirely; it's a normal part of being human. But you can stop it from quietly eating every pay rise you ever get. A few practical shifts:
Bank the rise before you see it. When income goes up, redirect a meaningful chunk of the increase straight to savings, debt repayment or super, before it ever lands somewhere you can spend it. Automating this removes the moment-by-moment decision entirely.
Separate wants from a genuine step up in quality of life. Not every upgrade needs to be resisted — but it's worth pausing to ask whether a purchase reflects something you actually value, or whether it's simply what the treadmill expects of someone at your income level.
Notice what you already have. Deliberately paying attention to the things that are already going well slows adaptation down. It sounds soft, but the research on this is genuinely solid.
Anchor spending to your own goals, not your own history. "What did I spend last year" is a weaker benchmark than "what actually matters to me over the next five years." A plan built around the second question tends to survive a pay rise intact.
None of this means never enjoying the fruits of a higher income, it means being deliberate about which parts of a pay rise go toward lifestyle and which parts go toward the life you're actually trying to build. That's the difference between a treadmill and a runway.
If your income has grown over the past few years but your savings rate hasn't kept pace, it's worth a conversation. We can help you build a plan that redirects future pay rises toward what actually matters to you; before lifestyle creep gets there first. Get in touch to book a time.
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