Owning a thriving private practice is an incredible achievement! As your hard work pays off and the practice becomes more profitable, it’s natural to want to enjoy the rewards. After all, one of the ultimate goals of running a business is to create financial freedom and stability—for your business and yourself.
But there’s a sneaky trap many successful practice owners fall into: lifestyle creep. It can happen to anyone, and it often starts without you even realizing it. This post will walk you through what lifestyle creep is, why it happens, and how to make sure your personal financial growth doesn’t come at the expense of your business.
What Is Lifestyle Creep?
Lifestyle creep happens when an increase in income leads to an increase in spending—often without much thought or planning. It starts small, with an upgraded car or a few more vacations, but it can quickly escalate to larger expenses like a bigger mortgage or private school tuition.
While there’s absolutely nothing wrong with enjoying the fruits of your success, lifestyle creep becomes a problem when spending rises faster than profits or when business challenges arise. Here's where things can get tricky:
Seasonal fluctuations: A summer slowdown, fewer clients over the holidays, or a dip in referrals can hit your income harder than expected.
Staff changes: If multiple therapists leave at the same time, they may take clients with them, creating a sudden drop in revenue.
Operational hiccups: A struggling biller or a change in systems can delay payments and disrupt cash flow.
Marketing shifts: A higher cost per lead, algorithm changes, or increased competition can drive up your marketing expenses, leaving less room for profit.
Tax surprises: A larger profit means a bigger tax bill, which is a good thing—it means your business is doing well! But if you’re not working closely with your accountant or are relying solely on a tax preparer at the end of the year, it’s easy to forget to save enough for taxes.
As a business owner, it’s not a question of if something will go wrong, but when. Challenges are an inevitable part of running a business, and they don’t mean you’ve failed. In fact, they’re part of the adventure of business ownership—and being prepared for them is the key to long-term success.
Real-Life Examples of Lifestyle Creep
Let’s look at some common scenarios where lifestyle creep sneaks in—and how it affects both the business and personal finances.
Example 1: Celebrating Growth Without a Plan
Imagine a practice owner who grows their profit from $10,000 a month to $25,000 a month—an amazing milestone worth celebrating! The owner starts taking more money out of the business each month, assuming the higher income will last forever.
Then, a slow month hits, and the practice only earns $5,000 in profit. The owner, still expecting their usual $20,000, withdraws the full amount—depleting the business emergency fund and putting the practice at financial risk.
Example 2: Lifestyle Upgrades Add Up
With more money coming in, it feels natural to upgrade your lifestyle. A new car, weekly luxuries, or designer clothes seem harmless at first. But over time, these expenses add up, leaving no emergency fund for the business—or at home.
Without savings to cover personal or business expenses during a rough patch, the practice owner faces unnecessary stress and hard financial decisions.
Example 3: Big Moves, Bigger Bills
A practice owner sees their income rise and decides it’s time to move to a bigger house in a more expensive neighborhood. They take on a mortgage that’s twice as high as before and enroll their kids in private school.
These new financial obligations quickly absorb all the extra income, leaving little room for savings. When a summer slump hits and income dips, the owner is forced to take more money out of the business than it can afford—risking the survival of the practice.
Example 4: A Bigger Tax Bill Catches Them Off Guard
A therapist owner doubles their income and enjoys the financial freedom that comes with it, but they forget one crucial detail: more profit means more taxes. Without setting aside extra money for taxes throughout the year, they end up with a massive tax bill they can’t easily cover.
Using a system like Profit First can help prevent this scenario. In my book, Profit First for Therapists, I outline how to use this method to allocate money for taxes, expenses, and profit, ensuring you’re always prepared for tax season.
Why Does Lifestyle Creep Happen?
Lifestyle creep is common because it feels so natural to adjust your spending as your income grows. But these seemingly small shifts can create big financial challenges for your business if not managed intentionally.
Here are some reasons why lifestyle creep happens:
The Reward Mentality
After years of hard work, you feel like you’ve earned a few upgrades—and you absolutely have! But without a plan, small indulgences can quickly become recurring expenses.
Social and Family Pressures
Success often brings new expectations from friends, family, or even your own perception of what a successful business owner "should" look like.
Lack of Cash Flow Planning for the Practice
Many owners don’t have a clear plan for managing cash flow in their business. Without understanding how much they can sustainably take home, it’s easy to overdraw.
Assuming Perpetual Growth
It’s easy to assume that income will always keep growing, but this mindset overlooks the natural ups and downs of running a business.
The Role of the Practice Owner
As the owner, your most important role is ensuring the survival of your practice. Without profit, your business can’t grow—or even sustain itself. Profitability gives you the freedom to handle challenges, invest in growth, and enjoy your success without stress.
How to Protect Yourself from Lifestyle Creep
The good news? Lifestyle creep doesn’t have to derail your practice. With a little planning and intention, you can enjoy your success while keeping your business profitable and secure. Here’s how:
1. Build a Business Emergency Fund
Save at least two months of business expenses in a separate account. This will provide a buffer for slow periods, unexpected costs, or opportunities to invest in growth.
For example, if your monthly business expenses are $15,000, aim to save $30,000 in your emergency fund.
2. Create a Personal Budget
It’s okay to increase your personal spending as your income grows, but it should be intentional—not accidental.
Take time to map out your monthly expenses, savings goals, and splurges.
Review your budget every month to make sure it aligns with your income and long-term financial goals.
For example, if you want to upgrade your car, plan how much you’ll spend and how it fits into your overall budget before making the purchase.
3. Set a Consistent Owner’s Draw
Instead of taking out more money every time your business has a good month, set a consistent owner’s draw based on what the business can afford year-round.
For example, if your business makes $25,000 in profit most months, set a draw of $15,000 and save the rest for taxes, business growth, or your emergency fund.
4. Reward Yourself Responsibly
Celebrate your hard work with intentional rewards that don’t jeopardize your financial security.
For example, instead of committing to weekly luxuries, plan a one-time splurge like a family vacation or a new piece of equipment for your home office.
5. Plan for Seasonal Fluctuations
Use historical data to identify trends in your practice’s income and plan your spending accordingly.
For example, if you know summer is a slower season, aim to save extra cash during busier months to cover the difference.
Final Thoughts: Balance Growth with Stability
Growing your practice and taking more money home is a good thing—something you should absolutely celebrate! But it’s important to do it in a way that keeps your business secure and sustainable. Challenges will come, but with the right financial habits and preparation, you’ll be able to weather them and continue thriving.
At GreenOak Accounting, helping practices scale is our specialty. We understand the unique challenges of private practice ownership, and we’re here to help you build a profitable practice and a lifestyle you love—without putting your business at risk. If you’re ready to take your finances to the next level, schedule a consultation with us today.
This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney, or advisor regarding your particular facts and circumstances.
GreenOak Accounting specializes in working with counselors and therapists in private practice. For more information on our services, visit our website.
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