The STRIP Method May Be Crucial For Preserving Your Finances Amid Lifestyle Creep

Receiving an increase in income can feel like the answer to all of your problems. That is, until you find yourself inadvertently bumping up your monthly expenses to match. This phenomenon of increasing your expenses each time your income goes up is known as lifestyle creep and it can keep you barely scraping by or even living beyond your means for years longer than necessary.


TikTok sensation, Vivian Tu, also known as YourRichBFF across the social media platform, has created a technique for avoiding lifestyle creep and building wealth as an act of self-care for a future version of yourself. She has named the financial planning method S.T.R.I.P., with each letter representing one of the vital steps of planning ahead for your future monetary success and security. Here is how the method breaks down and how you can get started right now on putting together a plan that works for you. 

STRIP for financial security

Vivian Tu is a former J.P. Morgan stock trader who hung up her Wall Street hat to become a full-time financial influencer helping everyday people become financially literate through social media. Her S.T.R.I.P. method starts with focusing on creating a budget and adjusting it each and every time your income changes. She advises her followers to take a realistic approach to budgeting by allocating 30% of their income to goods and experiences that can be classified as "wants" rather than "needs" (via Business Insider).


The other 70% of your income, according to Tu, should be split 50/20 with 50% dedicated to monthly expenses and other necessities, and 20% put toward saving, investing, or paying down debt. The specific intent for this last 20% will likely change over time depending on the current state of your emergency funds, other savings, total debt, and whether you have access to a retirement account through your employer. 


Most financial advisers, including Vivian Tu, advise that you prioritize saving enough money to cover three to six months of your current living expenses before focusing on paying extra toward your debts, per Forbes. The sentiment behind this advice is based on the fact that those without an emergency fund available are likely to end up in even more debt when life inevitably throws them a curveball in the form of an unexpected layoff, illness, injury, or repair bill.


The buffer an emergency fund creates is there to prevent you from taking on more high-interest debt to bail yourself of out an urgent and unexpected situation and ending up in a financial hole. If you're starting out without any savings at all, you may wish to dedicate the full 20% of your income that the S.T.R.I.P. method recommends allocating for savings and investments to building this emergency fund. Paying the monthly minimum on your debts until you've saved three months' worth of expenses and then reassessing your plan may be the wisest approach. 

Total debt

The first step to creating a plan for repaying your debt is to assess how much you owe in total and then finding out the interest rate attached to each individual debt. Typically, credit cards carry the highest interest rates while student loans and home mortgages carry the lowest, though this is not always the case. Some debts, such as outstanding medical bills, are free from interest altogether. Make a list of all your debts and rank them from the highest to the lowest interest rate.


If you've already saved enough to cover at least three months of living expenses, you may wish to temporarily shift all or most of your 20% income allocation to paying down your debts. Focus on paying off the debts with the highest interest rates first. Vivian Tu recommends paying the monthly minimum on all debts with an interest rate below 7% while paying off those with rates higher than that as quickly as possible, per Business Insider. 

Retirement funds

Once you've reached the point where you have an adequate emergency fund saved and you've paid off all debts with interest rates higher than 7%, Vivian Tu advises that you turn your attention to planning for your retirement, per Business Insider. Depending on your age, it may feel like retirement is a faraway dream that will never become reality, but the day will arrive and probably sooner than you realize.


If you have a 401(k) or other retirement accounts through your employer, your goal is to maximize your contribution. A financial adviser or your company's human resources department can help you decipher exactly what that amount is and whether or not your employer will be matching your contribution. If you're self-employed as a freelancer or small business owner, it's up to you to open your own retirement account. Tu recommends seeking out an IRA or ROTH IRA, depending on your income level. 


If you've managed to cover your monthly expenses, build an emergency fund, repay your high-interest debts, and maximize your retirement savings and you still have income left over, congratulations! You're now ready to start investing, according to the S.T.R.I.P. method. This may look like literal investments in stocks or bonds, or investing in your own future by seeking higher education and expanding your earning potential (via Business Insider). Ideally, you'll have enough income left after completing the previous steps of the plan to do both.


As you navigate the S.T.R.I.P. technique, it's important to keep in mind that the final letter, P, stands for plan. Each step is merely a concept until you realize it by applying it to your own individualized financial plan. Write out your plan on paper, enter it into a spreadsheet, share it with your friends and family, or shout it from the rooftops. Be sure to rework your plan whenever your income changes and you'll be headed toward a financially secure future.