It’s a war out there on your money and lifestyle inflation is public enemy number one. Lifestyle inflation is just a fancy term for the phenomena of spending more money as your income rises. Or as Biggie would say (yes, I’m a closet rap fan who loves me some Notorious BIG and Tupac), “I don’t know what they want from me. It’s like the more money we come across, the more problems we see.” Preach brother!
We often feel like more money will solve all of our problems, and certainly a rise in income should provide you with a more comfortable quality of life. But if you’re raising your lifestyle above your needs and it’s causing you to live paycheck to paycheck or impact your ability to save for the future, then you’re in over your head with lifestyle inflation. So, how do you get back on track? Here’s my six tips to help get you started.
Admit You Do It
The first step towards getting a handle on it, is recognizing it and seeing it in your own purchasing habits. Go on—say it, “Hi, my name is _____________ and I am a lifestyle inflator.” Seriously though, I’m right there with you. Many of us all make those big upgrades as our lives change. We go from our first beater car as a teenager to our first new (or newer preowned) car with a payment after we land a “real” job. We move from our starter home to our “dream” home as our families and our incomes expand. We do these things because we feel we’ve earned them, deserve them, even need them or want to show everyone else what we’ve earned, deserve and need.
That’s all well and good if you can truly afford to do so. But, can you really afford to put in that huge pool just because you got a raise that would cover the payments? Is it really imperative to upgrade the family minivan to a fully loaded Escalade? What you once considered a luxury is now deemed a necessity and all that changed is a few dollars in the bank. This is the spending that has to be evaluated when you ask yourself what your ultimate financial goals are.
Some of us are perfectly content spending our lives working to afford these luxuries and there’s nothing wrong with that—I’m not trying to shame anyone for the choices they make. But for those who would rather focus on making sacrifices now in order to enjoy an early retirement or a debt-free lifestyle as soon as possible, these purchases deserve a second look and a hard evaluation of their true costs and the pros and cons.
Take Steps to Course Correct
If you admit you have inflated your lifestyle and you wish to change that, look for opportunities to do so. Automatically funnel any future raises to savings before they hit your bank account. Make wise purchasing decisions when it comes time to replace something. For instance, we used to have 2 SUVs for a time because we are a large family; it just seemed to the obvious thing to do. Then my husband got a job 30-some miles from home (one way) and suddenly that 15 mpg was taking a bigger bite out of the budget. Maybe two gas-guzzling SUVs wasn’t the way to go after all?! So, we downsized his SUV. Occasionally, it takes some work around since only one of our cars fits all of us, but we have survived just fine with one SUV and his hybrid sedan that gets an awesome 40 mpg.
Skip the window shopping and unsubscribe from all of the promotional emails from any company that could tempt you to spend more than you need—most any discount code you could ever want could be found with a simple Google search.
Ladies, send the husband to Target with your list if you can’t be trusted to stick to it yourself. We all make jokes and see the funny memes on social media about needing toilet paper and coming out $150 later—sans the toilet paper. It’s funny…but it’s not. That money should stay in your wallet, not line the pockets of Target executives employing every possible tactic to get you to forget the toilet paper and spend lots more on their cute Cat & Jack clothes that your kid is just going to ruin the first time they wear them! Save your money–they look totes adorbs in their hand-me-downs, I swear! Just as clothes don’t make the man or woman, they don’t make your baby either.
Reconsider Even the Small Things
I have a friend who spent some time as a single mom and then after getting married, her income obviously increased. She shared that one of the little things she looked forward to, now that she had some flexibility in the budget, was no longer shopping for her cleaning supplies at the dollar store. Lo and behold, she purchased her supplies from a general merchandise retailer, spent more, and found they didn’t work as well. So, she was back to shopping at the dollar store, and now happy to do so.
Keep in mind that sometimes more doesn’t always equal better. A $150 Shark vacuum works as well as a $500 Dyson (and some would argue, even better!). My $30 Pioneer Woman enameled cast iron Dutch Oven from Walmart could certainly go toe-to-toe with the $300 Le Creuset and I don’t freak out when my husband washes it with ordinary dish soap (OK, well maybe a little!).
Look at the Bottom Line Changes to Your Income
Congrats, you just got a 5% raise on your $100,000 salary. That $5,000 sounds like an additional $400 a month coming in, but you’ve got taxes to factor yet. Deduct at least 40% to be safe and you’re left with only $250 more per month. Respectable sure, but not enough to make a huge difference to your bottom line or your lifestyle. So, keep that in mind before you start making plans to put on a second story addition.
Define Your Happiness Yourself, Not with Things
Value relationships and experiences over possessions. Take those vacation days, plan surprise date nights, gift memberships and season passes to your friends and family. They’ll appreciate your time more than your money as it’s limited and so much more valuable.
Buying expensive things simply to impress others or make yourself feel more accomplished is really counterintuitive. We live in a country where you don’t have to be wealthy to purchase luxury items. Most anyone can access enough credit to buy designer clothes, handbags, the latest technological gadgets, even luxury brand cars without actually being able to afford those things, so it’s not as much of a status symbol as you may think.
Lifestyle inflation is often times a subconscious and natural reaction in the wake of bringing in more money. Who wouldn’t make some upgrades when you’ve finally achieved the means to do so? Nothing wrong with that. Just be aware that the potential to interfere with your financial goals is there, but you have the power to fight it.
What say you budget slayers? Has lifestyle inflation ever caused you to upgrade when you should have stayed the course? Or perhaps you saw through the temptation and scaled back instead of going all in? Would love to hear your stories in the comments!