7 Ways I Fight Lifestyle Inflation (and 6 Ways I Fail)
Since starting my current job, I’ve been lucky enough to receive two raises and an occasional bonus here and there. I’m very aware that I can fall prey to lifestyle inflation (when you start spending more just because you’re making more) if I’m not careful.
Buying more things when your income increases is not always a bad financial decision. Replacing a 20 year old car or paying for dental work you were putting off are good examples of using an increased income to improve your quality of life. But it’s easy to start justifying more and more purchases once your income increases, and instead of having more to save or pay off debt, you still end up living paycheck to paycheck, struggling to make ends meet.
Below are some examples of how I fight lifestyle inflation and a few examples of how I have failed to fight it.
How I Fight Lifestyle Inflation:
Rent or a mortgage normally takes up a large percentage of someone’s total expenses. My partner and I live in a very small apartment in a less expensive part of town in order to keep rent cheap, even though we technically could afford a bigger place. Also, because my apartment is smaller, I don’t need to spend as much money to fill it with furniture and decorations. Win win.
As much as I’d like to, I don’t give more for birthdays, anniversaries and holiday presents than I used to. I can still buy thoughtful presents that show I care without going overboard.
My partner and I are on the same page with budgets, even though he makes more money than I do. It makes vacations, finding an affordable apartment, saving for a house, potentially planning a wedding and going to concerts/ restaurants, etc. much easier because we have the same idea of what lifestyle we choose to afford.
4. Investments/ Debt Payoff
I do my best to automatically put bonuses and extra income in savings before I think to spend it.
I also make sure retirement fund contributions and other investments increase as my salary increases. It helps me ‘feel’ less of the increase in income. I also put that money towards high-interest rate debt like student loans so they can be paid off faster, lowing my monthly expenses in the process.
5. Splurges and Recurring Expenses
I try to be aware of and limit splurges, memberships and subscriptions.
Questions I ask myself regularly:
- Would I have bought this before I got this raise?
- Did I used to go out to eat this much?
- Is this a beauty treatment I can do at home for cheaper?
- Do I need this expensive subscription, or is there a similar service for cheaper?
- Can I justify this membership, or is it just something I have because I make more money now?
6. Others’ Perception of Me
I normally advocate that everyone be open and transparent about their money situation. It helps people share ideas and support and lets people know if they aren’t being paid a fair wage compared to others.
I also believe it fights the stigma that your income determines your value as a person, which it absolutely doesn’t. Not that I lie to anyone, but I don’t let the people in my life know that I have more money than I used to.
This will be different for everyone but for me, loved ones are less likely to invite me to lavish occasions/ expensive restaurants/ concerts, etc. if they don’t think I’m making as much as I do. And when I tell them I can’t afford something, they are more likely to believe me and not push it.
This one can be difficult sometimes, but I really try not to compare myself to my peers. A coworker/friend my age just bought a beautiful home. I love hearing about her exciting home projects and decorating ideas, but sometimes I feel a little sad that I don’t have the square footage or permission to do projects like that at my apartment.
I need to remind myself every once in a while that taking on a mortgage and settling down to one location is not the best option for me and my partner right now, and that our smaller apartment meets all of our current needs.
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How I Fail to Fight Lifestyle Inflation:
1. My Car
Before getting a full time job, I had a 22 year old pickup truck that was hanging on by a thread. I was so excited to buy a car with all the bells and whistles (hello automatic windows!) that I went for the best one I could find, taking on a huge auto loan when I could have easily purchased a slightly older model with similar amenities. Doing a little bit more research could have saved me thousands.
2. I bought a smartphone, car, and paid off 2 major student loans within a month’s time.
There isn’t anything wrong with any of these individually. But I threw money at a lot of things at once and then lost my job about 6 months later. If I had staggered these expenses, my savings and emergency fund would have been healthier and I could have more easily weathered such a drastic dip in income.
Sushi is my ultimate ‘treat yo’self’ thing. But what once was a luxury is slowly turning into something I buy whenever I feel like it.
4. Dropping almost $1500 on one weekend trip
I was lucky enough to go to IMATs this past year with a friend in Toronto. We rented an expensive Airbnb in the middle of the Entertainment District (it had a hot tub with a rooftop view!), bought a ton of makeup and spent extra to expedite my passport so I could get it in time.
I could have easily saved hundreds if I had chosen less expensive travel accommodations and had renewed my passport earlier.
5. Beauty Treatments
Two things I love to splurge on are the occasional lash lift and tint and getting my hair dyed rose gold at the salon. I don’t do those treatments every 2 months like recommended, but I do gladly shell out for them when I’m feeling extra fancy. These are two things I never did before I started working full-time.
6. My ‘Upgrade’ Spreadsheet
I have a google spreadsheet labelled ‘Upgrade’ with a list of things I either want to eventually purchase or replace.
Some of them make sense – like getting quality waterproof boots (I live in the Northeast), a cute pair of glasses with an updated prescription, or new software to make better content for a side hustle.
Some of them don’t make financial sense, like a pair of $65 sunglasses or Apple Airpods, both of which I absolutely do not need. I genuinely think they would be fun to own, but I don’t believe that either of them will make me happier.
Some of my ‘fails’ were due to poor planning or impatience, so please learn from my mistakes. But some on them (sushi, a smartphone, rose gold hair) are fun things that I enjoy and really wanted before I could afford them. As long as I don’t go overboard, I don’t think there’s anything wrong with splurging a little.