You may have heard the term “lifestyle inflation,” but if you haven’t, lifestyle inflation is when you start buying more to support a more lavish lifestyle. This could happen as you get older or as your income increases.
Awhile not all lifestyle inflation is necessarily bad, it certainly can wreak havoc on a budget if you aren’t careful. Another danger of lifestyle inflation is that often time, people’s desired lifestyle costs more than what they make, resulting in credit card debt or other forms of debt.
These certainly aren’t rules, but rather guidelines on how to keep your lifestyle in check. So here are 10 ways to avoid lifestyle inflation.
1. Forget About the Joneses
Keeping up with the Joneses is dangerous to you and to your budget. We all have moments of impulse where we see what our friends and neighbors have an we want it. For me, when I look at my friends, I want to travel more, buy a house, and eat out more. But these are all things that, though I feel confident I can do someday, would bust my budget right now and honestly aren’t my top priority at the moment.
So ignore the Joneses and do what’s best for you. Make your money work for you and trust your gut with timing. You might not be able to afford everything your friends have right now, but you can make it a goal to work for it and save for it for the future.
2. Trust Your Budget
Your budget is in place for a reason. It’s because it works for you.
Many people consider budgets to be confining, but have you ever thought about how much freedom a budget actually allows you?
If you budget properly, you’ll have more money to spend how you want. If you can control “boring,” but necessary expenses, like the electric bill, rent, groceries, and debt, you’ll have more money left over at the end of the month. Then you can actually choose how to spend that money in a way you want.
3. Allow Yourself Limited Inflation
It can be challenging to keep living like a broke college student years after you graduated, and it’s okay to allow yourself a little inflation. But you have to decide what your priorities are.
For me, when I finally broke free of the “broke college grad” stage, I started purchasing much healthier and more wholesome foods, as well as buying a few minor decorations for my apartment. It didn’t cost a ton, but it helps me to keep going with my budget.
If your budget allows, give yourself some sort of small luxury. Maybe you will allow yourself to go to a movie once a month, or a night out with friends every so often, or a gym membership. Whatever it is, make sure it 1) still fits within your budget and 2) is something you truly value.
4. Have a Plan for All Extra Money
When you have extra, unexpected, income, what is your plan for it?
While you can’t expect to get a tax return, inheritance, or birthday money, it doesn’t hurt to commit to putting extra money towards savings or debt.
This also goes for making extra money. I committed to putting any extra money through blogging and freelance writing towards debt. I don’t allow myself to use this money to inflate my lifestyle because honestly, I work HARD for that extra money and I don’t have to do it. I would hate to see my hard work be wasted on frivolous purchases. I am buying my financial freedom with that money.
In addition, any extra money, like gifted money from the wedding, tax returns, or extra paychecks go to our debt. When you get a large chunk of unexpected money, it can be so tempting to spend it, so planning what you will do with that money ahead of time prevents lifestyle inflation.
5. Keep a Running List of Wants and Needs
Keeping a list of wants and needs helps you to prevent impulse purchases.
For example, you might really want to go on a vacation to France. With vigorous savings and planning, that could totally happen. But when your friends try to get you to go on a trip to Hawaii, you’ll have to make a choice between what you want and what your friends want.
And when you keep a list of your needs, you’ll be able to better prioritize your spending. You’ll find yourself often having to pick between wants and needs, which will keep your finances in check.
6. Sell Items Frequently
Look around your house. How much stuff laying around don’t you use?
Take the time to frequently audit your possessions will remind you how much you already had. It will promote a minimalist lifestyle and show you that, frankly, you likely already have everything you truly need.
Plus, selling your items is a nice way to earn a little cash to pad your emergency fund or pay off debt!
7. Decide if Luxuries or Convenience is More Important to You
There are different types of lifestyle inflation. You can buy more luxury items – like furniture, fancier clothes, vacations, or cars, or people tend to splurge more on convenience items, like eating out, time-saving apps, or delivery services. While I don’t allow myself many big “luxury” inflations, I have allowed myself to purchase some convenience items because my time, though it has become more important, is less.
Convenience purchases, to a point, can be a reinvestment back to yourself. I personally would so much rather spend money on something that saves me time or makes me feel better versus buying something luxurious just to have.
My most recent convenience purchase was an upgraded iPhone. As a blogger, I constantly rely on my phone to conduct business, and my old phone ran out of storage and no longer supported my needs. So this was a luxury that was worth the cost to me.
8. Know Your Bare-Bones Budget
While this hopefully isn’t the budget you have to rely on every day, I always keep a bare-bones budget in the back of my mind. This is the budget I would switch to if I ever lost my job or came down with a serious illness or emergency.
It’s important to keep this budget in mind because at some point in your life, you won’t be able to afford luxuries. So how can you keep your lifestyle in check?
Think about someone rich who lives lavishly. They could make a million dollars a year. But if they lost their job tomorrow, could they support their current lifestyle for very long? Probably not.
This is a case for not ever increasing your lifestyle too quickly. While you don’t need to be a cheapskate all the time, it’s important to limit your lifestyle to something you can afford no matter what life throws your way.
9. Advance Your Savings Goals
When you receive a raise or lump sum of income, how do you spend it? Do you automatically consider how you could increase your lifestyle?
I’m challenging you to instead, focus on increasing your savings. There is always a case for saving more money. It doesn’t make much sense to continually fund a more lavish lifestyle while you keep your saving goals the same.
Remember, as you earn more and your lifestyle increases, your savings goals must as well.
10. Remember, Personal Finance is Personal
Everyone has drastically different financial situations, and your money is yours. Don’t let anyone tell you how to spend it!
If you don’t care about buying a house ever, then don’t buy one. If you make $500,000 a year, but choose to invest all of it while not increasing your lifestyle at all, more power to you.
And that goes for me as well. These are all tips for avoiding lifestyle inflation, because I believe we all should live somewhat below our means. But don’t think I’m trying to tell you how to spend your money! Your situation, values, and needs are so different from mine or anyone else’s. So do what’s right for you, but also be mindful about how much you’re spending on creating a lifestyle for yourself. Because having a great life doesn’t need to cost a ton 🙂