Lifestyle inflation is a huge drain on finances. Lifestyle inflation occurs when your income goes up, so does your spending. At first, it appears very justifiable! My family recently experienced this when I went back to work in April. We found ourselves with a doubled income after living on a single salary for almost three years. When I saw that first paycheck hit my account I was so tempted to go out and spend it – I earned it, right? But what was I going to spend it on – clothes I don’t need, toys my son won’t play with, an upgraded vacation package I won’t appreciate… Fighting lifestyle inflation is tough. In a culture that says “treat yo self!” in just about every situation, here are a few tools to arm yourself with so you don’t give in to lifestyle inflation.
Set priorities before new money hits your account
When I accepted my new position, I felt a rush of relief. Our budget was getting bigger again! After years of being ultra-frugal (bordering on cheap) I could now “afford” things like salon haircuts, brand new clothes, and could pay down our debt way faster. But “affording” (aka lifestyle inflation) and actually purchasing these new items doesn’t align with our priorities. So we set new ones before my paycheck ever credited the account.
Where do you want your money to go outside of paying your bills?
Do you want to save for a vacation? Kid’s college? Paying off debt? Saving for a car so you can pay cash? Maybe renovate your home?
These are all questions you get to ask yourself. Once you determine your financial priorities – it’s time to make them goals.
Financial goals will always have five things:
- What – what are you saving for?
- Why – why are you saving for this?
- How – how are you going to put your money there?
- How Much – how much money are you going to put there?
- When – by when do you hope to achieve this goal?
Let’s use vacation as an example – here’s what a goal statement would look like: We are saving money for a vacation. Vacations are important to us as they let our family experience new things together. Every payday, we will immediately transfer funds from our checking account into a designated savings account. Our goal is to save $5000 by 2023. That totals to just $210 each month or $105 each bi-weekly paycheck.
Saving for things is great, but this can also translate to paying off debt. Review all your current balances and regular monthly payments then set a goal as described above.
Posting these goals somewhere you can see them is a perfect motivator to help you fight lifestyle inflation! Set them as a background or lock screen on your phone, write them on sticky notes and put them on your desk, even write them out really big and put them on your fridge – it’s up to you!
Make sure your budget is set with your new income
Building a budget takes one day of work, then little moments of time to actually make it run. Here is my super simple guide to building a minimalist budget.
Adding your new income make take some trial and error. Before the month starts when you expect your new income, add new income into your budget. This would be placed in the “income” section of your budget. Whether it’s a side hustle or a full time job, it all counts as income. Once you have it added, make it go somewhere.
Remember those goals you set? Add those in, too! And that’s generally where your increase income will go. Designating where your money will go before it even arrives is one of the best ways to fight lifestyle inflation.
Automation for your money starts with your paycheck. Most employers offer to split you direct deposit over how many ever accounts you want (check with HR first). You should also be able to adjust your retirement contributions on your own or through your company’s benefits department. These are things you should definitely do.
Why split direct deposits? Because you don’t have to think about it.
Say you’re saving for that vacation or building your emergency fund. Wouldn’t it be easy to have money just automatically go into that savings account without you ever seeing it? You take away the work from yourself when things are set up automatically. Because if I saw money in my checking account that should go into savings… but it looks so tempting to spend!
Another way to automate savings is by setting up automatic transfers with your bank. Most can be done through your online banking. Set the day, amount, and frequency – and you’re done! If you want money to go into saving on the 14th and the 29th before your next bi-weekly paychecks, you can have it set up that way! If there is ever a month when your expenses are higher (car repair, insurance renewal, school fees, etc), you can always skip that transfer and have that cash stay in your regular account.
Got a raise? Raise your retirement contribution! There are loads of retirement calculators out there and some are even built into the website you’ll use for your retirement account. Whether it’s through your employer or you’re contributing to a retirement account on your own, it’s so important to save for your future. Shiny stuff and things are fun right now, but retiring early or on-time is even better.
The feeling of restlessness with your stuff – the comparison trap
You might have started a new job or got a promotion. Now you see all the people around you wearing nice outfits, carrying top of the line laptop bags, and driving a more expensive car than you. Let’s pretend these are the Joneses. From what I hear, the Joneses are broke! So stop trying to be like everyone else.
While that’s easier said than done, I understand the level of discontentment you can find when you start to see people in person again. It’s hard to hear people talk about their vacations or new house. Or to see pictures on Instagram of the perfect living room. It makes us feel restless with our things – we can afford new stuff now, right?!
While you can technically “afford” to replace your “old stuff” with new and exciting things, think back to what your priorities are. Would buying all new stuff aid you in reaching those goals? Does that spending align with your priorities?
Even if your coworkers have nice things, you don’t know how they really paid for them. Those coworkers could be in a mountain of debt and you wouldn’t even know. The average American has over $90,000 in debt. We have no idea how our friends, family, or influencers pay for things.
So instead of replacing everything in your home, try to refresh it. Rearrange the furniture. Declutter a little. Change out the décor with things that haven’t hung on the wall in a while. Try a capsule wardrobe challenge before purchasing a whole new wardrobe. Rotate toys before you buy new for your kids. Even cooking new recipes at home can help curb the temptation to eat out.
Create a 72 Hour List
A 72 Hour List is simply a list of things that are wants rather than needs that you would like to purchase. This can be anything from concert tickets, to new seasonal clothing, to a new car. The items on this list are truly wants that don’t need to be purchased right away. The key to this list is that you write down the item you want to buy and then wait three days. If you still want the item in three days, you can go purchase it (if you have the space in your budget).
Writing down what would have otherwise been impulse purchases, gives us time to pause and think over what we are about to spend and bring into our homes. This list has saved us many times from spending money that we didn’t need to.
It also acts as a “wish list” in that we write down purchases that we want to make in the future – not necessarily right away. Things like a twin size bed and a sized-up coat for our son, a paper shredder, and other, perhaps boring things have made the list. It allows us to set a budget for the item and then go find the best deal. With how much I love to thrift, this list comes in handy! Because when I see something on the list and it’s exactly what we want, I can snap it up and save money.
Gratitude and showing how thankful we are for the people in our life shouldn’t just be reserved to the holiday season. Whenever I feel the twinge of “I need that” or “ugh, but my (insert whatever trendy consumer object here) is soooo like, outdated” I very consciously think of two or three things I’m grateful for. There not always big, but they make my life better in some way.
A good way to start daily gratitude ritual is by writing what you are grateful and thankful for down in a notebook. It doesn’t have to be anything fancy!
Log what you’re grateful for so when you have seasons of wanting more or feeling like you’re missing something, you can look back at all the good that has happened.
Another way to express gratitude is by telling someone that they’re awesome and why they’re awesome. Like my husband – he’s awesome because he cooks most nights because I’m a terrible in the kitchen. Letting someone know that they’re great and you recognize that they put effort into something makes them feel all the warm fuzzies… and you will too!
So to fight lifestyle inflation…
- Set priorities
- Make a budget
- Automate everything you can
- Stop comparing yourself to others
- Make a 72 Hour List
- Practice gratitude
These are all key parts in not only fighting lifestyle inflation, but also can lead you to living a simpler, richer life.