Ways to Beat Lifestyle Inflation

In the past couple of years, my hourly wage has doubled. On top of that, now, I don’t have to pay tuition. I think that most people in my situation would be battling some major lifestyle inflation. And I am, of course, no exception.

I think that, when you can all of a sudden afford things that you couldn’t before, lifestyle inflation will hit you a little bit no matter what. Even if that means that you allow yourself to buy a coffee every once in awhile and you didn’t let yourself before, it’s lifestyle inflation.

I really want to curb my tendency toward lifestyle inflation as much as possible. I still have debt to pay off and want to buy a house, so all of that inflation money could go toward saving or paying down debt more quickly.

Here is what I think would work for me to beat lifestyle inflation:

Pretend You’re Not Making More

I’ve considered filling out a form with payroll at my work to transfer the difference between what I used to make and live on, and what I now make, into my savings account.

I think setting it up like this so that it never hits my account will stop me from rerouting the money toward less important things, like new dresses and shoes.

Another way to do this, if you have self control (which I don’t), is the budget just as if you were making the same amount as before, and manually reroute your extra money to your savings goal.

Cut Back

To avoid the cash implications of lifestyle inflation without depriving yourself of the things that you want, cut back in areas that you don’t value.

For instance, I’m spending a lot of money each month on my cell phone bill. This was necessary while I was in school because I was constantly on the phone with group members, checking my email for grades, and navigating to conferences. However, now that I’m not in school I could cut my phone bill back significantly. I could then spend the savings on things that I want, instead of my bill, and then I wouldn’t be hit with the extra cost of lifestyle inflation.

Keep Your Goals in Mind

When your income increases or expenses drastically decrease (like when you pay off debt), keep your goals in mind. Why were you working so hard toward making more money or decreasing your debt? Likely, there was a reason. Maybe you wanted to transition into home ownership. Maybe you wanted to save up for retirement.

Creating a vision board or even just setting your computer desktop background to an image of a goal can be very helpful in avoiding lifestyle inflation. You have lived on less for awhile; why can’t you continue to do so while saving up for a goal?

I try to spend some time each week reflecting on my goals and what I’m saving for. I try to look at the things that I want to buy as barriers to my goals. Lifestyle inflation will only block you from reaching your goals, whereas avoiding it will help you reach them sooner; the extra cash that you’ve come across is just fuel to the fire.

Allow Yourself to Indulge

I think it’s impossible to avoid lifestyle inflation completely, and I think it’s also pointless. If you are making the effort to make more money, or if you were successful in climbing out of debt and have some extra cash, reward yourself! Both of these things can be stressful and difficult to do, so rewarding yourself is important.

While it’s not necessary to reward yourself with TVs and trips to the Bahamas, allowing yourself a night out or a new pair of shoes every once in awhile won’t hurt. In the long run, will the $20 you spent on dinner affect your goal? Probably not. If you spent $20 on dinner 5 times per week, then you’d have a problem on your hands.

Have you struggled with lifestyle inflation in the past? How did you beat it?


Ways to Beat Lifestyle Inflation — 27 Comments

  1. Having the raise money transferred automatically into a savings or retirement account is perfect to help you not miss the extra cash. I agree that you still have to enjoy some of the raise and treat yourself once in a while, for working harder and making more! I upgraded in what was important to me (travel, food) and kept the same apartment, didn’t buy a car or a flat screen TV.

    • I’ve done something similar with my increase in wage. We still live in the same apartment, but I’ve started saving for travel more and also putting away money for a down payment on a house.

  2. I actually think I live more frugally now that I have a job than I did in university. While lifestyle inflation is tempting, the urge to get out of debt is much stronger. I think though, that once I get out of debt, I’m going to allow myself a bit of lifestyle inflation, this bare bones thing I’m doing right now won’t cut it for the long term.

    • Bare bones isn’t very sustainable, you are right. It will be good to give yourself a break and let yourself enjoy your debt freedom and all of the hard work that you’ve put into paying off debt!

  3. I think your suggestion to set concrete goals is the key. “Save for retirement,” particularly when you’re young, is a too vague and far-off goal to inspire spending discipline. But saving to accumulate a $10,000 emergency fund in 9 months, or saving a $20,000 down payment in 24 months, or even saving $2,500 for a tropical holiday (gotta have some fun too!) next winter make it easier to forgo immediate spending. Once the set of goals are set, then, yes, have the appropriate chunk of money funneled directly from payroll to a dedicated savings account.

    • I think it’s hard though, to set goals for the long run because it’s not easy to stay focused for that long. Which is why I think that rerouting the money, if you are making more, can be helpful in this.

  4. Great points, especially having the extra going to savings. I think key is maintaining the same lifestyle and not getting caught up in all the extra income. Also finding new goals to reach can help to not be unwise with the extra money.

    • I find that having all of these things at play is the most helpful. If you are rerouting the money to savings, it can go toward a goal as well. There’s a lot of benefits to rejecting lifestyle inflation!

  5. Automatically bumping up my 401(k) contribution is a good key whenever the paycheck increases. It automatically goes toward savings and you never have to even see the paycheck or get tempted by the extra money.

  6. No matter how much income my wife and I bring in we still lead the same life. We don;t go on a spending spree if we have good months. Because we are both self employed things can change from month to month.

    • That’s great. Is there a goal you are working toward? IF you save it all, what’s the point at which you give yourself a little more discretionary spending? Just curious.

  7. Keeping our goals in mind is something that my wife and I do a lot. Some months my side jobs bring in more money, but we keep reminding ourselves of our money goals and that usually keep[s us from blowing the extra cash on something stupid.

    • That’s great. I tend to need to make smaller goals in order to stay focused. So if I have a big goal (ie saving for a down payment) I give myself some smaller goals to meet it (ie $1000/month). When I reach it, I give myself some leeway with spending.

  8. We used to always take the amount of our raises and add it to the direct deposit that goes to our savings account.

    But we would always go back and take the first month’s addition and use it for a splurge – usually a nice dinner or something like that. You have to celebrate the good things! 🙂

  9. I have absolutely experienced lifestyle inflation. I won’t say that I’ve struggled with it though, because I’ve enjoyed it 😉

    But, I DO make it a point to also automatically increase savings for retirement whenever I get a raise, etc. I think automating that so that you never see it is an excellent way to do it.

  10. So true! If you think that you’ll be getting a job or if you think that you’ll be getting a raise, and you start to rely on something that isn’t even a sure thing, that can be really damaging to your finances. Murphy’s law, you won’t get the raise/job/whatever. Good luck with the control Jeremy!

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