Avoid Lifestyle Inflation

As you continue to read through my blog I don’t want you to get the feeling that you have to live like a poor college student for the rest of your life in order to achieve financial freedom. Spending and lifestyle inflation get a bad rap, but they’re not necessarily the enemy when it comes to your finances. It’s more about how you approach spending. You want to find a balance between enjoying life and saving for it.

What Is Lifestyle Inflation?

Let’s say you get a big 10% raise this year. Instead of using that money to pay off debt or put towards your investments, you use it to live a more comfortable life. You move into a nicer apartment, buy a nicer care and you decide to go out to fancier restaurants. That’s called lifestyle inflation, and in the personal finance world, it’s never a good thing. Experts warn against it because, as consumers, we have a tendency to consume too much, and we end up paying the price later.

At its core, though, I don’t think there’s anything wrong with lifestyle inflation. I’m certainly not living the same lifestyle I was living in college, and that’s a good thing. At the same time, when lifestyle inflation makes it hard to get out of debt, save for retirement, or break out of a paycheck-to-paycheck cycle, that’s when it becomes a problem. Some people define lifestyle inflation by those problems, which may be fair, because they often go hand in hand.

When something new and cool is introduced in your life, suddenly that new and cool thing can become the new normal, and it now takes something even newer and cooler to satisfy you. You can probably see how this can lead to a spending problem. You buy a fancy new phone, you get used to all of its cool features, and you can never see yourself going back to a boring old flip phone ever again. In fact, you need everything in your life to be as convenient and intuitive as your phone, so you buy apple watch, a smart tv, and a tablet…even if you can’t afford them.

“Never spend your money before you have earned it.”
– Thomas Jefferson –

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