Lifestyle inflation is when you increase your spending with there’s an increase in your earnings. That way, you’re saving the same or near the same amount of money, and you’ll squander all your earnings on a nice life. So even though you will start going to expensive restaurants and buying more cool things, you will end up sitting around and feeling sad. Thanks for reading, that’s all.
Oh wait, I can’t post 70-words texts.
If you’re interested in a completely boring explanation, you can read about this on Investopedia.
Here’s what I think:
- That’s okay to increase what you’re spending.
Investopedia gives an amazing example: “Sharing a two-bedroom apartment with three other roommates to keep housing and utility expenses down suddenly seems less attractive. An individual experiencing lifestyle inflation might go out and lease a one-bedroom apartment where they can live alone.” That’s fine, except it’s a little off-topic.
You always have a bottom line of how you want to live your life. If you ate quick-boiling vermicelli and lived on the outskirts with three (five, ten) other neighbors, it’s okay to afford a little more when you start earning more.
If I was eating a single hot dog for my lunch at university, and when I started earning money, I started going to a restaurant with my girlfriend, that’s okay. Cut your coat according to your cloth. That means if you can’t afford something, be ready not to afford this. But if you can afford it, why not if you wish?
Lifestyle inflation isn’t about any improvements in your lifestyle being bad. At least, their sign and everyday proof that you’re working hard enough to live better. And that’s okay.
- You should find the fine line of how you feel okay to live.
It’s simple. Let’s start with the fact that you are fairly young and starting from scratch. In that case, you should have an understanding of how you want to live your life. It’s not that you want to have a cool car, or a big house, eat at a restaurant 3 times a day, and fly to the most expensive country for a vacation. If you think that way, it’s not ok. But if you have a basic set of understanding of what you want, then it’s ok to spend money on it. If you’ve been living and eating a sandwich for morning, lunch, and dinner and making a room with 3 other roommates, then when you decide you can now eat at a cafe and live in your apartment, it’s ok.
I would call it the bottom line of what your normal life looks like to you. Of course, you could call it lifestyle inflation, but almost 100% of people in any country experience it in almost the same period. Surprisingly, you have money when you graduate from university and start working. Before that, you either didn’t have or had very little unless you were a parent-backed whose parents weren’t giving you pocket money but paid you a salary-like sum every month.
- And now you reach your bottom line in your lifestyle; that’s when lifestyle inflation really begins.
Congratulations, you’re not living a life of eating sandwiches. You now have a set of basic things you want in your life. This is where real lifestyle inflation can begin. Many fall into this trap, but not many get out.
This is when you don’t just eat good food but want to eat at an expensive place. When you don’t just buy yourself a car, but you buy an expensive car.
In short, every aspect of your life becomes better (and more expensive) than how you actually okay living. Now you’re no longer just spending to live an appropriate lifestyle, and you’re starting to over-consume.
And as a result, your income has gone up, and your expenses have gone up as well. It’s a sad situation; now you have no money. Or rather, you have money but spend it all on things you forget about in a couple of days.
You can spend money on different things, usually, that’s a better lifestyle: a better car, a bigger home, more expensive restaurants and leisure, frequent trips.
What to do?
Let’s ask the experts.
For example, in this article for US News, Kyle Enright and Yanel Espinal give you some cool advice:
- Yanel Espinal says, “We always want more and more!”
- Robert Johnson, Ph.D. and professor at Creighton University, also adds that it’s bad when you can improve your financial condition!
- Then Enright confirms my opinion “That’s okay not to live like you were living when you were 20”, he says.
- He also adds that that’s bad if you spend money instead of saving it for your child’s education. (One more right shot!)
- Then Espinal suggests you… to save! (And she’s so right!)
- And Enright suggests you automate your savings, and Espinal suggests you set the goals. Johnson also advises you to invest.
And at the end, you are encouraged to stop pampering yourself.
This article on Insider gives you the same advice: check your budget, manage your budget, save money, and control your finance. The expert they asked (that’s Clint Camua, regional director and partner at EP Wealth Advisors) says, “It is important always to make sure that any additional spending one does to improve lifestyle happens after being sure an emergency fund is established, savings for retirement aren’t curtailed, and consumer debt doesn’t increase.”
The same as Insider’s advice is here in The Balance article. And here on CNBC. The golden triad: budget, control debt, save money. Investopedia will advise you of the same. Just imagine if you invest X, you will have Y in Z years!
Why am I so prickly? Because it’s all “set a goal, make a plan, and go for it” advice. Obvious to everyone. No kidding. They just don’t work.
I think every person knows that budget planning is a cool thing. Cutting unnecessary costs is a cool thing, but that’s something we know but don’t practice.
All these are straightforward things, but if you feel your lifestyle is inflating, you probably don’t need this advice just because you know them and still don’t follow them. There’s a flood of such advice, and they’re bouncing from article to article.
When in the second year of uni, I earned the first couple thousand bucks (I’ll remind you that I studied to be an economist), I knew all this very well: that’s better to save money, better to invest, and all these things. And I spent it all on delicious sushi. In fact, I ate it every day for breakfast and lunch. I had a mountain of sushi boxes on my balcony.
Because that kind of advice works a little bit wrong, no kidding, they’re useful. They’re great. Only our psychology doesn’t work that easily. It’s like advising a high school student to study. And telling a teenager to behave. We know that, but we don’t always follow it.
There would be no “clever” advice. Budgeting won’t help; planning won’t help. Reducing your expenses sounds like something extremely obvious. Just because after reading all these articles, nothing will change. That’s like reading articles about perfect relationships. How many people have they helped?
Every word I write is my personal opinion; you’re free to agree or disagree. That’s what I’ve learned from my experience. First of all, that’s about how you see yourself. A cup of coffee, even every day, wouldn’t hurt your financial stability.
If you’re reading this, you’re probably concerned about this issue. And that means everything is okay. Understanding is the first step to resolving.
The problem is that spending is a self-esteem booster for many of us. At least, that’s how it was for me.
At university, I was complex because my parents were not very rich. When I saw rich classmates, I wanted to look richer and make them think I was rich too. Just like them. It always hurt me that even though I was smarter than all of them put together, I couldn’t afford to go to a club and spend a couple thousand a night there. It’s a bit oppressive.
When I started earning, I liked the feeling of having money. I would buy something, take an expensive cab to a restaurant, or leave a couple hundred in tips and feel better about myself. You could say I started to appreciate myself more.
I liked spending a lot but wearing cheap stuff because I was like, “I’m a cool and rich nihilist.” And then I kind of got bored and stopped. Or rather, I just started socializing more with my friends, even moving out of my apartment and into a shared apartment with them, and I didn’t care anymore.
Because I just realized that it didn’t say anything about me at all. How much I spend and how I live doesn’t say anything about me. So seeing all these guys driving around in expensive cars and tipping the waiter (hand to hand with the banknote) looks like a lot of fun.
Hey, that’s even more obvious than budget and save! Yeap, maybe. I just want you to understand: you won’t follow all this cool advice until you realize that money is nothing.
Of course, they’re important. But that’s not what you should constantly think about. Until you think about the world in terms of other people’s income (and that’s a common thing in American culture, much more common than in European, for example), you will never follow all these wisely given advice. Because they’re not about the topic, all these words about budgeting, investing, and saving aren’t about “What to do with lifestyle creep?”; they’re about what to do with the money that is left after.
So what to do? Make life easier. Maybe your spending is unnecessary, not because it costs you money but because you don’t need them.
I’m sure if you perceive life as a path to retirement savings, you’ll go crazy because it is unbearable to wake up every morning and think about how today you will save to put money aside for your account. Simply because it’s forcing yourself to give up something you really want, and you just shouldn’t want it because you realize whether you really need it or whether it’s just a thing you want to buy for other reasons.
The best analogy is weight loss. Diets won’t help you as long as you want to munch. Even the best ones, because you’ll either think about it all the time or you’ll just snap. But the first time I lost weight, I just changed my mind about eating a lot of calorie-dense food. I just realized at some point that you have to eat when you want to eat, not because there’s nothing to do.
Great advice and no specifics! Try meditating. Or read a book. Or write books. Or take a walk with your daughter. Or with your son. Or study math. Or watch soap operas. Or go camping with your wife. Or start learning Ukrainian. How do I know what will help you make sense of your life?
The fact is, you just have to realize that money and consumption are not important. I mean, it’s not something to think about all the time. It doesn’t matter how much you make or how you live your life, as long as you enjoy it. Just try to move in the direction that it doesn’t matter.
If you bought yourself a new phone or went to an expensive restaurant, there’s no point in blaming yourself for it. Because it will take time for you to come to see money as a tool, it can take a year or a couple of years. It could be a couple of months. You can talk to your loved ones about it. Just don’t make a big deal about trivial things.
And when you realize that you have stopped consuming like crazy, you will still have some money left unspent. And that’s when we go to all those experts.