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5 Life Changing Moments That Lead to Lifestyle Inflation

In simplest terms the concept of lifestyle inflation refers to a person’s spending going up as their income goes up.

lifestyle inflationSome lifestyle inflation may be unavoidable but it’s a good thing to keep it in check as much as possible. Otherwise you end up living paycheck to paycheck and having little or no money let over to pay down debt, save for retirement and use for other investments.

When a person is at that point, with no money left to create a cushion, life gets really stressful.

Moments of Lifestyle Inflation

We can be drawn to increase our lifestyle at any point in life. As I see it though, there are five instances when we are most susceptible to increasing our spending. Here’s how it often works.

1. After college graduation at the first real job

Remember that first paycheck at your first real job? Awesome, wasn’t it? After years of being a poor college student, I couldn’t wait to go out and spend it.

It finally feels possible to get your own apartment and not bunk with your college buddies anymore. After all, their disgusting habits are growing tiresome. It’s funny…the habits didn’t seem so strange a few short months ago prior to landing that job.

With the busyness of life increasing, eating out becomes more attractive. Clothes suddenly don’t look as expensive. That updated smartphone with unlimited data plan sure would be nice to stay connected at the new job.

2. When you get a raise

A little lifestyle inflation kicked in after landing the first real job. But oh boy, watch out now. The raises are coming and it’s time for the bigger ticket items to get upgraded.

And it all starts with the car. Bye, bye old beater…hello brand new _________. (Fill in your choice and never mind the car payments…you can afford it now.)

You will also be upgrading to a two-bedroom apartment to “spread out” and have some office space. Plus, the additional closet will help for all the great clothing and other trinkets beginning to accumulate.

And don’t forget the spending that comes now as you feel compelled to circumnavigate the globe attending all the weddings of your college friends. “Oi…will they ever stop,” you wonder.

3. When you get married

That two-bedroom apartment you’ve been living in simply isn’t going to cut it with two people collectively merging their possessions. So it will be time for that starter home – the three-bedroom castle with living and dining rooms, a larger, eat-in kitchen, garage and at least .5 acres of land…just to keep a buffer from the neighbors (because you hated living so close to people in the apartment).

And of course, you can’t consider renting the house. That would be throwing money away. Getting a mortgage would be the best route to take so at least we are building up some equity each month.

Once in the house though, you realize your stuff doesn’t fill all the space. So what quickly follows is another couch (so we can have friends over), an entertainment center (to fit that flat screen TV your spouse brought into the marriage) and a cabinet so all the girlfriends can ooh and aah over the china and crystal they bought you at the wedding.

4. When you have kids

Of all these stages of life, lifestyle inflation is least avoidable when kids come along. Ask any parent how much stuff kids need and they will just roll their eyes. The answer is A LOT!

Two kids and their stuff will still fit into your three-bedroom house. But after awhile, you’ll be frustrated the office space room was sacrificed to become a kid bedroom. Suddenly using your laptop at the kitchen table doesn’t seem all that appealing.

Plus the kids are noisy and peace and quiet is hard to come by. Sure would be nice to have an office again…or better yet a finished basement whereto the kid’s playroom could be banished.

And then you get THE NEWS…another kid is on the way. That four-dour Accord you just paid off is no longer going to work. Time to upgrade to a new mini-van (with payments again). Or better yet a Suburban. That way the 30-something couple can maintain their cool factor.

5. Anytime there is external pressure to conform

As luck would have it, you’ve done pretty well despite the increase in spending. You are now in upper management at your job and living in a trendy, swim-tennis community. But the retirement fund is behind and you haven’t started saving for the kid’s college. You vow to do better but then realize that…

…you are the only ones on your block sending your kids to public school.

…most in your community hire their own landscape company.

…the new job you are pursuing will require a whole new wardrobe and different vehicle to drive clients around.

…your friends Facebook pictures sure make that Disney vacation look fun.

These pressures to conform, to fit in and to keep up with others, continue to drive your spending forward.

Solutions to Lifestyle Inflation

So how do we stop this? I’m not entirely sure we can, not 100%.

But maybe we can slow it down by…

1. Being aware. Understanding what lifestyle inflation is and knowing when we are most vulnerable to spending increases is a start.

2. Being disciplined. The word “No” has to enter our vocabulary at some point if we are going to limit our spending.

3. Being content. Nobody has everything. We shouldn’t attempt to become that person who uses spending to find happiness.

4. Being future-thinkers. Our spending habits are mostly focused on the now. Dreaming about and setting goals for the future will shape our minds to limit spending in the present.

Spending increases are going to come. It’s a part of life, unless you choose to live off the grid. The real danger is that lifestyle inflation becomes a habit that you cannot break. Commit today that you will fight this monster that keeps our futures from being winning ones.

Questions: At what time in your life did you feel most vulnerable to lifestyle inflation? How are you combating lifestyle inflation? How do you resist the external pressure to conform?

Next Post: Emergency Fund Basics: The Step On Which All Other Success Is Built

Prior Post: A Singular Focus of Paying Off Debt Leads to Peace

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  1. I think I feel the most lifestyle inflation when I see my family or friends spending money. My friends like to go out a lot and spend a bunch of money they receive from their parents on food and drinks, but I don’t have that luxury. I also like knowing the feeling of providing for myself and back when my parents did try to give me money at times, I would never accept most of the time because I liked being financially independent.

    • It can be challenging when those around you are living large with no regard to how they are spending. I try to simply remember that I shouldn’t be trying to live their life. My standards are my own.

  2. We felt the temptation to bump up lifestyle when I got my current job, as it had a healthy income increase. But budgeting saved us. We’d spent years creating a reasonable baseline spend for various categories, so we couldn’t fool ourselves into thinking additional spending was natural or needed. I think that’s one of the main benefits of tracking spending or budgeting: it turns the passive activity of spending into an intentional one.

    • Those baselines for spending do stick in your mind. And that’s good. You know exactly what you should be spending on any one budget category and raising it almost feels a little naughty. 🙂

  3. Love this, Brian. Lifestyle inflation can be hard to balance, especially when marriage and kids come along! There is a lot of pressure to “keep up” and all fairness you also want to enjoy your money too. It’s finding that balance, I guess, where you enjoy money but don’t go overboard and sacrifice other more important goals. I always tell people that “no” can actually mean “yes” to something more important.

    • “…all fairness you also want to enjoy your money too.” That’s a great point Shannon and what makes it really difficult. I don’t want to live a pauper’s existence in my midlife only to have excess wealth I don’t really need in my later years. There has to be balance as you said and living a little in the present should be a goal. The question is “how much” are we living in the present.

  4. Being disciplined and content of what you have is very important to be on a right track. I was an impulse buyer before and I always bought unnecessary things because I saw on my social media accounts that my friends has a brand new gadget or clothes, but I stopped those bad habits.

  5. Haha a two-bedroom not being big enough for a married couple =) We’re still in a one-bedroom with a baby…ahh life in NYC! I’ve been pretty good with not inflating my lifestyle by being disciplined and aware of my finances. Getting the first job definitely made me think I could spend more though (but then I went back to school part time in the evening while working during the day which made my budget tighter and gave me less time to spend money). I think I was a bigger spending during my single years since I felt the need to go out to “hip and exciting places” and to buy things to impress others. Luckily my wife is pretty frugal too and we enjoy fun but frugal activities.

  6. I think that for me the best thing to fight lifestyle inflation was losing my job during the recession. The first thing I did was file for unemployment that day then I called up my friends and went to the bar where they paid for my drinks (it was like a second birthday!) Then I went on a vacation and when I came back I learned to cut my budget drastically. When I found my next job I realized that I didn’t mind my lifestyle when I was unemployed so I kept most of it the same. Now I can save a lot more just because I realized I was fine the way that I was.

    In a way I think it’s a good thing for people to have to learn to live like they are unemployed at some point in their lives, it makes you realize what you really need and what you don’t. Hopefully you learn some lessons from it like I did and when you find a new job you have a better grasp on what you really need.

    • “… I didn’t mind my lifestyle when I was unemployed…” Funny that you should say that Zee. We’ve experienced something similar here in regards to watching TV. We had gone without it for several years as we paid down our mortgage debt. Now that our mortgage is paid off we have chosen to get cable TV again. But I’m not very interested in watching it yet. My lifestyle of living without it for so long has really taken hold.

  7. I was most affected by lifestyle inflation in my twenties. I was young and making a really good salary and spent it like a nutcase on things that really have little meaning to me as I look back. It didn’t help that my co-workers were doing the exact same thing. It took me a while to figure out the why behind the spending and find ways to reign it in. I am so glad that I have a much tighter control over my money and choose how I want to spend it.

    • I can see how the co-worker thing can be a big deal, especially in fields where there seems to be more pressure to keep up. It’s tough to say “No”…you don’t want to be seen as weird and become an outcast.

  8. Getting my first job was probably one of the bigger ones. Having that sudden influx of money is exciting! But when I graduated, I listed out all of my expenses, and quickly realized where most of it was going to go. I wanted to have enough leftover to save. Being aware is so critical!

  9. The best tip for me is to be aware. Every year when I get a raise, I make sure to put the additional money toward my student loans.

    • “be aware…” It can sneak up on us. Mentally preparing for those moments before hand will help keep our spending in check when they do come.

  10. I have said NO a lot lately. But I have just gotten a new job! Can I start to say yes now, will that be inflationary? Can I start to replace what I have lost? My income is going to sky rocket – relative to what it has been, will I be able to hold onto the lessons I have learned from poverty? I hope that NO remains part of my lexicon.

    • Awesome Brad! I’d say you can replace what you’ve lost within reason. But, having been through the dark times, I don’t think you’ll have a problem saying “No” to bigger ticket items.

  11. I think for me it was when after I got my first pay check after spending years living as a broke college student. Just like you say, lifestyle inflation is unavoidable and I think it’s not that bad to spend a bit more than usual sometimes when you have money. Nevertheless, I agree to with your points — we should be more aware of our spending and think through to the future so we don’t overspend.

    • “…spend a bit more than usual sometimes when you have money.” It’s getting to the “have money” part that is the challenge. Odd thing is I would say most lifestyle inflation occurs between ages 25-40 at a time when most don’t have a lot of money. That’s the danger.

  12. “… now that we are completely out of debt the attraction to spending more… is more powerful than ever”. – Ha! Live with that feeling for awhile – it’ll disappear. After you’ve put your kids thru college/grad school debt-free, paid off your mortgage and fully funded your retirement, trust me – there isn’t any shiny object out there that will attract you. It’s all a state of mind. Best of luck. I’m loving your blog.

    • “Live with that feeling for awhile – it’ll disappear.” I’m not sure Jim. The attraction to spend has been around my whole life. I think it’s my vice. 🙂

  13. Great reminders Brian. I think for most people, these events tend to happen within a few years of graduating college, and if someone isn’t careful, they are going to find themselves staring up at tens of thousands of dollars in debt before the age of 30. I think I feel most vulnerable to the lifestyle inflation when I feel the pangs of jealousy. Sometimes, as much as I hate to admit it, I see something and want it. I think it’s human nature. I’m too rational now to go out and buy it, but man if I could, I probably would. But I’m more comfortable knowing my money is going to provide for a life of wealth, and not debt.

    • I agree Ryan…The post-college life is definitely a danger zone, especially as one begins to advance in their career and perhaps feel the pressure to conform to their co-workers standards of living.

  14. I sometimes feel the pull about lifestyle inflation – some friends of ours have got a shiny new car and I like it. However, I know our car will do us just fine. Just need to remember that we’re doing alright; when the time comes when we need to upgrade, we’ll research first!

    • “…we’ll research first!” That’s a really good step Nicola. That process of evaluation is critical and regularly keeps me from buying more than what I need.

  15. Those are some definite milestones where our culture tells us we *deserve* to spend some more. I find that overall some of the biggest lifestyle inflation pressure comes from ourselves via our innate desire to look good to the outside world.

  16. Only experienced 3 out of 5 thus far (no wedding bells or babies yet) but I can say my first job out of college still made me feel poor. 😛 But when I got my second job and had a salary and benefits, I felt rich beyond words (making only $37,500 before taxes in New York City). Amazing how it’s all relative. I’ve certainly given into lifestyle inflation, notably buying coffee pretty regularly now that I’m making more money.

    • “…my first job out of college still made me feel poor.” Haha…fair enough. 🙂 Sometimes that first one isn’t all it’s cracked up to be.

  17. I definitely fell for the raise + lifestyle inflation trap, and as the raises got bigger, the lifestyle got bigger as well. Just as you mention, there are so many moments where lifestyle inflation can get ahead of you and it’s important to be mindful of those. I recently had a client in who was so excited that she got a raise and immediately had her money spent. I informed her that she immediately needed to send that extra money to savings. Since she was already find living her life without the money, she needs to pretend like it never happened and allow that increase to increase her wealth. She had never thought about it like that.

    • “…she needs to pretend like it never happened and allow that increase to increase her wealth.” Yes…absolutely…great advice Shannon! If you can hold the line on your standard of living then that will have a great impact on increasing your wealth.

  18. Yes! I like how you outline this–it’s so easy for lifestyle inflation to creep in, even when we think we’re still being frugal. Comparing myself to others is the biggest danger for me–I just have to put blinders on and keep walking down my frugal path. We’re so far “behind” our peers in spending (especially since we live in a big city), that we joke about it. But, it’s taken us awhile to be completely comfortable with how far from the norm we are with regard to spending/saving. We’re hoping to have kids soon and I’m on high alert for how to combat lifestyle inflation on that front (advice welcome!)!

    • Well, it sounds like you’ve set some good standards in regards to being disciplined. It will be critical to keep those going once kids come along. It’s near impossible to hold the line on spending once the kids come along. Where you don’t want to get trapped is convincing yourself to spend immediately for the big ticket items. Generally speaking, you don’t need a new car or place to live right away. Take it slow on the big things and you will be fine.

  19. I think moving was a big one for me. And not just moving to new states (Washington and Cali), but even to just a new place. There is a temptation to get rid of the old and start anew. Also moving to a new city, you don’t want to stay in and watch netflix (which is what I do now-lol), so you accept invitations to things, take a class, join a club, etc.

  20. In the past I always succumbed to lifestyle inflation because I was just following the crowd. Herd mentality I guess. I’m happy to have broken the mold and it ain’t ever coming back.

  21. So true, I know for myself I begin to justify crazy purchases in the immediate aftermath of one of these events. We just had our 3rd child, so my thoughts begin to drift to minivans and such, but we’re committed to fitting those 3 car seats in our Camry for now!

  22. I probably feel most vulnerable to lifestyle inflation now. A lot of our new friends live a pretty posh lifestyle and it’s tempting to join in sometimes. Fortunately, we have some self-restraint and are able to focus on our long-term goals.

    • I feel the same way Holly. Funny thing is, now that we are completely out of debt the attraction to spending more and buying bigger and better things is more powerful than ever. Who would have thought?


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    […] of private gadgets, and so forth. – and investing in index and mutual funds. All the whereas keeping lifestyle inflation in check in order that our bills weren’t outpacing our […]

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