Lifestyle Inflation’s a bitch. There, I said it. The old me could have cared less about this stuff, but not anymore! You give me a raise or a bonus or $hit, a $20 birthday bill and you better believe a good portion of it’s going into my savings :)
I’m sure I’ve talked about this at some point in this blog’s existence, but “lifestyle inflation” is basically when you up your expenses as you start bringing in more money. And pretty much everyone I know (including myself) does this to some degree. I mean, it’s kind hard NOT to. When we get a surplus of money it’s only natural we want to go out and spend it! We might not do it that day, or the next week, but over time that urge to upgrade to a fancier car or a bigger house or even sexier clothes gets stronger and stronger. And unfortunately it gets harder to silence if you don’t catch it early on.
So what do you do? Well, first you gotta decide if you actually care ;) After all, most of our friends are upgrading & living the high life so maybe we want to too? Everyone likes nice things, right? You have to figure out if you want all the toys now, or if you want to hold off ’till later and take financial security instead (or perhaps you can find a happy medium? there’s certainly no right or wrong answer here as long as you’re true to your desires).
Then, you’ve gotta come up with a plan. Saying you want to nix Lifestyle Inflation will only get you so far – you’ve got to TAKE ACTION and be aware of what’s going on to make stuff happen. Ask yourself – “What would I do with an extra $5,000? How about $10,000? Or even $1,000?” A business friend once told me that you should always have a plan for every $1 you get. You’ve got to know where you’d put it in advance, and what you can get out of it in return (for example, 5 hamburgers or a 30% profit). While he was referring to running businesses, I think it totally applies to personal finances too. If you KNOW how you’d handle extra money now, before you get it, you’ll be much more successful with it once it arrives. So come up with a plan.
You can also automate savings. Before I got all hardcore with maxing out my 401(k), I used to just bump it up a few % points whenever I received a raise. This way, not only would I be saving more money than I was the days before, but I wouldn’t even miss it! It’s VERY easy to get used to spending more money when you’re bringing in more money – so cut yourself off before you start knowing the difference. And you can also do this with IRAs, bonds, savings accounts, whatever financial tool you wish. Almost everything can be automated these days.
Remember, just because you CAN afford something doesn’t mean you HAVE to. THINK about what’s important to you in life, and how you can best put these newly given dollars to use. If you plan for it now before it happens you’ll reach those end goals of yours much quicker :) And I hope each of you do!
Killer resources and apps:
- Best Budget Templates & Spreadsheets (FREE)— The best free budget templates from around the community! Including the ones I use :)
- Personal Capital* (FREE) — A great app to track your investments and net worth. You can see an in-depth review we did here from a millionaire who checks it daily 😂
- You Need a Budget (YNAB)* (FREE TRIAL, then $14.99/mo or $98.99/year) — One of the BEST budgeting methods in the space, with new users saving $600 on avg their first two months, and more than $6,000 over their first year! Check out my friend Vic’s review of YNAB here that went on to completely change his finances 💪
- Digit (FREE 6 mo. Trial, then $5/mo) — This is one of my favorite apps for automatically saving money, and I even came on board as an advisor I believed in them so much! You can see my full review on Digit here.
- Acorns* ($3-$5/mo) – Similar to Digit, this app helps you automatically INVEST money by rounding up all your transactions to the nearest dollar and then investing it right away for you. My full review of Acorns can be found here.
- Honey (FREE) — By far my favorite coupon service out there! Click the Honey button any time you're about to buy something online, and BOOM - any discounts it finds will be automatically applied at checkout. You can see my write up on them here.
- Credit Karma* (FREE) — An easy way to check and monitor your credit score AND report! See my full review of these guys here.
- My Favorite Blogs + Books < -- Click here to see all my other recommendations!