How to avoid lifestyle inflation


It happens to us all at some point or another. We get a nice raise or a big bonus at work and we use it to buy the newest and biggest toy that we have always wanted.  Fast forward a few years and you are always moving up in life buying the newest things on the TV commercials.

Lifestyle inflation in itself is not a bad thing.  However, often we can not support our increase in lifestyle by our income alone and instead we turn to debt to finance it.  But, learning how to avoid lifestyle inflation can be an important step in learning how to manage your money better.

One way to avoid lifestyle inflation is simply to have a short-term game plan with your money. That includes making getting out of debt a priority.  So when you get a raise or a bonus, that money will already be pegged to go to paying off your debt using the debt snowball. By making becoming debt-free a priority, you will avoid situations where you get a $500 month raise and go out and get a $500 a month car payment which negatively impacts your overall wealth.

Learning to be content is another good way to avoid lifestyle inflation. Remember that someone is always going to have a bigger house, drive a nicer car, or take better vacations. Remember, until you learn to enjoy what you have now, you will never be able to enjoy what you will have later.

Finally, remembering your long-term plan and keeping your eye on the goal helps you avoid slipping up.  Of course you could join your neighbors and friends and buy the new latest hot-selling car or spend Christmas in the Caribbean on a credit card and pay it off next year.  But remember that by saving money, investing in things that go up in value, and making purchases in cash, you will have bigger and better things ahead.

Granted, we all increase our lifestyle at some point in life.  If I asked how many of you are living better lives then you were 10 or 20 years ago, the majority would say they are living better.  But by not drawing a line in the sand and by trying to keep up with the Joneses you are harming your financial future.  So why not decide today to cap your lifestyle at a certain point and develop a plan to save and give the rest?

So, what has been your experience in lifestyle inflation? How do you avoid the temptation to continually get the latest and greatest “stuff”?

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