Lifestyle Inflation – Where Financial Disaster Starts


in Frugality

mansion Remember early in your life when you didn’t have much money, didn’t make much money and maybe didn’t know quite how? You probably lived on hope, hobbies and friendships more than anything, but somehow there was a sense of purpose in the middle of the struggle that not only kept you going, but it probably also kept you happy. The promise of more income in the future was the fuel driving your dreams.

But something went wrong on the way to that place.

As income rose, you suddenly seem to need more stuff. As you earned more, you got more, and then a weird thing happened: even though you’re making more money than ever, you seem to have less control than you think you should. Every penny gets sucked up by some expense, often by ones you didn’t have just a few years earlier.

That’s lifestyle inflation! You make more, but the cost of the lifestyle you demand consumes anything extra.

Why We’re Better Off without Lifestyle Inflation

One of the more insidious qualities of lifestyle inflation is that we often can’t tell that we’re engaged in it. It comes about gradually, and with each new acquisition, with each service we add to our lives, the need for still more becomes more entrenched, more normal. As it feeds on itself, it becomes easy to convince ourselves that it’s the standard of who we are, and we might not even question it.

If you’re not sure you really need to get control of lifestyle inflation, ask yourself this question:

Are you better off with more stuff, more services, and a high cost lifestyle, or would your life be better, more satisfying, less stressful and more enjoyable with more money in your pocket and in your bank account?

In our drive to acquire stuff and build exotic experiences, we can become so weighted down with the costs of carrying them that life isn’t fun any more. Our world might look better on the surface—shiny new stuff has a way of doing that—but the cost of maintaining it becomes a heavy burden that cancels out the advantages.

In our culture, it’s virtually counter-intuitive that life can be both easier and more enjoyable the lighter we travel.

The Ultimate Solution: understanding you shouldn’t have it all!

The media bombard us with messages that we should have it all. Big house, multiple luxury cars, a second home, exotic vacations, a $50,000 designer kitchen (whether or not we even cook at home is irrelevant)—it doesn’t matter. You want it, you need it, you have to have it—all of it.

But you can’t juggle it all, you can’t afford it all and more important, you don’t need it all! Just accepting that realization is liberating. Thinking that we can have it all is the road that leads to lifestyle inflation, and the nagging feeling of a lack of control that comes with it.

How do we get control of lifestyle inflation? By taking control of our spending, one expense at a time.

  1. Drop some entertainment. Do you have cable TV and a Netflix subscription and a Wii andPlaystation and X-Box? Do you really need all of these? Do you really have time for all of them? Select two you like best and get rid of the rest. Not only will this save money, but 24/7 entertainment has a way of making time disappear—which can cost even more money; can you afford that?
  2. Avoid trading up on your home. A promotion or major raise shouldn’t cause an automatic “need” to move to a bigger home or a more expensive neighborhood. How many people would have avoided the foreclosure mess simply by avoiding their last trade-up? Bigger houses mean higher mortgage payments, property taxes, utilities and repair bills—it’s a cycle that never ends.
  3. Avoid flipping your car every 3-5 years. It’s bad enough that this pattern means a perpetual car payment, but it’s magnified by the fact that the new car is usually more expensive than the last one. The cost of this pattern over a lifetime is staggering.
  4. Curb recreational shopping. People debate whether baseball or football is America’s favorite sport; they’re both wrong. It’s shopping. If you doubt it, check out mall parking lots on Saturday’s and minor holidays. When money is tight, we might avoid going shopping so we don’t spend money we don’t have. That restriction disappears as income rises, and a slow financial bleed takes its place.
  5. Become more active in past times that don’t cost money. Spending money is often an attempt to avoid boredom, fill the hours or to compensate for a lack of human connection. The more money we have, the easier this is to do. But spending time with family or friends or doing charitable work usually costs nothing, and can build the kind of connections that spending money can’t. Life is more about what we do than about what we have.
  6. Stop watching TV! Television is all about advertising. The more time you spend watching it, the more you’ll think you need, and the more you’ll buy. It’s the plan behind TV and it’s not an accident.
  7. Bank the higher income from a promotion or raise. This is a sure fire way of building wealth without radically altering your finances. This is also the best way to gradually learn to live beneath your means and to ultimately create the financial security that will relieve many of life’s stresses in a way that the next new car, vacation or toy gadget never will.

Lifestyle inflation has become a process of gradually adopting a never ending series of high cost complications that drain our time and attention, and ultimately, our wealth. But more stuff should never be the end game of higher income. Instead, a rising income should be transformed into a stronger financial position, with more free time and a heightened sense of purpose. Those are the qualities that really make the financial journey worth being on.

Do you ever feel that higher expenses–lifestyle inflation–are sabotaging financial progress in your life? What are some examples?

(photo credit: Shutterstock)

Kevin At Out of Your RutThis post is from FiscalGeek staff writer: Kevin Mercadante. I’m very excited to have him contributing to the site. You can find out more about him at his own blog


Spedie 2011/02/07 at 9:17 am

I have been thinking about this very topic lately…good article and good timing from my perspective.

I am thinking about dropping my 3 cell phones completely and going back to a land line! How archaic according to my 18 year old. I have found, without a landline, that I have difficulty with dropped calls when on work related calls at home. I am also getting tired of being tied to that cell phone 24/7/365.

I will be able to save a lot with a $40 per month landline with unlimited long distance even with taxes added, instead of my 3 cell phones that are costing me nearly $180 per month.

My last kid turns 18 tomorrow and she has a job. My hubby don’t want his phone. Kid can pay for her own….2 of my 3 cells are off contract….time to get rid of them.

Lifestyle creep….is not a good thing on many different levels.

kevin 2011/02/07 at 10:08 am

Spedie–That’s pretty radical–getting rid of the cell phones and keeping the land line! Most sources recommend getting rid of the land line, but I certainly appreciate your decision.

You (and all of us) can probably find savings in so many spending categories. All we have to do is look at what we’re paying for, consider how we “survived” before we had it, then consider the possibility of letting it go.

Entertainment eats up more of the typical budget, especially when you include eating out ( I think of this as an entertainment expense since we mostly do it when we’re bored). It’s a rich source of overspending.

Beyond this though, a lot of people really do need to take a look at housing and cars. Those are structural expenses, meaning they don’t go away quickly and can cause a chain of higher spending accross the board.

Spedie 2011/03/11 at 12:23 pm

I did it. I cut the cell service and went back to a landline, and it was a good decision. I am saving $135 per month.

As for eating out, I don’t do that as I am terribly allergic to soy, and most restaurants serve food literally dripping in it. My entertainment budget is good at $100 per month.

Kevin 2011/03/11 at 8:38 pm

Wow, that’s dedication! Can I make one suggestion? Consider getting a prepaid cellphone–the cheapest one possible–just for emergencies. It’s worth having when you’re in your car and have a breakdown or other problems.

Cellphone services have gotten out of control cost-wise, but they can be lifesavers in an emergency.

Nasreen 2012/02/05 at 10:55 am

Sooo many props for this article! I <3 Fiscal Geek!

Charles 2012/06/06 at 8:35 am

It’s funny that I should find this post today because I was just discussing this subjoect with a friend of mine earlier. For example, you pay off your car and then think you can save more money since you have no more payment – but somehow you still manage to spend that money somewhere!

Stan 2013/11/01 at 1:21 am

Back in the day previous generations (somehow) didn’t live on credit and only bought what they had saved for, with the exception of maybe a house/car. Now we carry probably at least 3 times the debt.

Understanding you shouldn’t have it all is about right. Entitlement, it’s the new thing.

Rob 2013/11/01 at 1:24 am

They say the home and car are the biggest life purchases. How is anyone supposed to get ahead if they keep trading up? Settle in, ride it out, and reduce some debt!

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