Lifestyle Inflation – It’s a Choice


We are the lifestyle we lead, and our lifestyle is allowed by the income we’re able to earn to fund that particular lifestyle. When we start out in life we have a low income and thus we buy things like “starter homes” and sleep on futons while eating ramen noodles. It’s actually not too shabby starting out since everything is exciting, new, and an adventure. As we accumulate raises, better jobs, and increased savings we begin to spend more in relation to the income we produce. This is lifestyle inflation, and it’s completely a choice whether or not you decide to partake in it.

How Lifestyle Inflation Occurs

It’s a really slow process, but over the course of years we elevate our standard of living because our income allows us to do so. If you get a raise or a job that pays more what are you most likely to do? Save it or invest? If I had to wager a guess I’d say you’re going to spend it. If you’re like the majority of Americans (or other nationalities) you’ll most likely spend your new found funds on something like an automobile, housing, or consumer product(s). Why would you do that? Simply because you can since your income allows your lifestyle and delayed gratification is never the sexy alternative. Since you feel like you’ve worked hard over the years you may feel that you deserve your elevated standard of living, but by doing so you’re increasing your risk for future loss and possibly losing touch with the things that matter most.

Why Not Inflate Your Lifestyle?

Just because you earn more doesn’t mean you have to spend more, but that’s a tough sell to most people. They’ve earned it so they feel they should live it up and spend their hard earned funds on things that make them happy. Granted it’s fun to spend money, but happiness isn’t derived from money. There are a few reasons why you shouldn’t inflation your lifestyle which include:

-The higher you inflate your lifestyle the greater dependency you cause between you and your job. With higher expenses you’ll require higher income. Therefore, if you lose your job you may not be able to cushion the blow since your lifestyle costs quite a bit.

-Your money could be spent better elsewhere – Consumer products are nice, but they aren’t necessarily making the world a better place. If you decide to tithe or donate your increased funds to a better source or invest in something that’s helping make the world a better place you may derive a greater since of satisfaction in comparison to upgrading you TV.

-Checking out of the concept of lifestyle inflation simply means that as you increase your income you’ll have the ability to have greater choice in your life. If you’re not busy keeping up with the Jonses you’ll have more time to keep up with your passions.

Plan Your Increase in Income in Advance

You will slowly make more money over the course of your life. With greater experience, increased assets, and higher earning power we’ll make more money so it shouldn’t come as a shock that we should be prepared to deal with these incremental changes in our income. We should plan for lifestyle inflation by deciding what to do with the funds. As a bit of a idealist I plan on maintaining my current low expense lifestyle and using my extra income to increase my asset base to achieve financial freedom quicker which allows me greater time to pursue my passions. I’d also like to focus more on things like traveling, volunteering, and gaining experiences rather than the accumulation of consumer items that often occurs to Americans in their late 20’s and 30’s. What things do you plan on doing with your increase income as you get older?

Choosing Your Social Circle

Your social circle will directly correlate to the income you produce since you can relate most to these folks. It’s a bit sad, but essentially you enjoy hanging out with people that you like being around, which are the ones that make you feel most comfortable about yourself (which includes your income). If you’re really like to open your horizons I’d recommend trying to befriend people who are financially savvy and those who understand the plight of those who do not have the ability to inflate their lifestyle. Whether rich friends or poor friends, the ones who have similar values and belief structures will be the best to relate to in regards to your finances.

How have you dealt with lifestyle inflation?

Do you plan on increasing your lifestyle or spending your increased earnings on investments or allowing yourself greater freedom?