I ate a lot of macaroni and cheese.
If I budgeted properly, Id even have enough for a couple rounds of drinks with friends.
So where was my extra cash going?
Well, there was the extra $30 a month to have a washer and dryer in my apartment.
And the furniture that I gradually put in said apartment.
And the takeout food that I substituted for mac and cheese.
And the gym membership upgrade.
And the drinks with friends that evolved into dinneranddrinks.
None of these upgrades sounded like a big deal.
But combined, they added up to major lifestyle inflation, and they ate away my potential savings.
What Is Lifestyle Inflation, and When Is It Bad?
Lifestyle inflation, also known as lifestyle creep, happens when your spending increases as your income rises.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help…
Lifestyle inflation is a choice.
It happens when you upgrade to a fancier car or apartment because you have more money to spend.
Or you start dining out more or buying slightly pricier clothing.
The tricky thing about lifestyle inflation is that it isnt inherently bad.
Lifestyle inflation is the reason Im not shopping at Forever 21 at age 38.
Its the reason I have a real couch now.
The danger of lifestyle creep comes when you dont have long-term goals.
Without a plan, youre more likely to spend extra money mindlessly.
Youll stay broke even as the numbers on your W-2 soar.
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1.
You might be surprised by how much a littlestrategerycan help yousave money on groceries.
Making small changes at home can add up tohuge savings on utility bills.
Are you a budgeting novice?
Its OK this simple guide onhow to budgetwill get you started.
Spend More Money (but Only in Your Head)
How would you spend an extra $5,000?
And having goals will help you avoid mindless spending when you actually have more cash in hand.
Congrats, but Figure Out What Youll Actually See
OK, suppose that $5,000 raise becomes reality.
But hold on before you pop fire up the bubbly.
Do you know how much of that money youll actually see?
First, calculate how much extra youll pay in taxes.
Next, account for inflation the kind you cant avoid.
Pretend That Raise Never Happened for Now
Sure, you could spend that extra money on a pricier apartment.
And if thats your long-term goal and it’s possible for you to afford it, go for it.
But maybe your ultimate goal is to buy a house.
Avoiding lifestyle creep is especially important if youve got credit card debt or student loans.
Putting extra money toward what you owe will have a huge payoff, because youll save on interest payments.
But sometimes, avoiding lifestyle inflation is as simple as focusing on your own goals and ignoring everyone else.
You know your goals, your budget and your values.
You never know whether theres a financial mess behind the fabulous lives you see.
… but Treat Yourself (Within Reason)
Fighting lifestyle inflation doesnt mean you never get to treat yourself.
Youve put in hard work to score those raises or earn extra income.
Celebrating the wins can keep you focused as you strive toward your goals.
When Is Lifestyle Inflation OK?
Like Ive said, lifestyle inflation isnt a bad thing when you have a long-term plan.
Here are a few examples of when it makes sense to let your lifestyle inflate.
If youve finally saved enough money to make that happen, you have permission to stop daydreaming.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
