Sometimes ago, I wrote a post on laws of wealth generation. In that post I explained how the Parkinson’s Law or the law of Lifestyle Inflation works.
Recently, someone made a reference to that article and I decided to review the post. It was during that review that I remember a true life story that actually obey the law of lifestyle inflation.
Many years ago, I had a neighbor; he had very low income and a large family to support. Things barely get enough for him. And things go on like that for years. One day he told me he wanted to sell a land he had bought a long time ago, which had appreciated in value significantly.
We sat down together and map out various investment plans for him. But, our plan was short lived when he surprised me about a month later that he is moving in to a new and bigger apartment. Few days later, I stopped by at his new place only to find out that he had quickly upgraded all his furniture and electronics.
He began to eat out with his family and going on travel tours. And soon, he began to work even more hard and longer to be able to maintain his new lifestyle.
While there’s nothing wrong with treating yourself from time to time, it opens the door for lifestyle inflation to creep in. This happens a lot and my neighbor’s story is just one out of millions out there.
What Is Lifestyle Inflation?
Lifestyle inflation refers to increasing your spending (and thus, lifestyle) when your income increases. Common examples could be upgrading your home when you get a better job or a raise, or even going to out to eat more once you start making more.
The problem is that lifestyle inflation often steers people to overspend. Others are likely to inflate their lifestyle even when they really can’t meet the expense.
Over the years, I’ve learnt quite a few ways to delay gratification and avoid lifestyle inflation in certain areas so I could focus on my true goals. Here are 7 ways to beat lifestyle inflation.
1. Have Crystal Clear Goals
Your goals are gold.
That is the reason when athletes are going for competitions; the phrase ‘Go For Gold’ is often used.
Your goals set the tone for how you decide to live your life and that is the reason they are super important.
Your financial goal should be specific and crystal clear. Clearly set goals makes it much tougher for you to give in to lifestyle inflation because you already know exactly what your goals and targets are.
Also, you must me be cautious of vague goals. These kinds of goals often lead you unknowingly into lifestyle inflation. For example, setting a goal like ‘wanting the people around you to feel your worth’ is not financially wise. This opens the door to considering all kinds of options like; buying an expensive car, buying a large house, buying a new 4k Ultra television or financing a vacation which you may not have enough assets to cater for it.
Alternatively, a clear goal like ‘ attaining financial freedom, having a better life, becoming debt free and sending your two kids to college debt free’, will give you better ideas of what it will take to reach those goals and how to align your spending.
With you having clear goal, certain purchases and decisions that might inflate your lifestyle and won’t really contribute to your end goal are revealed and so you can easily shut them down.
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2. Stay Below Your Earning Radar
It’s disturbing to see people who spend all they earn and more. This has keep millions of people in the rat race.
One outstanding way to beat lifestyle inflation is to spend less than you earn. Track your income and get on a budget so you know what your expenses are and you can plan accordingly.
To effectively stay below your earning radar, you want to keep your entire lifestyle simple yet comfortable. With this technique, you won’t be spending money just for the reason that you have enough money to.
The moment you start tracking your expenses and sticking to your budget, you’ll be able to use any surplus money to move yourself toward your financial goals.
3. Stop Trying To Keep Up With Other People
We all admire the model on the magazine cover, the celebrities on the television and those ads on the bill boards are captivating. I have spent all my childhood year doing just that.
Wanting to keep up with the Joneses is probably the number one factor that leads to lifestyle inflation and ultimately debt.
The truth is, there will always be someone with more than you have in every area of your life, sounds bad but the good news is that you are far above millions of people around the world. It makes no sense to compete for the best and newest of everything, especially when you don’t really need it.
4. Identify And Avoid Impulse Purchases
Impulse purchases are the worst and can often lead to lifestyle inflation. Impulse purchases aren’t planned and are made as a result of pure emotion which isn’t good.
When you make an impulse purchase, you often aren’t thinking about your goals or budget. You may even regret the purchase later or spend a longer period of time working toward your financial goals.
Instead of relying on temporary happiness, take steps to avoid impulse purchases so you don’t get sucked into lifestyle inflation.
When you have some extra money, it’s easy to justify buying things you don’t need. Your first step is to identify your impulse purchase triggers. Once you know what they are, you can avoid those types of items or stores when you need to focus on improving your life, not filling it with clutter.
To increase your rate of success, you can also talk to your partner, family member or a friend to hold you accountable so you avoid impulse purchases and stay on track.[irp]
5. Know Which Deal Is Good For You
Black Friday Sales: 50% Off, Get 30% back on all items, 45% Off this Christmas. These are examples of what triggers the buying decisions of millions of people.
Most people make purchases because the discount sounds like they have a good deal but never consider its implications on their financial goal. Discounts are great but that is only when its inline with your financial goal.
For example, if I’m saving up for a new television of ₦40,000 and I have saved ₦35,000, then a store is giving a 15% discount for Christmas. That gives me ₦6000 back that I can use to fast track other areas of my plan.
A good deal at a bad time can put a lot of strain on your financial goal, so watch out.
6. Use Income Increases To Further Yourself Along The Way
When people get income increment they simply inflate their lifestyle. This clearly shows that such people have no plan or financial goal.
Once you set clear goals and get on a budget that makes you feel good, what motivation is there to spend the extra money inflating your lifestyle? If you can settle for a comfortable and affordable lifestyle that allows you to spend less than you earn, commit to sticking with it long-term.
As a result, you can use income increases like raises and side hustle income, tax refunds, and bonuses to further yourself financially.
Some years ago, I met a man who told me how he was able to save ₦10,000,000 in three years from his pay increase. He was receiving ₦120,000 monthly before his new post that gives him ₦450,000 monthly.
He called his family together and explained to them few reasons they will have to stick to their lifestyle. Which they all agree to and together they put away ₦300,000 monthly for three years.
The process is simple, keep living the way you have been when extra money and windfalls come through. You won’t really miss the extra money that you weren’t expecting or didn’t plan on using anything.
So get excited about putting that extra money toward your debt, retirement accounts, emergency fund, etc.[irp]
7. Practice Creative Lifestyle Inflation
There is one thing about human nature which I called the ‘fight back’. In your quest to stay focus on your financial goals, often time you deprived yourself of the good things of life. And just when you felt you have reached your goal, the ‘fight back’ begins. You unconsciously go back to all the things you’ve deprived yourself of and thereby setting your success on fire.
The best way to conquer this is to practice creative lifestyle inflation. With this method you intentionally inflate your lifestyle for a short period of time. This can be going to an eatery and order a very expensive food, or logging in an expensive hotel for a night. Just something that makes you happy.
This should be a once in a while activity, the essence of this is to bring fun into your life and feel good following your financial plan. And, you should always set aside some amount of money for this purpose.
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Wrap It Up
It has been said that inflating your lifestyle is okay every now and then as long as it’s cautiously premeditated. The problem with it taken to the extreme is that it can hold you back from attaining your true financial goals. If it’s your goal to be financially secure quickly and financially independent someday, it’s imperative to avoid lifestyle inflation at all costs.
Have you ever felt tempted to spend more after earning more? Do you ever use any of these tips to beat lifestyle inflation?
Over To You
So, what are the other advises, tips, strategies, techniques or methods that have worked for you? Please share with us in the comment below. Believe me; I sincerely value your opinion more than mine.
And don’t forget there is love in sharing!