Lifestyle Inflation: How to Avoid the Creep

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shutterstock_118933399Once upon a time, I was a young college graduate who was buried in a mountain of credit card and student loan debt. I was also a mindless (and reckless) spender—if there was any hint of a frivolous purchase in my path, out came the credit card.

The funny part of my situation? I was making almost $100K/year yet I had no money to my name!

With each new paycheck, raise or promotion, my spending ballooned. As did my wardrobe, restaurant/bar tabs and vacation costs. Essentially, every time I had an opportunity to increase my savings with a new influx of cash, I chose to spend it instead.

Why on Earth would anyone do this to themselves? For me, the answer was ugly yet easy: I was a casualty of lifestyle inflation. The more money I made, the more junk I bought and the more money I frittered away.

As the credit card balances swelled to greater proportions, I rationalized my debt because I “worked hard” and “deserved to treat myself.” I also felt I needed to dress a certain way, drive a certain vehicle, dine out in trendy (read: Expensive) restaurants and generally keep up a lifestyle that was rooted in materialism and consumption.

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Ick. I shudder now when I think back to those dark financial days in my past. However, I’m happy that I learned some valuable lessons, including the following ways to help myself avoid lifestyle inflation in the future:

  • Define lifestyle inflation and keep conscious awareness of it. Lifestyle inflation can mean different things for many people. For me, it means an uptick in frivolous expenditures that eat away at my bottom line and future goals. By keeping this phenomenon at the forefront of my financial decision making processes, it’s easier for me to avoid the temptation of slipping back into my former super-spending ways.
  • Choose what’s important to you and focus your efforts. Despite my efforts to keep lifestyle inflation in check, there are still pleasures in life I deem worthy of splurging on. For instance, I’m an avid traveler—the difference between now and then is that now I seek out lost-cost options for the trips I want to take and I save for the vacation prior to leaving on it.
  • Keep your eyes on the prize. If you’re struggling to keep lifestyle inflation in check, consider surrounding yourself with like-minded people who practice sound financial habits. Also make sure to keep your goals front & center of your choices. If you’re considering an expensive purchase or picking up a new habit, think about how those dollars spent today will impact your savings and/or debt payoff goals of tomorrow.

When it comes down to it, avoiding lifestyle inflation is a sure-fire way to set yourself up for future financial success. By maintaining some semblance of self-restraint and forgoing instant gratification now, you’ll be better able to live a life of financial freedom later!