My husband recently finished his Ph.D., and now teaches college classes. While it’s great that we have the extra income, I recognize that one of our challenges is going to be lifestyle inflation. Indeed, while I expect that we will be able to travel a little more (something I enjoy quite a bit), I don’t want to get carried away with too many other expenses.
Lifestyle inflation happens when you add more expenses to your life. For most of us, lifestyle inflation follows an increase in income. If you are concerned about lifestyle inflation, and you want to limit its effects, here are 5 things you can do:
1. Remind Yourself that You are Content with What You Have
One of the best things you can do is to remind yourself that you are happy with what you have. While treating yourself on occasion is not a bad thing, there is no reason to make a habit of turning luxuries into “needs.” Remind yourself that you have enough, and express gratitude for what you have.
2. Pull Back on Your Income Elsewhere
If you have multiple streams of income due to a two-income home, you could look for ways to cut back on some of that income. One of the bonuses (at least for me) of my husband working now is that I can cut back on some of the work I do. My husband loves teaching, and is happy to be paid to do it. I love writing, but was becoming bogged down. Cutting back on some of my income is one way that we can keep lifestyle inflation from getting out of control.
3. Increase Savings Contributions
Whether you are building your emergency fund, boosting your retirement account, or creating an income portfolio, you can put more money toward your future. Instead of spending the money now, on things you don’t need, set it aside for the future. You’ll head off lifestyle inflation while at the same time better preparing yourself for what’s next. You can also use the money to build alternative sources of income for the future.
4. Avoid More Monthly Bills
Try to stay away from adding to your monthly bills. I’m getting a new Tracfone. My husband tried to convince me that I should get a phone with an unlimited monthly plan, now that he’s got a job. However, I don’t want to add another monthly bill — especially since my use of the phone is likely to be quite limited. Resist the urge to add to regular, monthly obligations to your budget. Get a better idea of what you truly need, and stick to that. There is no reason to trap yourself in an unnecessary and costly contract just because you can afford it.
5. If You Do Add, Cut Something Else
Of course, you might want to add something to your lifestyle. After all, I enjoy travel. I’d like to do a little more in that area. However, if I spend more on travel, I can avoid lifestyle inflation by cutting somewhere else. There should be some degree of balance, so that you aren’t slipping into financial habits that might turn out to be detrimental.
How do you avoid lifestyle inflation?
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