Lifestyle Inflation – Hard to avoid. It strikes all of us …. from doctors to janitors. We’re all seduced into spending just as much or more than we earn.
The sad part – saving just 10% to 15% of our income easily puts us on the fast track to wealth creation.
So how do we beat the temptation of lifestyle inflation? Resist the urge to spend all of our money purchasing the newest, best, or biggest thing that catches our eye?
Make Your Savings Automatic
The old saying, “Out of Sight, Out of Mind” works magic for your finances. You never miss what you never had. The easiest money to save is the money that never reaches your hand.
This is perhaps the surest way to tame lifestyle inflation. Simply open a savings account and have a portion – say 5% to 10% – of your paycheck automatically sent to the account. You can use a credit union account or online savings accounts like ING direct. These accounts tend to offer the highest interest rates.
Having personally done this, I’ve found that after the first few months, you don’t even miss the money you’ve socked away. You’re simply forced to live on what is left over – and its easier than you think. The psychological boost of seeing savings grow is well worth the effort.
Review Your Current Spending
Its funny how recording your spending helps highlight money mistakes. Did I really need to waist $117 a month getting snacks from vending machines? How about spending $240 eating out each month – most of the food was no good anyway.
There’s something powerful about writing down and seeing exactly where your money is going every month. You also gain the power to discover where you can slash costs and save money.
Crush lifestyle inflation cold by using our Financial Tracking Sheet to determine where your money is going. Once you’ve done this, try to cut costs by 10% in each spending category.
In the food category, for example, people can usually cut spending 10% simply by going out to eat a few less times a month, taking lunch to work once or twice a week, or by buying more generics during the weekly grocery trip.
Cutting just 10% in each spending category is an easy way to dramatically strengthen your finances, leaving you with money left over to save, invest, and pay off debt.
Live Like You Never Got a Pay Raise or Windfall
You’re finally getting that well deserved pay raise. Yet even before the extra money hits your hand, you’re envisioning new shoes, a new television and perhaps even a new car. Stop lifestyle inflation in its tracks by continuing to live on your old salary while socking away the pay raise into savings and investments.
Ask Yourself This One Question
Deep down, many of our purchases – especially the more expensive ones – are made to impress others. We may not want to admit it. But we’ve all been guilty at one point or another.
This need to impress, need to prove ourselves with expensive toys can place a heavy toll on our finances.
When contemplating such a purchase, ask yourself this question: If I lived in another country where no one knew me, would I still buy this item?
If the answer is NO then maybe its time to reconsider your purchase.
Pick Your Pleasure
Like kids in a candy store we want it all – fine dining, designer shoes, fine clothes, large houses, expensive vacations. As kids we realized eating all the candy we got our hands on quickly made us sick.
Yet as adults we fail to realize that indulging in everything that attracts our attention makes us financially sick.
There is a remedy. Determine what you REALLY enjoy the most. Indulge in one or two of these guilty pleasures while ruthlessly slashing spending in other areas.
If you have an eye for designer handbags, indulge BUT cut costs dramatically in other areas. Take your lunch to work instead of eating out. Cut your cable and cell phone bill. Learn to use the library instead of heading to the book store, and put off buying a new car for another year or so.
Love eating at fine restaurants? Enjoy… but go to fewer movies, buy fewer clothes, and forgo that expensive foreign vacation.
As kids we had to make choices – to take the Now-And-Laters we had to put back the candy necklace. Making the same decisions as adults allows us to spend money on what we truly enjoy while cutting back in areas that matter less.
- Hi. My name is Dr. Charles Alonzo Peters and I created Mocha Money because I was tired of watching people struggle to make ends meet, living and working just to pay bills, becoming swallowed up in the quicksand of spiraling debt.
You deserve more out of life. Your family deserves more.
My goal is simple – to help you live a more prosperous, financially sound life.
You can contact Dr. Alonzo Jeffers at This email address is being protected from spambots. You need JavaScript enabled to view it.