Lifestyle inflation is out of control. But you can put a leash on it. Take control today and start living a truly wealthy life.
Moving up feels great.
Who doesn’t like a higher paying job or raise?
Starting the first job out of college is a huge income boost. And most people raise their spending with it.
Your wants become reality. You can go out more and buy new toys. In most cases, things you can easily do without. But now they’re affordable. It’s lifestyle inflation.
In time, some of the new toys and services start to feel like needs. If you’re laid off or emergency expenses come up, you’ll need to cut back. And it doesn’t feel good.
Instead of spending everything you make, save a little. It can prevent financial hardships down the road. Save today to retire tomorrow. It’s good to reward yourself but it should be done in moderation. You’ll be much happier if you save today. And if you invest what you save, you’ll be able to buy more in the future.
From every tax bracket, folks in the U.S. live paycheck to paycheck. They see each payday (after debt payments) as their spending limit. And they spend it all… Saving just isn’t a priority.
In every case, there’s room to cut expenses. But we seek short-term gratification… and that usually requires spending and taking on debt today.
To prevent spending too much, you can categorize expenses as “Niceties” and “Necessities.” Necessities are what keep you going. They include a place to live, food, healthcare, etc. In other words, the essentials. And niceties aren’t needed… But they feel good to have.
If you require a cup of coffee to work, it’s a necessity. You can make a $1 cup at home. Or turn it into a nicety… A $5 cup from Starbucks. If you have a cup from home instead of Starbucks every day for a year, you’ll save $1,460. There’s room to cut back everywhere. (I drink tea… my time in China had an impact)
Now an example that’s hit hard while I lived in Delray Beach, Florida… nice cars… Ferraris, Lambos, Rolls Royces, Teslas… They’re everywhere. And still I’d never buy one.
Legally, they can’t go any faster than my Honda Accord. But I guess they have bragging rights though. And at a hefty price, $100,000+. So I’ll stick with a reliable car that gets me from point A to point B. I’d much rather spend the money on snorkeling trips and other adventures. Plus I wouldn’t have to worry about parking in safe places and paying for expensive repairs.
It’s alright to buy niceties as your income increases… just limit them so you can buy more in the future. Find a good balance. It’s crazy how much people are willing to pay for some niceties… For example, wine…
It’s a crowded market and you can find bottles for less than $5 or over $10,000. Some people convince themselves the more expensive bottles are better… But are they really? The video below sums it up.
You can easily do without the $100 dollar bottle of wine. If you didn’t know it was more expensive, you likely wouldn’t think it tasted any better.
Just because you’re making more money doesn’t mean you need to increase your spending. Most people find ways to spend their pay raise. The higher pay becomes a need to keep up with an inflated lifestyle.
As your income increases, find a good balance between the niceties and necessities. Avoid lifestyle inflation.
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