I’m looking for a new apartment for the first time in 10 years, and I’m realizing what I want now isn’t what I wanted 10 years ago. Back then, I didn’t care about a parking space or laundry. Now I do. When did that happen? That’s the tricky thing about lifestyle inflation: it sneaks up on you.

What is lifestyle inflation, anyway?

Lifestyle inflation happens to all of us. As our earning goes up, so does our spending. It can happen so slowly and so naturally that we don’t even notice it. And as our spending increases, what we expect increases, too. It’s why we used to be happy with a $5 frozen dinner and now we want a $50 dinner out. Inflatable furniture was fun in college but now we want a more formal couch. Taking the bus was no big deal before, but now we want a car. Maybe all of these apply to you. Maybe none of them do. But something does.

Over time, it’s natural to have our desires change. Some of these happen because the world changes. 20 years ago there was no such thing as a smartphone, so of course no one wanted one, and now most of us have them. But think in the shorter term: are you satisfied with your 2 year old smartphone, or do you feel that you have to have the latest in the series?

Different types of lifestyle inflation

Not all lifestyle inflation is the same. Some of it happens naturally and some is more forced. If you’re trying to “keep up with the Joneses” then you’re engaging in deliberate, forced lifestyle inflation. You’re buying fancy clothes and expensive jewelry, driving a fancy car, and living in a fancy house so that you can “fit in” and impress others.

A less deliberate version of this is simply spending time with people who spend more money than you do. You might be used to spending $20 for an evening out, but if all of your friends regularly spend $150, you might begin to spend $100 and think you’re being frugal. It’s like when I used to hang out with a bunch of people who ran marathons, and soon it seemed normal to run 8 miles just for fun (not that I ever did that myself, but it sure seemed normal when other people did it.)

And then, like I said before, some lifestyle inflation happens just because our tastes and desires change over time. Spending 1/3 of your salary on housing might have been $700 per month before. Now you spend $1500 per month, but it’s still only 1/3 of your salary so it seems ok. You began to buy only organic meat, cheese, and produce, so you didn’t notice that grocery bill getting bigger.

Awareness matters

If some lifestyle inflation is inevitable, then the one thing we can do is to be aware of it. When we’re aware of it, then we’re making smart, conscious decisions. We can decide if we want to buy a car, or maybe it’s worth taking the bus instead. Laundry in an apartment would be nice, but maybe I should stay at my current feature (and rent) level.

I’m a firm believer that the most dangerous lifestyle inflation is the lifestyle inflation we’re unaware of. How is your lifestyle inflating? What do you need to be aware of? Make the choices so they don’t make you.

Forget “supposed to”

A client was preparing to graduate college and get his first job. As we reviewed his upcoming expenses, he mentioned wanting to buy a car. I asked why. He answered, because that’s what you’re supposed to do: you graduate college, get a job, rent an apartment, and buy a car. I pointed out that he’d be taking the subway to work every day, and his parents also lived on the same subway line. He could use Zipcar and occasionally borrow his roommate’s car if he really needed to somewhere off of public transportation. Still, he felt he was supposed to get a car.

I suggested that he wait 6 months to get a car. That would give him time to try living without one, to get used to his new neighborhood, and to earn some money for buying that new car.

5 years later, he’s still happily car-free.

Think of all of the money he was going to spend on a car, insurance, gas, and maintenance. Think of the headache of finding parking spaces in the city, shoveling out his car when it snowed, and taking care of it in general. And all because he was “supposed to” get a car.

What are you doing or buying because you’re “supposed to” that you don’t really need? It might be time to cut back on some of that lifestyle inflation before it inflates too much.

If I can afford it then why not?

Our earnings generally rise over time. As we earn more, it’s easy to spend more. Not only does this not feel like a problem, but it feels justified. If I’m earning more, why shouldn’t I spend it?

Again, I refer you to awareness. If you want to spend more and you can afford it, then go right ahead! But remember: when you spend money on expensive jewelry, a new car, or the latest phone, you’re not spending it on something else.

What are your goals? What do you want most? If you want to backpack around South America, lifestyle inflation could delay or destroy your ability to fund that trip. Ditto for retiring early, buying a house, funding your kids’ college educations, or anything else.

Your salary is higher, but it’s not unlimited. Make conscious decisions about how you spend it so lifestyle inflation doesn’t derail what you really want to spend it on.

You can have just about anything, but you can’t have everything, so you have to make a choice. Don’t let lifestyle inflation make the choice for you.

Not sure how much you could be saving? Or how much you might be losing to lifestyle inflation? Use this free calculator to figure it out:

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