Generally, when you hear about “lifestyle inflation” in the personal finance community, it’s got a negative connotation.
I get it. When people think of lifestyle inflation, they think of wasted money.
People waste their increased income by putting it toward new or more expensive things rather than their financial goals. This is why increasing your income isn’t always the answer to helping you get out of debt or build your savings. A higher income is only helpful if you can avoid lifestyle inflation and put that extra money toward your financial goals.
I’ll admit it, I have struggled with avoiding lifestyle inflation as my income increased.
Sometimes Lifestyle Inflation is a Bad Thing
When I first started freelancing, I used some of the extra money I earned to pay for convenience food and other things to “save me time” so I could work more. It was a vicious cycle. I wanted to work more to pay off debt, but instead, I was working more and spending more instead of being able to funnel all of that money toward my financial goals.
Then when I quit my job last year, I actually experienced a few months where I had a significant drop in my overall income. This is because I was earning money from my full-time job and my business before I quit. After I quit, I was earning the same with my business as I was at my full-time job, but that was about half of what I had earned in total before quitting.
This lower income is what made me realize I had succumbed significantly to lifestyle inflation. And it was a struggle to lower my expenses as I adjusted to only having one income from my business instead of two incomes from my business and my full-time job.
Sometimes Lifestyle Inflation is a Good Thing
Since then, my online income has increased my net take-home pay to about double what I was earning at my full-time job. But my living expenses have increased too.
These days I spend more money on food and household purchases, entertainment and eating out, my car, and my personal trainer.
Sometimes I feel a bit guilty about this increased spending since the entire reason I started blogging was to hold me accountable for paying off debt. But then I think about what I’m spending my “lifestyle inflation” money on and I don’t feel so guilty.
I’m spending more money on food these days because I’m trying to eat healthier. I want to eat more fruits and vegetables, and high quality food. This month I’m even doing a Paleo challenge, which is more costly than eating some of the processed foods I was buying before.
I’m also spending more on household items. Part of this is due to my coupon stockpile running out of some of the basics, but I also put off a few purchases and needed home repairs because my zero-based budget would have been negative at the time I started my blog.
The next two are definitely more “wants” than needs. I wanted a new car and I am happy I bought it even though it did mean taking on a car payment each month. I am truly enjoy eating out and spending time with my friends, so I’m trying not to beat myself up about it.
Finally my personal trainer is something that makes me feel strong, healthy, and more confident in myself. Those are all things that money can’t usually buy, but in this case that $170 each month is well worth it to me.
Should You Succumb to Lifestyle Inflation?
In general, I still know and understand that lifestyle inflation is not necessarily a positive thing. It can be destructive to your finances and hold you back from reaching your financial goals. But in some instances, a little lifestyle inflation can really increase your happiness and quality of life. To me, that’s worth it!
Have you ever given in to lifestyle inflation? Do you ever think it’s a good idea?