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Sometimes Lifestyle Inflation is a Good Thing

September 9, 2016

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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?

When people think of lifestyle inflation, they think of wasted money. But there are times when lifestyle inflation makes sense.


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15 responses to “Sometimes Lifestyle Inflation is a Good Thing

  1. Controversial post, Kayla! What it comes down to, though, is that everyone’s financial lives are different, and there is no one right way. You still have a goal to reduce your debt (although I must admit that your car loan for a self declared “want” made me cringe a bit, sorry). As long as you do not lose sight of your goal to reduce debt, continue to commit to payments, then you are OK.

    1. I don’t mind you cringing at all about the car. My old car was decent – a lot of factors played into it though, like reliability as a single girl on long road trips and I didn’t want to risk it failing on me on one of those. Overall, I know that lifestyle inflation can be a hindrance to getting out of debt (or saving, or other financial goals), but I felt that most of my inflations were good things for my health in the long-run.

  2. I really appreciate this post! I get discouraged while reading personal finance blogs because I am not interested in living on $20,000/year when I make 5x that amount! It often feels like there is no room for people who enjoy eating out or paying for whatever luxuries they choose in this world, so thank you for being a voice for those who can’t meet those exacting frugal standards that so many bloggers are able to live up to 🙂

    1. I’m definitely not one of those frugal bloggers. It’s not something that comes natural to me. I like to spend money and sometimes I do think it’s ok. I am working to get out of debt and I don’t plan to take on any more debt in the future. I like having my finances in order, but I also like to live a little.

  3. Correct Kayla! I was like that a year ago. I was earning more and my expenses became more as well. It felt like I wasn’t making difference when it came to my savings. It wasn’t making improvement. So what was when I thought of budgeting, which started my financial stability as I was able to start saving and track my expenses.

  4. Interesting post. Personal finance is personal, of course, so only you can decide how you should prioritize your spending. I think the important question is whether you are still able to make progress on your financial goals (presumably paying down debt and saving money) and if the answer is yes, then more power to you.

    1. I get what you mean. I do feel decent about most of my financial decisions with increasing my lifestyle, and I’m definitely made strides financially too. I have more debt than when I started due to my car loan, but I also have more savings and more peace of mind because I know how much money is coming in and how much is going out. Before my blog, I had no idea and that would often end up with my account being negative.

  5. This is something I’m struggling with now. I’ve started making money on the side and got a raise at my main gig. I want a new computer and some home upgrades ive been avoiding. However, the other part of me is thinking that the extra money should go to debt.

    For now, I’m going to leave my spending the same and I’ve been saving my extra income toward a computer.

    1. When you make your money with a computer, I can see why that’s a priority to get a new one. I’m glad you’ve been saving for it. I don’t plan to keep increasing my lifestyle by any means. It’s at a much more sustainable/comfortable level for me now than it was before, so I’ll probably keep my monthly spending around the same level going forward even as I (presumably) make more money.

  6. Oh I totally agree! Lifestyle inflation has been a GOOD thing for me. Organic food, yoga and time with friends. I sometimes think that because I was so broke for so long that I became accustomed to giving up stuff I loved to save money. Now that I’m not broke and find myself enjoying my money (while still saving of course) I’ve ended up feeling really guilty about it. But isn’t the whole point to get your finances in order so you can enjoy your life? Very interesting topic.

    1. Thanks Amanda! I definitely agree with you. Although I’m not debt free yet and I don’t have as much saved as I’d ideally like to have, I knew I couldn’t keep going with my budget where it was. It wasn’t sustainable for me. I decided that increasing my budget a little bit would probably be a better idea in the long run instead of depriving myself until the point that I cracked and went on a giant spending spree, causing a big set back in progress. I’d rather be “slow and steady” instead of going 2 steps forward and 1 step back, which is what I feel would have happened if I didn’t increase my budget a little.

  7. I know that I have succumbed to lifestyle inflation over the last 11 years. 11 years ago I was a full time college student and made minimum wage. As the years went on I graduated, got a better job and slowly began to increase my income. That led us to eating out more AND still buying groceries. I often think about how back then I didn’t care about eating out. I didn’t have the money to do it so I never thought about it – It didn’t bother me in the least. Now that I have extra money I am somehow ‘ok’ with spending it on food we don’t really need to get. Most of the time I am paying for the convenience. This totally bothers me but now it is a hard habit to change, especially with a busy busy lifestyle with kids. I would love to revert back to my old way of thinking but I have tried and to be honest I usually fail. I haven’t figured out how to successfully cut back on the fast food and restaurants. I need better willpower!! #thestuggleisreal

    I use this food expense because this was the most noticeable and obvious lifestyle inflation for me.

    1. I get what you man. I can be hard to “deflate” your lifestyle and while it sounds like it could be a good idea for your finances, sometimes those conveniences are totally worth paying for to help your busy life. I don’t have kids, but I’m still ok with paying for convenience sometimes.

  8. Thank you for this. Tired of hearing how it’s a bad thing. A few years ago when I was making $10,000 I couldn’t afford health insurance, visits to the dentists, etc.

    Yet finance blogs sometimes act as if we should all be living as the people making $10,000 like I was back in the day. Someone that makes $100,000 shouldn’t expect to live and spend the person that makes $10,000.

    Also what is so wrong with having nice things if you have a huge emergency fund, retirement savings, etc., and making overall progress on your financial goals.

    1. I agree Lila! I don’t think there’s a problem with increasing your lifestyle for the things you value as long as it isn’t causing you to have a set back on your financial goals.

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