Lifestyle Creep. Lifestyle Inflation. Keeping up with the Joneses. Whatever you want to call it, those of us that are careful with our money know that as we make more money, we need to resist the temptation to spend the extra cash. But when the money comes, what can you do to resist lifestyle inflation? And is a little bit of lifestyle creep OK?
My husband recently graduated with his Ph.D., and we’re moving to a new city so he can start a great job with a nice paycheck. We’re going to have more money coming in than we’ve ever had before. We know we want to ramp up our savings big time. But we’ve been living the frugal graduate student lifestyle, so a little bit of lifestyle creep feels acceptable, right?
Conscious Life Design
I’m carefully considering our new lifestyle because a move like this can reset both our good and bad habits. Research has shown that transitions like the birth of a child, a divorce, and even big moves, can permanently change our spending habits.
We know some increase in expenses is unavoidable. For example, our housing costs are going to increase by about fifty percent. My husband would have to commute 1.5 hours every day to be able to keep the same rent. For us, the extra dollars will be well worth the extra 30 hours we get to spend with each other every month rather than fighting traffic.
On the other hand, there’s the less necessary lifestyle creep. My husband has been living the college student lifestyle, so he needs a new wardrobe. We don’t have an automatic dishwasher nor in-house laundry, and those would certainly be nice to have. We’re leaving our cheap furniture behind since it’s expensive to move across the country. Is it time to buy furniture we love and plan to keep for awhile, even if it means spending a bit more?
Since I know that it’s all too easy to spend the extra money, I’m doing everything I can to tuck the extra cash away. We plan to max out the 401(k) immediately. We’re also going to deposit some of our income straight into savings. I hope this will make it feel like we have a lot less money than we actually do. I’m even thinking of taking the extra savings account off of our Mint tracking system so we can forget about how much extra cash we have. This will hopefully reduce the urge for lifestyle creep.
We’re not sure how much is reasonable to spend in our new city, but we plan to set a spending limit and take it from there. By setting a flat spending limit, we’ll get used to living on a certain budget no matter how much we make. Then, future pay increases can go straight to savings instead of an increase in lifestyle.
If we find that our spending target is too aggressive, we can always change it. But if we give ourselves too much wiggle room, I’m sure we’ll succumb to lifestyle creep and find ourselves spending more money than necessary.
A Want List
We still do want to buy a few things over time. We plan to make a list of everything we’re considering, and then we’ll take a moment to also consider the 10 year cost of the item to see if it’s really worth it. If it’s been on the list for a few months, and we still feel like it will add value to our lives, we’ll budget the item into our spending.
When we revisit the list, some of the things won’t seem important. Also, by slowly buying each purchase one by one, we’ll draw out the enjoyment of each purchase by anticipating and then appreciating each item one by one.
Striking a balance between saving and spending
Here’s the reason why I’m spending so much time thinking about making these smart spending and saving decisions: I don’t want to mindlessly increase our spending to the detriment of our financial future.
On the other hand, I don’t want to hoard money either. Money serves a purpose. I don’t want to mindlessly accumulate just to have more and more money. It’s money well spent if it helps us live happier and healthier lives.
What do you do to ward off lifestyle creep? What amount of lifestyle inflation is OK?
This post has been written by Jenna, our staff writer who hails from http://pftwins.com.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.