Lifestyle inflation happens when you make more money than you did before, but you also spend more money. It might not seem like it could happen to you, but it can happen to anyone! Here are 10 ways to avoid lifestyle inflation.
Change Your Mindset
It is important to make sure you have the right mindset so you don’t fall into the lifestyle inflation trap. You shouldn’t be trying to keep up with other people and what expensive new gadgets they have. You should just be trying to live within your means. Practicing gratitude will also help you with this because you will be more grateful for what you have than what you don’t.
Track What You Spend
Spending money without paying attention is a bad idea. You should always track your spending, whether it be by using pen and paper or an app to help you budget. Make sure you always know where your money is going and do not just pretend you have a never-ending supply of cash on hand.
Budget
Once you have tracked the money you are spending, it is a good idea to budget where that money will go. You can also make changes and adjustments to your budget, so you are spending less money each month. Paying attention to what is being spent and where will get you very far in your financial journey.
Make Important Expenses a Priority
Just because you are avoiding lifestyle inflation doesn’t mean that you can’t save money for fun things, like travel, entertainment, and going out to eat. You will have some extra money after you pay your bills, so why not put some aside for the times when you want to treat yourself? You can look at the non-essentials you are paying for and decide if there could be one you want to cut from that. Then you will have the extra money for more expensive things (in moderation though!).
DIY
Doing things yourself might not sound glamorous. Also, if you have extra money, why not just pay other people to do chores you don’t want to do? That is a valid question, but it might guide you into lifestyle inflation. It will save you money in the long run if you DIY. Mow that lawn, clean that house, or buy those groceries. Your wallet will thank you.
Don’t Make Random Purchases
Everyone likes to buy themselves something nice now and then. But you should limit what extra random purchases you make. You can have a monthly amount you set aside when you buy something that wasn’t planned. Unplanned purchases happen sometimes, but just make sure they aren’t an all the time thing.
Invest Your Money
If you have some extra cash lying around, instead of spending it, you could invest it. Investing in retirement programs like a 401(k) or an IRA is a great way to use some of the money you have. You can also invest in the stock market (if you are feeling lucky).
Purchase Used Items
Who says you always have to buy your items new? No one! So go ahead, purchase that used skirt or that refurbished coffee table. There is no shame in buying things used!
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Cut Down on Recurring Expenses
Small recurring purchases add up over time and can lead to lifestyle inflation. Look at the ones you have and see if there is anyplace you can make cuts to. Also, see if there are cheaper alternatives to the expenses you have.
Read More: Are Companies to Blame for Inflation?
Save Smarter by Automating
You can automate it so that part of your paycheck goes right into your savings account. You won’t miss this money because it is gaining interest! This will make you save smarter, not harder.