The Ultimate Guide To Avoiding Lifestyle Inflation

Thursday, March 19, 2020

If you want to stay on top of your finances, whether you’re saving for retirement or you simply want to ensure you have the money to continue living your current lifestyle in the future, you need to avoid lifestyle inflation.

You can still live a comfortable lifestyle when you avoid lifestyle inflation, sometimes called ‘lifestyle creep’. You just need to remain mindful and ensure you know what’s truly important to you and your family.

Below, we’ll go through a few pointers that will help you to avoid lifestyle inflation now and in the long run:

Come Up With A Necessary Budget

You do need to spend money on certain things, so make sure you sit down and come up with a reasonable budget. You should have an idea of the percentages you’re going to spend on categories such as food. You could even try the envelope method, which will discourage you from overspending on certain necessary categories. For instance, if you don’t want to spend more than X amount on food weekly, put that amount in an envelope and add up your shopping as you go. If there’s money left over, you can leave it in the envelope but you’re not supposed to transfer it.

Keep an eye on your budget and ensure it’s always as tight as it can be. You could even look at some of your current bills and see if there are ways you can cut them down. Compare electricity rates and see if you could be getting a better deal.

Avoid Spending Triggers

Everybody has their own spending triggers. For some it’s shoes, for others it’s anything in a sale. You don’t need to cut back on everything you like to buy, but you should stay mindful. If you want something, try to wait at least a few weeks to purchase it. Avoid impulse spending at all costs!

The key thing to remember is that if you get a raise, you shouldn’t immediately spend it in your head. You’ll need to exercise self discipline to put extra money towards things you really need, such as your retirement fund and investments.

It’s a good idea to pay attention to times when you might spend out of habit. If you don’t need to buy anything, then don’t browse online sales if you’re likely to buy. If you go shopping with somebody in person, stick to a list and don’t buy for the sake of it just because you’re out.

Value Experiences First

Experiences are one of the only things we can spend money on that actually help make us richer. When you value experiences over things, you’ll usually be able to avoid lifestyle inflation and live a more meaningful life.

Outline Your Long Term Goals

You can’t be expected to avoid lifestyle inflation if you don’t even know what you’re aiming for. By actually outlining your goals and making them official you can start taking steps towards them.

Avoid Getting Into New Debt

It’s all too easy to rack up credit card balances and other debts when you’re keeping up with the Joneses. You might feel like you can afford it at first, but the novelty will quickly wear off and its easy to become overwhelmed. Nobody should think this way - who wants to ‘afford’ debt, anyway? Interest rates can make getting into debt so expensive and risky. Try paying off the debts you have currently, as aggressively as you can. There are different techniques you can use - some like to pay off smaller debts first to get them out of the way.

Once you have paid off all of your debts, you can use the money you were putting towards debts to reach your goals. Be strict with yourself if you have to. Freeze/bury/cut up your credit cards and only buy things you can afford. Your credit cards should be for genuine emergencies only, but ideally, you should have an emergency fund.

Emergency Funds and Savings

Emergency funds and savings are the best way to avoid getting into debt - think about it. What will you do if you need to take unpaid time off work? What if your car breaks down unexpectedly? What if you have to take a pay cut? There are all kinds of things that can happen without warning, and you don’t want to panic. Start working towards an emergency fund so you can have peace of mind!

How are you going to avoid lifestyle inflation? Leave your advice below!

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