by: Amy Ng
As you age and realize your earning potential, it’s only natural that you will add to and enhance your quality of life. Economic theories assume that humans are rational beings, yet the irrational action of spending beyond ones’ means is a very common reality. Many people see every income boost as a means of buying more stuff. Each raise at work results in a new addition to an increasingly cushy lifestyle filled with unnecessary purchases. The result is people putting off retirement. Even with plentiful salaries, the ever increasing investment in stuff leads them to constantly feeling like they don’t have enough money. Most of us have, or know others who have, experienced the allure of lifestyle inflation. Today’s post covers five things to consider when experiencing this enigma:
- Identify Your Goals
Upon receiving a raise or bonus, one of the first best things you can do is sit down with your loved ones and discuss your personal and financial goals. Talk about where you want to be in two, five, or even ten years. Whether you want to travel more, save for your children’s educations, pay off debt, or buy a home, you’re more likely to avoid lifestyle inflation if you understand how those funds can bring you closer to achieving those goals.
- Get The Money Out Of Your Hands
Before you start spending new, additional income, determine whether you’re happy with your current lifestyle. If your needs are being met, set up an external account and transfer the excess funds so you don’t end up needlessly spending it. This “out of sight, out of mind” approach is a simple but conventional tactic you can use to your advantage.
- Practice Delayed Gratification
It can be hard to imagine how the things you give up today will make a big difference decades down the road, but no one is more invested in your future than you! Understanding that Wants and Needs both come with price tags can help you identify whether making purchases increases your quality of life or is just adding to your meaningless collection of gazingus pins. Yes, it’s important to be able to enjoy the fruits of your labor, but it’s more important that you do it mindfully and not automatically.
- Stop Keeping Up With The Jones’s
As we age and find ourselves surrounded by successful peers, we often feel the urge to spend freely. It’s the classic “Keeping up with the Jones’s” conundrum; a financial problem rooted in social pressure. You don’t want to look like you can’t keep up! They get a new house, you get a new house. They get a new car, you get one. And so forth. People often end up buying a bigger house or a more expensive house than they truly need, which can cost more money to maintain and fix over time. In fact, Americans are spending nearly half of their household income on mortgage and transportation costs. Remember that the more you spend, the harder it may be down the road to do things like follow your dreams or switch careers. You might have to decline a job offer you’re really interested in because it won’t support your current lifestyle.
- Forgive Yourself
However, if you do succumb to lifestyle inflation, your first course of action should be to forgive yourself for your misstep. As with a diet, there will be days when you fall off track and think “I’ve already messed up today, so my progress for the month is ruined!” Don’t let these negative thoughts seep in and deter you from staying motivated. The best thing we can do for ourselves is be our biggest cheerleaders through the highs and lows of our financial journey.
Greater income can help you achieve your financial goals as you advance through life. Be careful, though! Feeling that you have the right to spend more in order to prove your success is tempting and could have you blowing through that windfall before it makes a meaningful difference. To combat this, make a plan on how additional income can help fund your personal and financial goals.
Lastly, remember that your success shouldn’t be measured with a material yardstick. The true measures of success are health, love, friends, family, and experiences!