One of the facts of life that we tend to gloss over sometimes is that our salary determines our spending.
Well, unless we are spending like we are one level up in our jobs, in which case, we need to knock it off as soon as possible and start getting our spending in order!
When we make $30,000, we spend $30,000. In fact, if you're an average saver, you pat yourself heartily on the back if you get to the end of the year with two or three thousand dollars in the bank.
There are all kinds of strategies for hedging against lifestyle inflation. But I wonder . . . .
Is Lifestyle Inflation Inevitable?
Let's say you just graduated from college. And let's say that you were one of those enterprising college seniors that had a part-time job while you were finishing your degree.
No matter what job you get upon graduation (provided you do get a job) you will be making more money than you were. That's not hard math. But maybe your room and board were “free” in that they were wrapped into your tuition and instead of paying them month-to-month, you'll be paying them for the next few decades.
Sure, you'll have increased expenses, but once you're gainfully employed, you'll be living further from the edge.
Is it Really Possible to Escape Lifestyle Inflation?
Now, you're no longer a broke college student. That was fun, though, wasn't it? It certainly helped you write those philosophy papers and understand Zen Buddhism. But you're living on your own, now, even if you still have roommates. And since money is coming in, hopefully at a faster rate than it's going out, you start to relax.
You look around your place and you see that you've been using the same three towels — for four years. Yes, it's a little disgusting, but what could you do? You were living close to the edge, and your towels worked, even if they were a little, how shall we say, not appropriate for guests.
You then easily justify buying more. Is that lifestyle inflation? You bet it is.
Here's the thing. Some inflation is going to happen, regardless of how you plan against it. When you're close to the edge, you make sacrifices. But once you start earning a salary, you are more able to vote with your dollars and spend a little more to buy local or organic. When you're broke, you can't spend according to your values. The cheapest thing is your only option.
I think the value of money is being able to decide how to use it. You're expected to inflate your lifestyle. That's why you get all kinds of ads thrown in your direction. The trick is to expect it and set up a system to hedge against it. Save as much as you can. Bank raises and bonuses in your retirement fund. Inflate, sure, but don't be ridiculous. Live beneath your means.
Don't buy the Bentley but stop eating ramen noodles. The sweet spot lies somewhere in between.
What do you think? Is lifestyle inflation inevitable, or am I just making excuses?