5 Ways to Stop Lifestyle Inflation Before it Starts - Atypical Finance (2024)

Reversing lifestyle inflationcan help your finances out a great deal. But what if there was a way to stop lifestyle inflation even before it starts?

In the medical field, it is widely known that preventing a sickness or disease is preferable to trying to treat or reverse one. Similarly, if you can stop lifestyle inflation before it starts, you’ll be in a much better position for a healthier, happier budget.

Here are five tips that you can use to look out for, and ultimately stop, lifestyle inflation before it starts.

1. Know What Lifestyle Inflation Is

We’ve gone over what lifestyle inflation is briefly, but to get a better understanding, let’s look at what inflation means.

Inflation is essentially the lowering of the purchasing power of a currency due to the rise in the cost of goods and services. This means that your money isn’t worth as much and can’t buy as much as it could before.

Inflation is something that isn’t really in our control, especially at the individual level. Central banks try and control it using a variety of tactics, but ultimately, inflation can occur regardless. On a personal level, we just go with the ebbs and flows of this sea we call our economy.

In the same way, when your lifestyle inflates, it is most likely because you weren’t keeping control of your finances. That may be reflected in how often you look at your finances, if you’re using the right budget for you, or if you’re using too much debt.

Knowing that lifestyle inflation is primarily brought on by spending that we aren’t fully in control of, keeping track of your money and budgeting are great ways to keep lifestyle inflation from happening.

2. Be Intentional with Your Money

As I mentioned, lifestyle inflation occurs when your finances are not kept under enough control. We’ve all been there before. That shiny new 4% raise starts being reflected on our checks and it gives us some breathing room. We relax a little too much and stop paying so much attention to what we’re spending.

The way to combat that is to be more intentional with your money. Usually, you are notified that you will be getting a raise at least one pay period in advance. Standard raises usually aren’t something that you just all of a sudden notice on your check.

Use this couple of weeks to plan what you want to do with your raise. Be intentional with your new money.

Do you want to put it toward debt? Do you want to save it? Maybe you want to add a little bit to your dining out budget.

Decide on this before you get your raise to put yourself in a great spot, even if it is deciding to spend a little bit more money. There’s nothing wrong with intentionally deciding to spend more money on something.

Remember, inflation is something you can’t control. Your decision to intentionally put money toward something is a decision you can control.

If you’re going to spend money, though…

3. Spend on What You Value

Have you ever felt guilty about spending money, even if it was something you needed or would impact your life in a positive way? You can say goodbye to that feeling if you spend money on what you value.

Spending money on what you value has a couple of benefits that you might enjoy. For one, it gives you permission to spend money on what you know will be of value to you. When you give yourself permission to do something, you no longer have to feel guilty about it.

Secondly, spending money on what you value will keep you from spending money on what you don’t value. It’s a lot easier to budget and keep control of your money if you’re not spending it on the things that don’t matter to you. This directly affects lifestyle inflation.

To get this one done, think about what really makes you happy. If material things make you happy, that’s fine. I recommend you focus on experiencing and not things, though. These tend to have a higher reward.

I like to have people ask themselves three questions:

  • What is most important in my life? – Is it family? Faith? Is there a tie between a couple of different things?
  • What do I enjoy spending my money on? – Do you like spending money on food? Vacations? Upgrading your computer? It’s worth noting that you’ll want to avoid the things that give you a small rush and then it fizzles out. What do you like to spend money on that gives you that lasting effect?
  • What do I enjoy spending my time on? – What would you do if you had unlimited time? I like to spend time watching old movies so I don’t mind spending money on them. It also helps that they are generally cheap.

Figure out what you value to guide you in your spending. This is a natural defense against lifestyle inflation.

4. Ignore Your Raises

I don’t know about you, but in the past, I’ve been guilty of a line of thinking that looks similar to this. “I just got a $4,000 raise at work so that means I can now afford a brand new $20,000 car!” There goes that raise for 5+ years.

Have you done something similar?

Also, think about when you do get a raise at work. I mentioned previously that a standard raise at work is something that is presented to you. Most places make a big deal about yearly reviews and the announcement that you’ll be earning more very shortly.

A great way to get around this is to completely ignore that new money coming into your check. If you were making ends meet before and don’t really need the money, it’s safe to not include it with the rest of your earnings.

So what do you do with the extra money?

Setting up an automated transfer into your savings account is one idea. If you want to use the money to pay off debt, subtract your old paycheck amount from your new paycheck amount and put that toward your debt. You can either add it to any automatic payments you make to your debt or set up an additional payment.

Out of site, out of mind.

5. Hang Out with People that Have Similar Values

It’s really hard to not spend money around people who like to spend money. Have you had friends who always want to go out to party, spending a ton on alcohol while they’re out? It’s very hard to keep up with and maintain that sort of lifestyle.

Just in general, it’s hard to let go of the mindset and need of keeping up with Joneses. Now, imagine if you were friends with the Joneses!

To be clear, I’m not saying you should definitely drop any of your friends who you think might be detrimental to your finances. However, it is important to maintain a relationship with people that do spend like you do and value similar things.

Take a look at the friends you have and hang out with. Can you hang out with the ones who like to spend money less and get together with the friends who have similar values than you more?

Another thing I recommend doing is just talking to your friends that help inflate your lifestyle. If they are true friends—and I bet they are—they will understand if you have a conversation with them about not spending so much money.

After the conversation, some of your friends that hinder your ability to stave off lifestyle inflation may become friends that actually help you avoid it. It’s worth a shot!

The Best Offense is a Good Defense

Lifestyle inflation can be reversed if you noticed that you’ve succumbed to it. However, like football and so many other things, the best offense for fighting this is a good defense. Recognizing lifestyle inflation and preventing it are key.

Don’t fall into the trap of keeping up with the Joneses. Keep your life simple and true to you. Carve your own path and find your own way.

Staying in control your finances and you’ll notice that the unintentional shift with lifestyle inflation will be a thing of the past.

5 Ways to Stop Lifestyle Inflation Before it Starts - Atypical Finance (2024)

FAQs

How can we stop lifestyle inflation? ›

Being proactive and automating your savings are effective strategies to combat lifestyle inflation. By setting up automatic transfers to your savings or investment accounts, you ensure that a portion of your income is consistently directed towards your financial goals before you have a chance to spend it.

How to fight lifestyle creep? ›

Crafting a mindful budget, maintaining your savings routine and avoiding impulse spending can help you avoid lifestyle creep and remain financially flexible.

How do you keep the same lifestyle after inflation? ›

It's possible to avoid lifestyle inflation by consciously establishing spending and saving amounts. Setting up an automated savings plan can be a good way to ensure you meet your savings goals and that spending is capped.

What is an example of a lifestyle debt? ›

Lifestyle creep, or lifestyle inflation, is overspending after your income increases. For example, if you get a new job that gives you $20,000 more per year in take-home pay but decide to buy a (non-essential) car for $30,000, you'll have more debt than before your raise.

What are the ways to stop inflation? ›

Monetary policy primarily involves changing interest rates to control inflation. Fiscal policy enacted through legislative action also helps. Governments may reduce spending and increase taxes as a way to help reduce inflation.

How can we solve the problem of inflation? ›

Inflation could be controlled by an adjustment in monetary policy. Implementing monetary policy will increase interest rates, which will reduce the purchasing power and thus lower aggregate demand. Lower demand will reduce prices and thus reduce inflation.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

What is the lifestyle inflation trap? ›

Lifestyle creep, also known as lifestyle inflation, is a phenomenon that occurs when as more resources are spent towards standard of living, former luxuries become perceived necessities.

How do you deflate your lifestyle? ›

There are many ways you can lower your expenses through lifestyle deflation. For example, you could start by creating a budget and tracking your spending to identify areas where you're overspending. Then, you could make conscious decisions to cut back on those expenses.

What is the best way to stay ahead of inflation? ›

Five tips for protecting your money during high inflation
  1. In times of inflation, prices increase and the value of currency decreases.
  2. Keep the money you set aside for the future in an account that earns interest.
  3. Identify expenses that can be trimmed by tracking your spending.
  4. Focus on paying down variable rate loans.

How to deal with inflation creep? ›

Inflation creep and lifestyle creep are different beasts, but the solution to both is the same: You have to become more aware of your spending habits, and make tradeoffs if you want to afford the stuff you care about the most and still save money.

How do you beat inflation personally? ›

Inflation survival guide
  1. INVEST IN A DIVERSIFIED MIX. If you haven't checked in on your portfolio recently, now is a good time. ...
  2. STAY FINANCIALLY HEALTHY WITH A BUDGET. With the price of food and energy rising fast, inflation is already hitting most of us right in the budget. ...
  3. BOOST YOUR EMERGENCY FUND. ...
  4. REVIEW YOUR INSURANCE.

How rich people live off debt? ›

Wealthy family borrows against its assets' growing value and uses the newly available cash to live off or invest in other assets, like rental properties. The family does NOT owe taxes on its asset-leveraged loans because the government doesn't tax borrowed money.

How can I be debt-free for life? ›

Here are six ways to completely avoid incurring debt.
  1. Build a large savings. Working toward a sizable savings account is difficult, but it's also the most important way to stay out of debt. ...
  2. Pay off credit card transactions immediately. ...
  3. Buy a cheap used car. ...
  4. Go to community college. ...
  5. Rent. ...
  6. Buy only what you need.

How to use debt to build wealth? ›

You can enhance your financial position and create long-term wealth by leveraging debt to invest in appreciating assets such as real estate, consolidate high-interest debts to improve cash flow, use high-yield savings accounts or borrow to acquire profitable businesses.

How can we stop hyper inflation? ›

One of the first steps for recovering from hyperinflation is to establish a new currency. That currency could be a new version of the existing currency, a credible foreign currency such as the U.S. dollar or pegging the currency against another benchmark such as gold.

How can we reduce inflation naturally? ›

Healthy eating tips to help reduce inflammation
  1. Eat plenty of fruits and vegetables. ...
  2. Choose high-fiber carbohydrates. ...
  3. Eat more fiber. ...
  4. Choose plant-based and leaner animal protein sources. ...
  5. Be conscious of your fat sources. ...
  6. Reduce the omega-6 to omega-3 ratio in the diet. ...
  7. Reduce your sugar intake. ...
  8. Limit or avoid alcohol.
Nov 16, 2023

How can we save from inflation? ›

You can fight the impact of inflation on your household's finances with these six tips:
  1. Cut costs at the grocery store.
  2. Save money on transportation.
  3. Plan ahead for cheaper vacations.
  4. Check your budget.
  5. Pay down credit card debt.
  6. Earn money on your savings.
Apr 6, 2023

How to beat the inflation rate? ›

  1. How to Beat Inflation. Investing in assets with returns that outpace the rate of inflation is one of the best ways consumers can beat inflation. ...
  2. Beat Inflation by Investing in Gold. ...
  3. Invest in Stocks to Beat Inflation. ...
  4. Beat Inflation with Real Estate. ...
  5. TIPS Are Designed to Beat Inflation. ...
  6. Beat Inflation with I Bonds.
Jul 31, 2024

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