Be A Conscious Consumer
Jane lived with her two best friends in a just-good-enough 3 bedroom city apartment. Her first job out of college paid her a nice $68,000. She took public transportation to work, went out on most weekends, and bought some new outfits every Spring. Her kitchen utensils and couch were kindly passed down to her. She was happy!
Now 30 and a couple promotions later, Jane was making $100,000. She moved to a studio by herself to have more personal space. She adopted a puppy, joined a boutique fitness club, and occasionally tried out Michelin star restaurants. Those passed-down utensils and coffee maker wouldn’t cut it anymore… an espresso machine was “totally worth it.” That once-a-year camping weekend required the best camping gear. Vacations in Cabo and New York City helped her escape her annoying boss for a while. Jane gifted her friends nice things for their birthdays, and her friends gifted Jane nice things in return. What was previously a luxury now became a necessity.
At 36, Jane was married and her second kid was on the way! Her new manager title came with a juicy salary of $150,000 (to match her 55-hour work weeks). Her old studio seems like a nightmare now in her newly-renovated suburban home. A new car, lawn service, and nanny became necessary.
Some expenses became trivial. A thousand dollars for bikes, a TV, or flights to Europe didn’t bat an eye. She couldn’t make it to the boutique gym much, but she kept her membership just to avoid that guilt that comes from quitting. Jane couldn’t make the camping trip anymore – her babies wouldn’t love sleeping on the ground – so the fancy camping gear sat idly in the shed.
You may know someone like Jane. Why am I telling you about her?
Because Jane is trapped. She has unconsciously entered the Lifestyle Inflation trap, and she will never get out of it.
Lifestyle Inflation refers to an increase in spending when an individual’s income goes up. All this time, Jane has been earning more and more money. But she has responded by spending more and more money.
It is what causes people to get stuck in a cycle of living paycheck to paycheck where they have just enough money to pay the bills every month. (Yes, someone who makes $150,000 can live paycheck to paycheck. In fact, Johnny Depp is now dead broke after earning $650 million in his career. And Nicolas Cage blew his $150 million fortune. They were trapped in Lifestyle Inflation too.)
Jane had placed great emphasis on the acquisition of objects in order to achieve happiness. She felt she deserved all the fancy things – a lavish wedding, nice house, brand new car, modern appliances, wine subscriptions, food delivery, skis, bikes, dresses. She worked so hard, why shouldn’t she get to have these things??
Companies exist to market how buying their thing will make Jane happier, and she fell for it. What she hadn’t realized yet was that buying things didn’t really make her happier.
Jane is not free. She is owned by her lifestyle…
If Jane were miserable at her job, she couldn’t take a lower salary at a company that would make her happier. She couldn’t start her dream company. She couldn’t stop working altogether to care for her kids full-time. Her lifestyle wouldn’t allow this.
How would she keep making mortgage payments on that house she just moved into? How would she afford her car payments? Her boutique gym, wine, Euro trips? Jane can’t take a pay cut. Her lifestyle owns her.
“She could just change her lifestyle.” Ah, yes. Just change her lifestyle. Sell her house and downsize, trade her car for a used one, take her kids out of private school, learn to cook instead of getting meals delivered, and turn down her friends’ annual boujee vacation. Easy!
It’s unlikely that Jane would be able to do this. Humans are social creatures, and we care what our friends and neighbors think of us. What will everyone think of Jane’s massive lifestyle change? Is she having a mid-life crisis? Did she get laid off?
Plus, humans suck at change. Our habits define us, and Jane built a habit of being fancy. It’s extremely difficult to settle for less. It’s extremely difficult to get out of this trap.
Avoiding this Lifestyle Inflation trap is much easier than trying to climb out of it. How can you avoid it?
People tend to increase their spending when their income increases because they believe that the additional goods and services they can now buy will make them happier. Often those purchases don’t actually make them happier. A better option would be to work toward financial independence by saving more.
Avoiding lifestyle inflation can mean achieving financial independence at a younger age, having the financial flexibility to choose a dream job over a higher-paying option, and retiring early.
As your income goes up, keep your expenses even or only slightly increased. Be satisfied with what you have, live below your means, and don’t get too fancy. Value experiences and relationships over things.
If you do this, you will have the freedom of not being owned by your lifestyle. You will feel free from annoying bosses, unpredictable health issues, the Joneses next door, and even an ‘oops’ baby. You will be happier, cleaner, and more at peace.
What could make Jane happier? Feeling satisfied – like she doesn’t need more, but has just enough. Doing a job she loves, even at a lower salary. Feeling secure in case of an unforeseen setback, like a layoff or cancer diagnosis. Retiring early. Learning and growing.
Not buying things.
While Jane tries to get out of the Lifestyle Inflation trap, you must avoid it altogether.
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