How to Avoid Lifestyle Inflation

Most folks don’t have a problem spending money. Instead, they have issues trying to put a cap on their lifestyle.

Here’s what typically happens:

  1. Normal Norman works for a company.
  2. Normal Norman wishes that he could afford to buy a new computer, car, house, and go on a vacation.
  3. Normal Norman knows he cannot afford those things on his current salary.
  4. Normal Norman gets a raise, and within weeks he has either spent or committed that raise to fund the want list that has been growing over the last year or more.

This is called lifestyle inflation.  Your standard of living always seems to unexplainably increase in line with your income.

I personally believe that God wouldn’t have any hard feelings against Christians who decided not to participate in lifestyle inflation and instead committed more and more of their income to serving others.  This essentially is the plan in Bob’s post on how to give away millions.

The question remains – how?  How does one put a cap on their standard of living?

Consider the Graduated Tithe

The graduated tithe is a concept that allows you to benefit from each salary increase, but it also allows others to benefit.  Basically, as your income increases by $1,000, you’ll give an extra 5% of that $1,000.  Essentially, if you start making $20,000 more than you do now, you’ll decide to give away 100% of your income above that mark.

What’s good about the graduated tithe is that you have a system in place for when your income does increase.  You’ve already decided how you will act when you come into money you don’t currently expect.  Of course, there are some drawbacks.  You may feel the pressure to start giving out of obligation, but I think anyone who enforces a self-imposed graduated tithe wouldn’t be burdened by the giving.  Personally, I think the graduated tithe is one of many good giving strategies.

Recognize the Relationship Between Money and Happiness

In some ways money does buy happiness (or peace).  In many ways my life is easier, more peaceful, and happier because I do have money.  I can afford medicine when I’m sick.  I can wash my clothes in a machine, not in a river.  I can buy food when my kids are hungry.  I can afford to contact my family by phone or with the internet.

You’ll notice that most of those things that contribute to my happiness are more foundational human needs.

Sometimes we start to think other bigger items will also contribute to happiness.  A bigger home or a bigger car would surely make us happier.  But that simply is not the case.  This is a concept that is discussed in length in the book Your Money or Your Life so I encourage you to grab a copy of that book if you’re interested in knowing more about this idea.

In order to avoid lifestyle inflation, you need to know how purchases impact you emotionally and spiritually.  Basically, you need to know when you’re at a point when you have enough.  When you can say that not one purchase and no single dollar will add more value to your life, you probably have enough.

I’m not a car person.  As long as the vehicle gets me from place to place, I’m happy.  Therefore, I don’t spend a lot on cars because a car doesn’t contribute anything of value to my life (as long as it is running well!).  However, I have some very fond memories of family vacations.  As a result, my family is more likely to spend money on vacations than we are on cars.

As you determine what type of spending contributes something of value to your life, you can then cut out whatever doesn’t add anything of value.

Get Outside of your Socio-Economic Bubble

Different ‘classes’ relate to money in different ways.  They also appreciate different things about money, and they have very different standards of living.  Living in a majority world country (traditionally known as third world) I see people on a daily basis who survive on much less than I do.  Since there is such a large lifestyle and income gap, I’m forced to constantly re-evaluate my own spending and lifestyle choices.

Some things are impossible to teach until they are experienced. By spending time outside of your regular peer group, you may be challenged and motivated to avoid lifestyle inflation.

What do you do or suggest to avoid lifestyle inflation?

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1 Comment
  1. Jake

    I read a very interesting article on LifeHacker a while back on the ‘ideal’ salary for happiness. Briefly states that you reach a plateau of $75,000 (adjusted for cost of living, of course) is the most you need to make to be happy, from a ‘worldview’ perspective. Apparently they proved that any money you make over that will not have an effect on your life in terms of real day to day happiness. Interesting read because it will make you second guess that next big puchase because you got your next raise. Read the article here.