It’s human nature to set your sights a little bit bigger time after time. We set goals to become stronger, faster, smarter and wealthier. We’re always trying to get a little better bit by bit.
But when it comes to money, always wanting more will mean that you’ll never have enough. It’s hard to be in a place of satisfaction and gratitude when there’s a desire for more.
Evaluate Where You’ve Come From
Many of us can think back to a time when we were making less and we couldn’t afford nice things. Perhaps you were underemployed after college graduation, and you worked hard to be able to afford your IKEA furniture. You scraped together change throughout the week to be able to afford Chinese takeout with your roommates. It was tough to pay student loans, rent, and to afford a little fun on a starting salary but it felt great to finally have your own place and to be able to eat something other than a steady diet of ramen noodles.
But now, many years later with booming careers (and perhaps a couple of kids), your old lifestyle is probably a distant memory. As you’ve grown older and your earning potential has increased, you’ve probably thought more about the mortgage, saving for retirement, and paying for your kid’s college than how you’ll afford your share of this month’s rent.
As your salary increases, it’s only natural that you’ll want to upgrade your lifestyle. Many of us want to buy a home, buy a car, and splurge on a nice dinner every now and then. There’s nothing wrong with wanting to live a better quality of life.
But when you look back on your previous standard of living, has your lifestyle stayed pretty consistent or have you significantly upgraded over the years? Has your lifestyle brought you happiness, or are you spending more and more money trying to chase joy? You might be able to afford designer furniture now in a house that you own, but you still want a bigger house. As you slowly upgrade your life piece by piece, it can be too easy to fall into the trap of thinking about what you lack, rather than what you already have.
The vast majority of the people reading this article are going to have enough food to eat and safe and comfortable place to stay at night. And yet, we might have the feeling that we don’t have enough of whatever it is that we want.
Know When Lifestyle Inflation Can Be Too Much Of A Good Thing
The need to constantly upgrade your standard of living is called lifestyle inflation. While some amount of lifestyle inflation is necessary, if it goes too far lifestyle inflation can end up making you unhappy, which is exactly what you were trying to avoid. Giving in to lifestyle inflation also makes it extremely tough to reach a place of financial security.
When the pursuit of a better lifestyle means you spend too much time working and worrying about money, it’s gone too far. If all you can think about is the next purchase or upgrade in lifestyle, you’ll never be happy with what you have. Psychology researchers have found that being more materialistic leads to lower levels of well-being.
Another side effect of lifestyle inflation is that you may never have enough to be able to support yourself without working. If you increase your lifestyle in proportion with how much you make, you’ll need an even larger sum to be able to retire since the previous dollars you saved won’t go as far to supporting your lifestyle.
The good news is that there are several ways to fight lifestyle inflation and live a richer life.
Be Intentional
As extra money comes in, be very careful to see where the extra money actually goes. When you look back on your past raises, how much went to improving your life (or lifestyle inflation), and how much went to longer term goals? Instead of feeling bad about where the money went in the past, take action to capture that money going forward! Make sure that you are expanding your lifestyle in a way that will make you happy rather than trying to keep up with your neighbors because you think that’s what you should do to impress them.
Live On A Fixed Amount
One great way to make sure that each increase in lifestyle is very purposeful is to live on a fixed amount, and then save the rest. It’s my favorite way to manage money as it helps you save and spend within your means, even if you don’t sit down to write a detailed budget every month.
Once you have your expenses under control, it’s really easy to automate your savings. When the savings happen automatically, you’re creating a financial future for yourself, without having to decide to make a good decision month after month.
This strategy comes in handy when limiting lifestyle inflation as well. If you decide to upgrade your lifestyle by sending yourself over a little bit more every month, it will be a very purposeful decision. This time spent purposefully changing your expenses means that the money will actually go towards your overall values and goals. Money won’t just leak away.
Create An Attitude of Gratitude
Taking a moment to be grateful has been scientifically proven to increase well-being. In her book, The How of Happiness, psychology researcher Sonja Lyubomirsky describes a study where participants that spent time thinking about five things for which they were grateful had a measurable increase in well-being.
As the holidays approach, it’s a good time to take a moment to appreciate all that you have. Look at the all the wonderful things you have in your life, like the people you love and the job that lets you provide for your family. Taking that moment of gratitude will put you in the right mindset to want less.
Create Financial Security By Upgrading Carefully
There’s nothing wrong with living a better lifestyle over time. But fight the urge to constantly upgrade and take a moment to appreciate what you already have. Going too far can keep you from a life of financial security. Make sure you are living your life according to your goals and values.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.