How To Avoid Lifestyle Inflation: 6 Key Ways

If you didn't know already, lifestyle inflation is the reason that 78% of people in the United States live paycheck to paycheck. It's the reason that 70% of lottery winners end up going bankrupt, and it's the reason that almost 80% of professional athletes, after they retire, end up broke.

Now, you might be asking yourself the question, what exactly is lifestyle inflation?

It can actually be summed up with one sentence.

"The more you make, the more you spend."

This is a trap that almost everybody falls into 80, 90% of people do this, and that is because it is quite literally embedded in our DNA. We can't help it. But in this article, I'm going to show you how you can reverse the process and overcome that instinct so that you can retire 20, 30 or more years earlier.

Instant Gratification

So the first thing you need to realize is that instant gratification is hardwired into every human being. That's the reason why we get addicted to Netflix, why we check our phones all the time. The reason why people spend, on average, about 8 hours a day consuming media. We all get addicted to the little dopamine spikes that happen whenever we watch a good show or whenever we eat something good, and don't forget that we are constantly bombarded by excuses for us to spend money.

Digital marketing experts estimate that we're exposed to 4000–10,000 ads every single day. In our modern consumer society, it's easier than ever to find different excuses to spend money on different things that you probably don't need and your brain tricks you into thinking that these things are going to make you happy and, well, they might make you happy for a split second; they are not going to make you happy in the long run. If you don't believe me, think about this.

"Average American lives a more lavish lifestyle than Louie the 14th."

Let that sink in for a moment. 

Everybody realizes this at some point in their life, but instant gratification will never make you happy and the sooner you realize this, the better.

6 Ways to Avoid Lifestyle Inflation

№1: Delayed gratification

So the first secret to overcoming instant gratification is the opposite, which is delayed gratification. You have to remember that delayed gratification is a habit that must be forged because instant gratification is so ingrained into our DNA. This has to be practised daily, and you have to try to do it with money and other things. Exercise, eating properly, making a schedule, getting work done. All of these things are examples of delayed gratification.

№2: See your Future

A straightforward way to overcome the instant gratification problem is to think about what would be best for me to do right now that would benefit me a year from now or five years from now. Whenever you think that way, you'll instantly realize that buying this random little toy will not make me happy five years from now. This greasy burger might make me happy for a few seconds, but 10 or 20 years from now, when I have a plaque in my arteries, that will not make me happy, and it's not going to be good for me.

Now, as I said, this is a skill that has to be forged. So it takes time and effort to start thinking like this. But once you start doing it regularly, it gets easier and easier to continue doing it, and after you do it for a few months to a year, it almost becomes second nature in you; you don't even really have to think about it.

№3: Budget Matters.

One of the big problems is that we aren't even aware of the bad decisions and the bad mistakes that we're making. Because of this, it's imperative to make a budget and track all the things that you're buying.

Many people think that making a budget is really difficult and time-consuming, but it's actually straightforward; if you use an app like Mint, it takes 5 to 10 minutes to set up. You just plug your credit cards and debit cards in there, and it automatically tracks all of your purchases. Then every month, just take five minutes to check all your purchases, and it'll show you what you're spending your money on.

Then all you have to do is think to yourself, is this something that I need, or is this something that I just want? And if it's something that you want to ask yourself, is this something that's going to help me? Or is this something that's just instant gratification? And it's going to be a waste of my time, and if it is something that you really do need or you really do want and it's going to help you, then you can go ahead and check around to see if there's a cheaper alternative. So you can bring that number down a little bit, and when you do this, I can almost guarantee you that you spend a lot of money on stuff that you absolutely do not need or stuff that you could use, but you're spending too much money on it.

So one example would be Starbucks coffee. You know, these coffees are over $5 apiece, and you can easily make coffee at home for 10 to 20 cents every single cup. 

So if coffee is something that you can't live without, you absolutely need it so you can get stuff done. That's totally fine; I'm not telling you not to drink coffee, but go ahead and just make it at home for yourself for 10 to 20 cents per cup and believe it or not, this will save you hundreds of thousands of dollars in the long run and also that feeling that you get when you check your net worth every month, and you see it slowly going up a little bit at a time is indescribable. Honestly, if you haven't done it before, you have to do it just to feel that. That alone is probably one of the absolute best things about keeping a budget.

OK, so once you've been using a budget for a month or two, you're going to have a pretty good idea of what your monthly expenditures are and what you really need to live and obviously, in the future, you're going to be more successful, and you're going to be making more money. So it's going to be very, very important to keep your expenses fixed.

Think about it, when you're in high school or college, you probably don't go out to eat that much. You probably eat most of your food at home, and you don't spend very much on food. Then you get your first job, let's say you're making $40,000 a year, and you start going out more. You start going out for drinks after work; you start going to dinner with many people. You start going out to all these events that cost a lot of money. You start buying coffee from Starbucks every morning because you're too busy to make your own. Instead of preparing your own food, you start ordering from Uber eats every night, and then you look at your bank account at the end of the month. You're barely getting by, and then after a few years, let's say, you get a promotion and all of a sudden, you're making $65,000 a year and of course, what do you do? You decide to move into a nicer apartment, and you decide to get yourself a brand new car, and all this time, you're wondering, why do I never have money at the end of the month? And this is why it is so important to keep your expenses fixed. It does not matter how much money you make. Just look at Nicolas Cage. He was one of the highest-paid actors in Hollywood, and he bought all this stuff like a mansion, he bought his own private island, he bought these shrunken doll heads that were like $2,50,000, and he ended up going bankrupt in 2009.

So whenever you get that raise, whenever you get that infusion of extra cash, save it, invest it, and that's how you can celebrate because, you know, every time you get extra cash, that's years shaved off of when you can retire, and you're buying yourself freedom.

№4: Avoid consumer culture.

This whole idea of keeping up with the Joneses, which started in the 40s, 50s is what started consumer culture, it's what started people spending way more money than what they needed to, and if there's one thing I've learned in life, the fastest way to be unhappy and foolishly spend all of your money is to compare yourself to others.

This keeping up with the Joneses mindset is a sure way to end up broke and depressed. So make sure that you do not fall into this trap. You absolutely do not need a giant house. Instead, spend that money on investment properties that will earn you even more money. You also don't need a super nice car. Instead of that, invest that money into a Roth IRA or a 401(k) and just having this mindset alone, even if you don't have a perfect job that makes a lot of money, will allow you to retire 20 years before everybody else.

№5: Stay away from bad influences.

So if you find yourself hanging out with certain people who spend ridiculous amounts of money, I can almost guarantee you that you as well will also start spending a bunch of money. So if you spend time around people who spend a bunch of money, you will naturally start to spend more money yourself. I thought that I was immune to this, and then I started spending time around a friend that spent a bunch of money on clothes and always went out to super nice restaurants all the time, and guesses what? I started doing the same thing.

So you need to do one of two things with these people. You either need to completely cut them out of your life, or you need to set boundaries with them, and it's not just people; let's say you find yourself spending a bunch of money on Amazon whenever you're bored. Well, if you don't have the self-control to stop yourself from doing that, it's effortless; just download an extension that either blocks Amazon, or you can just take off all of your credit card information so that you have to actually manually put it in your credit card every single time you buy something on Amazon.

№6: Have a Side Hustle Job

The next thing is crucial, especially if you find yourself with a lot of free time. You should definitely find yourself either a side hustle or a hobby. So this happens to everybody, you know, you're at home, you're really bored, and you get on Amazon, you buy something, or maybe you look online, you buy a course that you didn't need, you start spending money to fill the void of boredom, basically.

So a really great thing you can do is take that time and do something productive with it. Start yourself with a hobby or a side hustle. The average side hustle makes over $680 a month, which comes up to be over $8000 a year and believe it or not, a lot of the times; these side hustles will actually make you more money than a normal job because they're kind of seasonal jobs where people don't need them all the time, they only need them at a certain time of the year, which means that you do not have to compete with big companies. So, therefore, you can charge basically as much as you want. So an example of this would be being a caddy during the spring or being a personal shopper during the summer.

Conclusion

So I hope this helps you, and I make them as valuable as possible, put a lot of time into them and a lot of thought. I really like to teach straightforward financial concepts that don't take very much time, effort, or anything like that. They're straightforward to learn and very easy to implement. OK, that's it. Have a good one and bye for now.

Thanks for Reading!