How To Avoid The Lifestyle Inflation Trap

Let’s talk about lifestyle inflation.

Firstly, what the hell is it? Well, lifestyle inflation is when you start spending more money simply because you start earning more money.

When I first started working full-time, I remember someone telling me that “the more you earn, the more you spend” and that was the first time I had ever really thought about the concept of lifestyle inflation. I’ve now been working full-time for a couple of years, over which time I have had 4 pay rises. Those pay rises are because I’ve worked my ass off to develop more career skills and because I’ve obtained jobs at higher paying companies. As my pay continues to rise, I can see how easy it is to get sucked into spending more money. I’m always temped to buy more coffees, or to book more expensive hotels, or to buy fancier clothes because I feel as if “I deserve to treat myself.” And honestly, I do deserve it. I’ve worked hard to develop my skills and to obtain higher paying jobs, but for me, the best way that I can treat myself is to strive for financial optimisation. It’s more important to me that this hard work means I have more money in savings and investments than in material stuff that I don’t really need.

So, in order for me to optimise my finances and avoid the trap of lifestyle inflation, I have one simple trick:

I act like I don’t actually earn more money!

Hear me out…

Imagine that my old wage was $1000 per week. Now imagine that my new wage is $1200 per week. And now imagine that I save that extra $200 every week for a whole year. In just twelve months, I would have saved an extra $10,400 without even realising that I was doing it. So, when every pay day rolls around, I would transfer that extra $200 straight into a savings account without even thinking about it. I would then use the remaining $1000 to pay my rent, pay my bills, save, invest and splurge the rest on whatever the hell I want.

Even if your wage increase is less than $200 a week, the same principle applies. Even saving an additional $50 a week without thinking about it will add up to an additional $2600 in your savings account. This trick is such a killer way to avoid getting sucked into lifestyle inflation and it means that you can smash your savings goals even faster.

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The Stingy Bitch

Based in Sydney, Australia.
Created in 2020.

This site and all of it’s contents are provided for entertainment purposes only and do not constitute personal financial advice. All products that are mentioned are general product advice only, not personal product advice. Not all options are presented and my opinions are subject to change. All content and posts have been prepared as a general summary only and is not intended to be financial advice with respect to any particular matter. This post should not be relied on with respect to any particular matter. If you have questions about any aspect of the content or this site or otherwise require personal financial advice, you ought to seek financial advice. The author disclaims liability to any person who relies on this post.

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Published by thestingybitch

A Twenty-Somethings Guide to Saving Money Whilst Still Living Your Best Life

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