Core Principle #2: Reject Lifestyle Inflation

Part 1 – Rejecting Lifestyle Inflation

College life is a simple life.  Living in a single small room with a roommate. Biking to class.  Getting books from the library.  Cutting costs wherever you can to save up for beer money (which never amounted to much since there were no good paying jobs available).  Sounds rough, right?

Except that it wasn’t rough.  It was a great time.  Every day was a day spent with friends.  The simple things like a free concert, a sunny afternoon playing ultimate Frisbee, and a cheap keg of Bud Light were all you needed for a perfect day.

Then you graduated and decided you needed new clothes, a nice car, and a loan for a house because that’s what people do.  You bought an iPad to go with your Macbook and iPhone because mobility is key.  You got a gym membership to stay healthy, and you always schedule some nights out at a good restaurants to stay social.

This is called lifestyle inflation.  It starts when you graduate and get your first good job, and it continues when you get your first raise.  Eventually you get promoted so you decide you should move out to a nicer neighborhood farther from work, but that’s OK because now you have a pool and 3189 square feet of space for all your stuff.

But now you don’t have enough stuff, so you have to go to pottery barn and get more stuff.

You get where I’m going with this?

But the thing is, this is all avoidable.  These are all choices you get to make for yourself.  Just remember principle #1: question everything.

If you’ve already succumbed to lifestyle inflation: that’s OK.  I did too.  It’s not a life sentence to working a job you hate for things you don’t want.  The entire description above was me, literally (including the 3189 sq ft house with pool in a fancy neighborhood).  But then I found a way out.  I created my own lifestyle deflation.  I downsized my house, moved close to work, sold my car, got rid of the money-sucking pool, and much more.  And life got better.  Way better.  Now that I’ve seen the inflated life and the simple life, I know that there’s no going back.

Part 2 – Sometimes it’s not easy

This is more of a warning than anything else.  Sometimes rejecting lifestyle inflation is hard.  Sometimes it’s not fun to stand out as the guy who ride’s his bike to work, doesn’t go out to eat for lunch regularly, and lives in a small house near work rather than in the nicer neighborhoods 15 miles north.

And if it were all about frugality and rejecting lifestyle inflation, it would be nearly impossible to do this – and definitely not worth it.

This is when you have to remember that the core principles are ingredients in a recipe for what I like to call the brave new life.  They will complement each other and support each other, and when placed together they will make a wonderful dish.

Rejecting one of the core principles puts the dish at risk.  Taking one principle and saying “this one is too hard,” or “this one’s not for me” is like baking a cake and saying “sugar is bad for me, so I’m not going to use it in my cake.”  That would not be a very good cake!

The Blank Slate

The blank slate is beginning to fill in.  It still has a long way to go over the next 6 core principles, but we will watch the slate be filled in with principles and goals that support each other harmoniously. (click to enlarge)

29 Responses to Core Principle #2: Reject Lifestyle Inflation

  1. Chris says:

    Great article. My first apartment out of college was a reach. Luckily I wised up and seriously downgraded once that lease was up. I also just want to know where I can get a keg of BUG light? :)

  2. It’s just so EASY to go along with it that most people don’t even stop and think.

    “Wow, I got approved for a 300k loan! Let’s go buy a 300k house!”
    “I deserve it!”
    “Everyone else has one!”

    It’s a really easy trap to fall into so you have to be conscious and diligent in your efforts to avoid it.

  3. Krantcents says:

    I have no problem with lifestyle inflation! The problem is most people make bad choices and immediately get into debt. If you go from a meager part time job to a $50K job, you suddenly have more money to live better. You should enjoy it, but don’t go overboard!

    • I don’t completely disagree. There is some level of enjoyment that can be bought with the increased income.

      However, the correlation between money and happiness of very slim. There are studies that show that once you get past the basic necessities in life (food, water, safe shelter) there is very little correlation between the two. Anyone sitting online reading this article is most likely past this point.

      After reaching this point, the best ways to happiness are good relationships, memorable experiences, and inner peace. These things cost very little money, and the less you spend now the faster you can stop working a job you don’t like in order to free up the time for these things.

      Now, if your job happens to give you good relationships, good experiences, and inner peace then by all means, go ahead and inflate!

    • One more thought…

      A “brave new life” is a life of freedom. For 99% of readers of this site, the only source of non-freedom is the need for money, either caused by debt or regular expenses. This is why lifestyle inflation is problematic.

      If you love your job (ie. would do it for free) and are getting promotions year over year, then lifestyle inflation is no problem. However, if you would not be willing to do your job for free, then its time poorly spent other than to save money to buy the freedom I’m promoting.

  4. Shawn says:

    I am enjoying this core principle series very much.

    • Thanks for the encouragement. To be honest, I’m not enjoying it… :)

      I generally don’t like to take the position of authority in this area, since I still consider myself a journeyman. This is why I made the statement that I’d be presenting 10 items, so that I couldn’t back down. :)

  5. CultOfMoney says:

    I don’t know, I personally enjoy a bit of lifestyle inflation. It’s one of the reasons that make people work harder, because they can enjoy the fruits of their labor. Obviously you need to be smart about how you go about it, and most people aren’t. I don’t have any problem with someone (like me) going out to eat a couple times a week, but I also know that is my primary form of entertainment. I don’t go out to the bars with friends, so dinner is the best way to connect now-a-days. I think that as long as you understand and put your money toward what you are really devoted to, have fun.

    • “I don’t know, I personally enjoy a bit of lifestyle inflation. It’s one of the reasons that make people work harder, because they can enjoy the fruits of their labor.”

      I don’t understand this statement. It almost sounds like you’re glorifying hard work as the positive outcome. Am I reading that correct? (If so, we definitely disagree and you might not like one of my next principles :) )

    • One other thought on your comment, Cult. Please keep in mind that these are the core principles of what I refer to as a “brave new life.” I feel entitled to do so, since I pay $10 a year for the domain name. :)

      It’s not a “this is the only recipe to happiness” list, but rather one that has created miraculous changes for me.

      My only warning is that I do feel these 10 principles work together, so if you take 8 out of 10, you may not achieve the harmony I have.

      Regarding the idea of eating out, my only thought is that there are other ways to spend time with friends. If the only activity someone is willing to consider for socializing is sitting at a table and eating/drinking/talking, I would question their creativity and interestingness.

  6. Debbie M says:

    I also like lifestyle inflation. I’m so happy to have some things now that I didn’t have as a student: health insurance, property insurance, donations to public TV and public radio, organic and whole-grain foods, and a car (not just any car, but one that works). I like having my own place, now paid off, though I always have a housemate, and if I want something fixed badly enough it will get fixed, and I don’t have to worry about jerk neighbors moving in an blasting bad music loudly at inopportune times or asking me to quiet down because they can hear my barefoot footsteps overhead.

    But I agree with the idea that these things have a cost and that you especially don’t want to be paying for lifestyle inflation for things you don’t even want or that are fairly obviously not worth it (in my case, cars that break, eating out, seeing movies in theatres, and too much stuff as if my house were a museum instead of a toolbox for a happy life). Fortunately I was never sucked into some of the temptations (big house, mall shopping, make-up/hairdo stuff) and I’m undoing others (doing more of my own food processing, learning how to repair more things, buying only things for which I already have evidence that I will use them (or lend them) over and over).

    I’m sorry you’re not enjoying doing these as much as your other stuff. I hope you realize that all of our devil’s-advocate-sounding stuff is our way of processing your cool ideas for our own lives. Some of us won’t do a very good job of it (“I like my life the way it is”), but some of us will really think about making a change. I definitely struggle with how much more I want to spend than when I was a student, so it’s good to hear about more examples.

  7. lifeoverwork says:

    I’ve explored this before in my blog, but I think the bottom line is to let yourself do just enough to not feel deprived, while still understanding that you don’t always need more, more, more. However, I’m still guilty of it. And even when I’m not, I lead myself to believe that I’ll be guilty of it later:

  8. “This is when you have to remember that the core principles are ingredients in a recipe for what I like to call the brave new life. ”

    Nice! I really like the way you are expressing these ideas. Of course, I happen to call them the Principles of Mustachianism, and this might mean we should become arch-internet-rivals!

    I enjoy the tension between your more strict and advanced take on the subject, and the more casual views of some of my fellow commenters above.

    I am right there with you on the more hardcore side of this dividing line, as I don’t believe that spending extra money correlates at all with “the good things in life”.

    It can definitely buy happy experiences, but you can meet or exceed these happy experiences in ways that cost nothing, if you use your creativity to find ways to do it.

    Why would you bother to exercise this creativity when you already have a good income and you can afford to just buy the happiness instead? Because you like to challenge everything, and also because you’re interesting in earning a taste of what it feels like to be truly financially free.

    • MJB says:

      You’re both doing a fine job shouting from the mountaintop, “Hey, people! You already know this stuff! Remember college? Go back a bit further, remember summer vacation (freedom!)?”

      Nonsense that you must inflate your lifestyle to be happy. When, truthfully, we’re happiest when we’re simply hanging out with the best free asset of all … people.

  9. steveinfl says:

    Growing up very poor I was driven to make money for the things I didn’t have as a child: working car, my own home, money for dining out etc. Then as I earned more and more during the late 90s dotcom boom I figured my income rising would never end. I earned close to 6 figures but spent like I as earning double that and was certain I’d be a millionaire soon.

    What did it result in? Lots of debt. 10 years of repayment. Several very unsatisfying career moves. By also some good lessons learned.

    I learned I enjoyed biking to work- a necessity when I was poor and a choice now that I am not. I learned that the library offered me enough choices for reading that I didn’t need t

    • steveinfl says:

      oops…at amazon. I learned that some of my best times are walking the dog with my wife or working out in the yard instead of spending $80 for a fine Italian dinner. For me I had to learn this by experience even though I had great examples of this from my grandparents and great aunts and uncles who had lived and shown me a wonderfully rich life which didn’t require much $.

      Now I value the freedom more than the $. So I appreciate the brave new life blog because it providers inspiration and reinforcement.

      But I had to learn the hard way. Hopefully some of your readers can learn from your experiences earlier so they can get to FI earlier if that’s what they are seeking.

    • Thanks for sharing your story. There are a lot of younger 20-somethings who read this site, and hopefully your story can help them make the right decision on how to treat increased income.

      Man, I hate to think how I would have handled money had I been in the workforce during the 90’s. Probably exactly like you, ending up in major debt.

      Fortunately, I graduated and started working in March, 2000. I joined a high tech company filled with “virtual millionaires” due to stock options. 6 months later, many had been laid off and the options were worthless. This was sobering to me, and reminded me to return to my lower middle class roots before I had a chance to get into trouble.

  10. JB says:

    I remember the college budget (back in about ’90) was hovering around $600 per month. The addition of a wife didn’t change it very much. The addition of children, however, have caused a large increase in lifestyle inflation. A need to live in a neighborhood with a safe, rated public school in a house that allows everyone their own personal space are big culprits. A larger used vehicle to fit growing children. The ever increasing demand for clothing and food for growing kids. There are several more things that I can add, but any parent of teenagers will understand. So while I agree that it would be ideal to limit lifestyle inflation, a certain amount of it is inevitable if one chooses to have children.

    • I consider lifestyle inflation as fulfilling increased “wants” rather than increased “needs.”

      So while I understand and agree with your examples, I don’t consider them to be what I would define as lifestyle inflation. Rather, I see them as increased expenses due to increased needs.

  11. College life was extremely stressful for me. I didn’t have any money and I couldn’t wait to start earning. Sure I didn’t spend much, but with minimal earning, it wasn’t fun.
    Once I started earning money, my lifestyle inflated a bit, but I think it was still under control. I never went into debt and saved aggressively. Our cost of living is a bit high now. We’ll keep working on it, but unless we move, it won’t reduce all that much.

  12. I couldn’t agree more here, and this is something I live by. I recently received a raise at work, and it was pretty substantial.

    Yet, I’m still living the same way I was before. I’m just super excited about boosting my already high savings rate. That’s the only thing income inflation does for me at this point. It just becomes a way to boost my savings rate. I hit a full year savings rate of 60% in 2011, so I’m hoping I can build on that.

    • 60% is great, DM. And the best part is that if you keep the same lifestyle expenses as well as reinvest your dividend income (which I’m sure you’re doing) that will grow very quickly to 70% and 80%. Once you get there, the countdown begins!

  13. […] Core Principle #2 – Reject Lifestyle Inflation […]

  14. Poor Student says:

    I am luckier than most because I am reading great advice like this well before I graduate and move to the next stage of inflated lifestyle. Before I always dreamed of buying the big house as soon as I had a job to pay for it. But now I realize that even a small house will be a huge step up in terms of freedom and expense.

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