Think back to the last time you made it to that next level
of income with you personal finances. Was it a brand new job? A raise? What was your first thought? If it
was, “I have so much more disposable income.” Then you are not alone. There are
plenty of people who probably have that initial feeling. It’s exciting to make
more money, especially when it is your first “real job.” Letting your spending
equally grow with your income is called lifestyle inflation and can get out of
hand pretty quickly.
Hedonistic Paradox
Have you ever heard of the paradox of
hedonism? Well, it pretty accurately describes the dangers of lifestyle
inflation. There will probably never be a time in your life when you feel like
you’ve “arrived.” No matter how lavish your lifestyle becomes there is always
something out there that is bigger, better, and more expensive than what you
have. I like to call it the smartphone principle. If your goal is to have the
best smartphone out there, you are going to be spending a lot of money every
six months. It is better to learn to be content with what you have than it is
to constantly seek new and better things.
Awareness
Lifestyle inflation isn’t always such a conscience thing.
You may be out one day when you see something and think, “well, I can afford
that now, so why not?” Eventually that can become a regular occurrence. So the
first way you can combat falling into inflating your lifestyle is to become
aware of its
signs. Keep a watchful eye on yourself whenever you come into some new
money. Make sure you aren’t spending right under your own nose.
Stay Behind
Think about this. If you are struggling to make ends meet
and you finally get more money that’s great. However, if you let your lifestyle
inflate, your new expenses will eventually swell to the point that you were at
in your old income. It’s like you are kid who buys a whole new wardrobe of large
shirts as soon as you fill out your mediums. The best thing to do is to let
your income get a few paces ahead of your lifestyle. That way you can easily
handle all of your expenses.
Save
Another thing that could serve you better than splurging
with your new found income is using the money to bolster your savings. There
are plenty of things you could apply your new income too you’re your 401k, an
emergency fund, a child’s college fund, of general all-purpose savings
accounts.
Destroy Debt
There is one thing that you should definitely take care of
before you let your lifestyle inflate; debt. If you have pre-existing debts you
are really hurting yourself if you start to spend more frivolously after an
increase in income. Whether it’s student loans, credit card debts, or some
other thing that has you in the whole, an increase in your salary is your
chance to pay them off.
Considering these tips, try to avoid letting your lifestyle
grow to consume more of you money. Try to focus less on acquiring material
things and more on time with friends and family.