7 Ways to Avoid Lifestyle Inflation That Will Make You Save More

Are you stuck in your 9-5 rat race and can’t seem to overcome living paycheck to paycheck? Do you miss your financial goals each month? Beleive it or not you are not alone! One of the biggest causes of financial struggle is lifestyle inflation.

According to Investopedia lifestyle inflation is defined as “Increasing your spending when your income goes up. Lifestyle inflation tends to continue each time someone gets a raise, making it perpetually difficult to get out of debt, save for retirement or meet other big-picture financial goals”.

Below I am going to outline 7 actionable tasks you can take to avoid lifestyle inflation at all costs. Your financial independence is 100% completely in YOUR control.

Related articles:


Be conscious that lifestyle inflation exists

The first step in battling lifestyle inflation is realizing that it exists. It’s time to get honest with yourself. When was the last time you got a raise or a new higher paying job and your monthly spending increased? Did you fall into the millennial money trap after graduating college?

The more money you make does not mean the more money you should spend. If your bank accounts seem to always look the same after a raise, then you have been falling into the trap of lifestyle inflation.

Time to acknowledge it and start dealing with it head-on.


Automate your savings

One of the easiest ways to avoid lifestyle inflation is to automate your savings. If your money is out of sight out of mind you will be FAR less likely to spend it on things you don’t need.

A great way to automate your savings is setting your contributions to your 401 (k) or IRA’s to a percentage instead of a dollar amount. This will automatically increase your savings anytime you start earning more money.

A good rule of thumb is to be saving between 15-25% of your take-home income. This is not an easy task but it’s completely achievable if you automate your savings. Pay Yourself First! 

We have used the combination of Mint, Betterment, and Personal capital for years and it has worked wonders!


Always stick to a budget

As T$C we wholeheartedly believe that without a budget reaching your financial goals is near impossible! Don’t set yourself up for failure by refusing to budget your money.

You work hard for every dollar you earn so why not keep track of where it’s going? Setting up a budget will give you a much better understanding of your spending habits. Once you understand your habits you can make the appropriate changes to avoid lifestyle inflation.

We put together an article with some of our favorite printable budget templates that you can use to start budgeting with.

Related: 9 Personal Finance Organizational Tips You Need To Learn Now


Keep your long-term goals in your short-term memory

Write down and talk about the long-term financial goals you have in life.

Are you saving for a down payment?

Do you want to have an early retirement?

Are you trying to destroy your student loans?

Figure out what your long-term goals and write them down! Writing down your goals improves the chance of you achieving them tenfold.

The key to sticking with long-term goals is keeping them in your short-term memory. Don’t forget why you are saving money each month. Talk about and re-evaluate your goals on a monthly basis.


Frugal friends are your best friends

Let’s be honest frugal friends really are the best friends to have. It’s true your habits will mirror those around you.

Do you hang out with individuals that blow $50 at the bars every weekend?

Are all of your friends driving brand new cars or even worse leasing them?

Make a conscious decision to stay close to your friends that have similar goals in life. Surround yourself with the people who will support your frugal lifestyle.

Learn how to have fun with your friends and family without having to go out to dinner. Activities like hiking, walking, campfires, movie nights, etc will be sure to save you money.


Value experiences over material things

This is something that we LIVE by. At a young age, we decided we valued experiences far more than material things.

It’s been proven by science time and time again that material items only provide short-term happiness. How long does the “new car” excitement last, maybe 2-3 months?

Start focusing your time and energy on creating lifelong memories instead of buying the latest and greatest gadget.

Imagine how much money you could put towards a vacation if you owned a used car and brought lunch to work every day.

The more material items you possess the more you will be forced to work to pay for them. Time is much more valuable than money!


Avoid buying the bigger house

Besides financing new cars this might be the second biggest mistake of falling into lifestyle inflation. A house is not a liquid asset. It takes time and money in order to recoup what you have invested into it.

Instead of investing 30%+ of your monthly budget into your housing expense buy a smaller house. If you are renting, rent a cheaper apartment with fewer luxuries.

These monthly savings will free up your entire budget and allow you to use your money on what you prioritize in life.

Remeber to focus on your long-term goals. If having a bigger house is going to prevent you from achieving them reconsider getting a more affordable option.

How many bonuses/raises have you received in your lifetime?

How have you prevented lifestyle inflation?