Avoid the Lifestyle Inflation Trap – 5 Simple Steps to Follow

A lot of us often think that having more money in our pockets will solve all of our woes and issues in life. So we work hard. We work harder than most of our colleagues, just to be ahead of everyone else. 

However, for a lot of people, once we get the promotion or the salary increase that we have been dreaming about in the last few months or years, we still find ourselves in the same boat. We still don’t have enough money in our pockets. 

And we always end up asking ourselves, “What happened?”

I’m not different than everyone else. I was also a victim of this vicious cycle of living from paycheck to paycheck regardless of how hard I worked. It seems that there’s no end in sight. 

My Lifestyle Inflation Phase

I’m a hardworking and ambitious guy.

Coming from a poor family, I have nothing else to hold on to but my dreams.

Ambition motivated me to study hard and to work harder than everyone else. I didn’t mind spending 12, 14, 16, and sometimes even more hours at work.

I created processes that helped improve our workflows.

A lot of my team members also got promoted with my guidance. And in return, I also got promoted multiple times in my career. The fastest promotion that I got happened in less than a year.

In every promotion, I get a significant increase in my salary.

And because of the pay increases that I got, I was able to travel to different countries in the world. I bought new gadgets every now and then.

Dinner and lunches in nice restaurants became my thing. Daily drinking sessions with my friends and colleagues also became a habit.

And then regardless of how much I earn, I always end up broke a few days before the paycheck. And it became a normal thing for a few years because I didn’t notice it going on.

Everyone I knew was doing the same thing. Most of them were broke before the next paycheck came. And the worst thing is, aside from spending it all, sometimes we find ourselves in debt just to make ends meet.

A few years afterward, I started noticing the cycle. I started asking myself, why am I still broke despite the multiple promotions and salary increases that I had?

 

What is Lifestyle Inflation?

Lifestyle inflation is defined as or referred to as an increase in spending when your income goes up. Typically, it manifests in a lot of people who get salary increases consistently.

In my observation of myself and of my peers, it started as an honest reward to yourself for working too hard.

We keep telling ourselves we deserve this lobster dinner every Friday because we work too hard.

Or do we deserve this beautiful and expensive watch because I just got promoted?

We deserve to drink every Friday and Saturday night because we need to unwind from our stressful careers.

Our jobs are stressful and we don’t want to deal with the hassle of the daily commute, we’re going to book a Grab or Uber ride from and to our offices. And so on and so forth. 

Does it sound familiar to you?

These were just some of the personal justifications that I told myself when I was still employed. And these unnecessary indulgences kept me stuck in living from paycheck to paycheck.

How to Avoid Lifestyle Inflation Trap?

If you’re reading this now, then you’re also looking for a way out.

You’re looking for a way how to avoid the lifestyle inflation trap and save money.

Congratulations my friend!

This is a step towards escaping this vicious cycle of living from paycheck to paycheck.

To guide you in your pursuit of improving your financial habits, check out this list of some easy ways to avoid the inflation trap:

Know your ‘Whys”

Knowing your ‘Whys’ will help you avoid the trap of lifestyle inflation. It will guide you in every action that you will take not only in your financial life but in all the other aspects of your life.

Every decision that you make will be aligned with your purpose. Some of the questions that you may want to ponder on include:

• Why do you work so hard and why do you work very long hours? 
• What’s the reason why you keep on pushing yourself to get promoted or to earn more? 
• Do you want to achieve financial freedom or do you want to retire early? 
• Are you the breadwinner of your family?
• Is anyone depending on you financially?

If you know your ‘Whys’ then you will be mindful of spending your hard-earned money.

You understand why you have to save your money.

There will be a deeper understanding of why splurging on unnecessary things will not help you achieve your goals. 

Create a Budget and Follow it

Once you have a clear understanding of your purpose and goals, it will be very easy for you to create a budget. Your budget will help you stay on track when it comes to spending. 

Start by tracking your expenses to identify your monthly expenditures.

Are there any items that can be removed from your list?

Do you think there are certain items that have a cheaper substitute? 

Once you have identified your essentials, then you can start creating your budget.

Following a budget can be very difficult if you’re not used to it. Don’t beat yourself up if there are certain months when you exceed your budget. 

In those months that you exceed your budget, try to identify if those instances were really unavoidable like emergencies. Setting up an emergency fund will be helpful in ensuring that you stay on track.

Your emergency fund will cushion you in these kinds of expenses. 

Surround Yourself with Like-minded People

This is a tip that you will commonly see in every financial tip or self-improvement article. Why? Because people are easily influenced by others. Behavior is contagious!

If you are hanging out with people who often eat out at posh restaurants then, of course, you would want to do the same thing, especially if you really want to hang out with those people.

On the other side of the spectrum, if you have friends or colleagues who are used to bringing packed lunches, then you might be influenced to do your own meal prep as well. It will be normal for you to have your lunch at your office pantry instead of going out to eat at the nearby restaurants.

This is the hard truth that most people ignore – choosing who you hang out with will play an important role in the pursuit of your goals.

So, choose well my friend. 

Be Aware of Your Media Exposure

Advertisements that we often see in the traditional media and on the internet are made to sell products and services. They have hired the best talents in the world to help them market their business.

In the time of social media, these marketers also tapped individuals who have a huge number of followers to help them sell their products. 

If you are constantly exposed to feeds that constantly promote products, then I suggest that you limit your exposure to these feeds. Keep this in mind, especially if you’re trying to achieve your financial goal.

These advertisements are subconsciously inviting you to buy their products. That’s what it is made for – to sell you their products.

Minimize your exposure to TV. Choose your feeds on Facebook and Instagram carefully.

If your goal is financial independence, subscribe to blogs and social media feeds that promote mindful spending. Subscribe to social media feeds that talk about more affordable alternatives.

I have also been doing an internet detox lately. I have been unsubscribing to some feeds that are not aligned anymore to my goals.

I am, however, subscribing to tons of financial independence, investing, and personal finance blogs because I believe that they could influence me to improve my mindset and improve my financial habits.

Indulge in Valuable Experiences in Life

Spending tons of money to make you feel happy is an idea marketed to us by various businesses in order to sell their products or services. Living a beautiful and happy life does not always mean spending money.

If you really enjoy eating with friends why not invite them to a potluck party? You can also cook at home with your family and friends to level up this experience.

You can divide the tasks amongst yourselves. One of you can make the dessert, while the others will take care of the main course.

If you really like to travel, why not travel in your home country for now while you’re building your wealth? Traveling within your home country can save you some money since you don’t have to pay for international airfare, international travel tax, etc.

If you want to travel internationally, then start with your neighboring country. Their proximity to your country makes airfare cheaper.

Follow budget travel blogs that often talk a lot about travel hacking and cheap ways to travel. If you plan it carefully, you really won’t need to spend that much.

Learn new hobbies that can be beneficial to your overall well-being such as gardening. If you want to save some money while doing it, then plant vegetables and herbs.

The skills that you will learn can also become handy in the future. Who knows, your hobby can develop into a side hustle or a full-time hustle that can help you become more financially independent.

There are tons of ways you could enjoy your life without spending a lot of money.

These are just some of the steps that I hope can help you be mindful of your finances thus helping you avoid the lifestyle inflation trap. 

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Do you have any other suggestions or recommendations on how to avoid the lifestyle inflation trap? Feel free to share them in the comment section below.