What are your methods for fighting lifestyle inflation?

Obviously one major part of getting rich slowly is living below your means. I know I feel the pressures of increasing costs of food and fuel which I have no control over, and I'm sure all of you do as well.

But what about those costs you can control? How, when your means rise, do you keep your lifestyle from inflating along with it?

This has been something I've been struggling alot with over the last couple of years. My husband and I have purchased, fixed up, and furnished a house which seemed to make my money fly out of my pockets (though we did alot of work ourselves and did do it frugally).

Now that this has settled down somewhat, I've been focusing more on keeping the money we do make in our pockets to work for us. But sometimes staying disciplined is tough, and I'm curious to know how others deal with this.

I think it's important to think carefully and realistically about what would make your life better and what wouldn't. To have a clear vision of what your ideal frugal life looks like. If I'm realistic, I don't really want to change any aspect of my current lifestyle - except that I have roommates who regularly keep me up until after midnight. So that aspect, I'll happily change when I have money to do so, but I want to keep the rest of my lifestyle under control.

We fight life style inflation a couple of different ways.

(1) We limit the amount of available money by setting allowances for day to day spending. We each have $500 per pay period (half a month) for day to day spending which covers gas, groceries, eating out, entertainment, clothes, personal expenses, etc. When the money runs out we stop spending.
(2) We track our spending using Quicken. When we review our Quicken charts (monthly, year to date, etc.) and we see how much we are spending on eating out (our big misc. expense that we should be doing better on) or some other spending category (dry cleaning) it helps us to keep that spending down.
(3) When we have extra money in our budget we try to move that money to savings rather than life style inflation. Some time those savings goals could be considered life style inflation, right now we are saving for a nused car for me, but some how saving up cash for those expenses makes all the difference. Right now we have $14,000+ in the nused car fund (goal is $17,000) and we have started talking about when we should begin the car search (we've done some preliminary research and have a good start on which car models we will be targeting). On the one hand once we have a fully funded car account we probably will begin fine tuning our search and test driving cars. On the other hand, I'm not in a huge rush to get the nused car if my car continues to run okay (I really don't want to put more money into the car).
(4) We have tried to avoid taking on recurring monthly costs (i.e. Netflix) that increase our monthly outflow.
(5) Balance. If you are working hard, have your debt paid off, have an emergency fund, are saving for retirement, then its okay to spend some of that hard earned money on things or experiences that you will enjoy.

I think the most important thing is to stay disciplined. Have you thought about put some of your extra earnings into an account for non-necessities? Or perhaps for every increase in salary, allocate a certain amount to be invested or put into savings, which cannot be used unless an emergency occurs?

I know that when we have "extra" money in our lives it is very easy to want to spend it on new toys, but you have to be practical and remember to look at the potential future ramifications of these actions. For example, will purchasing this new BMW now have the potential to hurt you if a serious medical problem occurs? Do you really "need" this item, or could you make do without or use a less expensive alternative. These are all things that I think about before upgrading my spending with my increase in salary and has helped me to not go overboard.

This is an excellent topic. Some friends of mine are a definite victim of this, the more they earn the more they spend and the more they earn the more debt they've taken on. Now the shit has hit the fan with the wife quitting her job and they're now left with a mortgage+car payment which is more than their single remaining wage. They're still spending of course (on credit), amazingly the other day he was talking about buying a boat with his tax cheque!

Ok, let me be more specific - Personally, I'm not talking about buying a new BMW, really. Or anything like that. For me, its the little things:

1) oh, we need new cell phones, we have had the same ones for 3 years, and the phones are breaking. Let's get iphones! ($200 for 2, plus a net increase of $30 per month to our existing cell plan)
2) oh, we need new clothes. We make x amount of dollars, we can afford new clothes. We need them for work.
3) vacation. It wouldn't be summer without a vacation: this year - $5500. I remember being right out of college and spending about 1k on a vacation.
4) food - both eating out and grocery shopping. We make more, so why not buy higher quality (more expensive) food. Why not go out for a nice meal once or twice a week.

Now, don't get me wrong - we save. We save alot - but we could basically save - 100% of one salary (of the two) plus an additional 15% on top of the other if we wanted. And each year the things we "want" seem to turn into things we "need" or rather - we don't feel like we need to say no.

Much like the poster who expressed guilt for a big purchase (where i told him not to beat himself up too much) I am struggling in a similar fashion with reigning myself in.

Its fairly easy (at least for those with somewhat of a frugal mindset) to do the big things right - ie, buying a car (which we did recently, and got something very practical and understated). Its the little things.

I would recommend using a "zero-based" budget, where all your income is either spent or saved under different categories each month. That way their is no "extra money". While their is nothing wrong with increasing your entertainment money or whatever, make sure you are putting a name on all your "extra" money, even if that name is "blow at the casino".

IMO, if you have paid off all your debts, have a 6 month E.F., are saving appropriately for retirement and targeted savings like cars and other expensive items, then it is time to live a little. Dump that money into a "vacation" account and when it fills up, take the vacation. If you have a mortgage, start chipping away at it with windfalls.

I agree, it is tempting to bump up the lifestyle beyond your means, and before you know it, you get out of control. One thing that works for us is that whenever we decide to increase our budget in like "entertainment" or "eating out", we increase our "retirement savings" or "charitable giving" the same percent. This has kept things in check for us.

Ok, this is a really good idea. We have paid all our debts and have a 6 month EF, but we don't have targeted savings for things like our next car (which we will likely have to buy within 2 yrs) or for our next vacation. Maybe I'll start a new savings account with automatic monthly debits for these things just like they are bills.

Thanks.

Good call. Treat the targeted savings just like they are bills. Also, consider just using an excel spreadsheet to keep track of what money is in your savings account/money market account. This way you can keep your Emergency Fund and targeted savings going into the same account, just keep track on paper how much is in each category. Our HYSA on-line savings account is one account comprised of 1) 6 month Emergency Fund, 2)Next Car, 3)Expensive Car Repairs, 4)Christmas Gift Savings, 5)Property Tax/Car Tag Renewal, 6)New Home Down Payment, and 7)Vacation Fund. This way I don't have a bunch of different savings account to manage! Good luck.

I use ING and like having a bunch of sub accounts for my different savings goals and escrow accounts (i.e. emergency fund, escrow for real estate and insurance for each property, nused car fund, vacation/travel, furniture/house fund, 2008 IRAs, baby fund, etc.).

Having the sub accounts doesn't require any extra effort once they are set up. Our monthly transfers to ING are all automated.

I just did the same thing. So far, I only have emergency fund, real estate taxes and insurance, auto insurance and nused fund, & 2009 Roth IRA (Yes, I've already funded 2008, Hooray!)

I struggle with this too, and I'm really bad with formal budgeting.

What has been working for me to date is taking savings off the top (mine is for retirement, college funds, a new kitchen and a car) and not sweating the rest too much.

I have stupid rules for myself to limit some of the creep, for example I can only go to Starbucks if I'm travelling (ie, at the airport) or have pulled an all-nighter at work. Otherwise it is the office coffee pot for me. I try to be strict about only going out to dinner once a week. And I try to be mindful when doing things like clothes shopping.

Since I'm middle aged and have only mortgage debt, I do let myself splurge a little. I figure it is my hedge against an early death which would deprive me of the pleasure of finally spending some of my 401k money!

I love this - a little hedge against an early or untimely death!

You know the answer here - don't buy the iPhone. I want one, but I'm not willing to pay for one. So I've decided it's time for a cell phone upgrade (we have a "new every 2" plan with Verizon, so it's free). We'll get the free phones, and wait for the iPhone to be unlocked in another year or two.



Fine, but set a budget. I spend ~ $500 a year on work clothes. As long as I'm within that budget, it's OK to spend. Once I've hit that max, it's gotta be something undeniable (like a bleach accident with my black work pants!)



Again, you know what to do - find a cheaper vacation, if spending 5.5X your college amount bugs you. For me, the two things we spend on are cars and an annual vacation. We spend more on a vacation than most, but it sustains us the rest of the year. So, I spend less on clothes, shoes, furniture, computers, cell phones, etc. to afford the vacation.

The trick is to inflate your lifestyle in the areas that are personally meaningful for YOU, not across ever category.



This is our big hole these days. Going out to dinner used to mean the Wendy's Value Meal. Now, it means pasta at a middle-of-the-road restaurant, and we like a glass of wine with it. When I look at our monthly CCd summary, we're spending waaayyy too much on this. My answer would be - buy better food for at home - because even expensive stuff cooked at home is MUCH LESS expensive than food prepared by someone else.

If you find another solution or trick, please post it.



For me, it's all about budgeting. Long before I get my annual salary increase, I've already decided how it will be spent. Last year, I finally made the jump to socking away $1K/month in my 403(b). That felt GREAT. I also increased the $$ I give to my elderly widowed mom each month - from $150 to $200 a month. I'm helping her save up cash for a "nused" car in the next year or so (she drives a 12 year old Buick).

For this year, I intend to take the raise and MAX OUT my 403(b) - which will be another $292 per month. That will probably take care of most of my raise, in addition to taxes.



So get a GRIP on the little things, and decide where the personal VALUE comes from. I think it's perfectly OK to spend a little more on eating out if you're maxing out your IRAs and retirement savings, if you have no debt, etc. But if your lifestyle inflation means you're not meeting your savings, retirement and other goals, then you need to adapt.

If you ARE meeting all those goals, you should learn to relax. Maybe go spend some of the excess cash on a massage.

Sandi

Regarding the dining out, I found that going to a meal-prep place curbed my desire to dine out. Food was insanely good, and still costs less than going to Chili's.