Fighting lifestyle inflation: Hopping off the hedonic treadmill

Frugalists aren’t averse to spending. They’re just canny about how they buy, or whether they buy at all.

That’s a tough sell, so to speak, in a country where we’re persistently pressured to keep up with the Joneses (or the Kardashians). Flash sales, one-click shopping apps, deal websites, and near-weekly sales at brick and mortar stores make it soooo easy to buy.

Haul photos on social media, hot deals shared by friends, clothing or cosmetics worn by favorite celebrities, that bling your sister-in-law sported at Christmas – spending triggers, every one of them.

It’s tempting to believe that next purchase will be the one that makes you finally, truly happy. Except that it probably won’t, thanks to what sociologists call the “hedonic treadmill” or “hedonic adaptation” – our tendency to adjust back to previous levels of happiness after a spike in glee.

J.D.’s note: You might have seen this concept referred to as “lifestyle inflation” at GRS and other money blogs.

Maybe that initial joy is caused by a pay raise or the purchase of a big-ticket item like a luxury car, or even a smaller-ticket item like a leather jacket or the cookware you were convinced would change your life. All too quickly the Lexus becomes just another vehicle, and the raise seems to melt away thanks to lifestyle inflation (like, say, a higher auto insurance rate).

A steady practice of purchasing sets the bar higher every day. Shopping, meals out, luxury vehicles, fabulous entertainment all become needs rather than wants. Little extras and perks are no longer treats – they’re the bare minimum of acceptable.

Saying “Yes” to What Matters

As a midlife university student paying off divorce-related debt, my default setting was “no.”

  • No, I couldn’t shop anywhere but the secondhand store.
  • No, I couldn’t go out every weekend.
  • No, I couldn’t stop brown-bagging.

My dollars had better places to go than malls or movie theaters. Specifically, they were slated for slaying my divorce-related debt, and for building my emergency fund and retirement account.

Once I was debt-free and reasonably well-funded, the “no” setting turned into “well, sure – if you really think it through”. I was able to say “yes” to things that really mattered: health insurance, charitable donations, therapeutic massage, travel.

Mostly, though, I kept soaking beans instead of ordering in, taking the bus instead of buying another car (I’d given the old one to my daughter and son-in-law when they moved), and sticking with my thrift-shop apartment furnishings.

It’s not that I minded spending. I just didn’t want it to be too easy. You shouldn’t want it to be easy, either.

Saying “no” or “not today” doesn’t just improve the bottom line; it also enhances the occasions when you do say yes. A really nice meal out or tickets to the opera or the monster truck rally feel super-special precisely because you don’t get them all the time.

I love steak, probably because I rarely eat it – but when I do, oh boy is it ever great. Would I enjoy it as much if I ate it twice a week? Probably not.

Three Simple Steps to Avoid Lifestyle Inflation:

1. Bank every raise or bonus. Divert the difference in pay immediately into a high-yield savings or retirement account.

2. Prioritize Debt. If you come into extra money, put it to work paying down debt.

3. Focus Internally. You don’t have to keep up with the Joneses, promise. Living below your means isn’t just smart, it’s the very definition of financial stability.

Deferred Gratification Doesn’t Have to Hurt

Understand: I’m not saying you should never buy anything. Frugality does not translate to a life of joyless self-denial. What it does mean is making conscious decisions about what’s right for you and your money.

Obviously you should enjoy the fruits of your labors. Never underestimate the effect of a Saturday matinee or a craft beer with friends; even small treats can feel supremely luxurious.

But treat yourself mindfully rather than automatically. How easy it is to think, “It’s just a hobby magazine” or “I deserve to hit the clubs every weekend while I’m young and carefree”. Pile up enough of those publications and pay enough of those cover charges and it starts to look like real money.

Deferred gratification doesn’t have to hurt. In fact, new electronics might be exponentially cooler because you researched them, anticipated their purchase for weeks, and then paid cash. Which brings me to a word you don’t hear all that often: sacrifice.

Putting off immediate desires used to be a defining characteristic of adulthood. First apartments and first homes were small and modestly decorated (and “decorate” was often code for “things from your grandparents’ attics”). Making it in the real world meant years of hard work and of using it up, wearing it out, making it do or doing without.

That notion may seem downright quaint to those who grew up in a culture of buy now and pay eventually. Why shouldn’t you have the latest smartphone upgrade? Why shouldn’t your first apartment have throw pillows and wallpaper borders and pillow shams that match the dust ruffle? Why shouldn’t your kids have the best that money can buy?

Because you pay for many months or even for years, that’s why, and because it’s not just the interest charges that hurt. Being in debt means opportunity cost – think of where that money could have gone! – and more to the point, it limits your options. How many people do you know who hate their jobs but can’t afford to quit because they need to make minimum payments on the credit cards that paid for all the things they bought to take their minds off the fact that they hate their jobs?

Frugal people do attend shows and sporting events, buy cars, take vacations. What they don’t do is get these things by going into debt without a clear plan to pay it off. That’s like sticking your head in a lion’s mouth on the theory that it might not be hungry today. But it probably is – and you won’t know for sure until you feel the jaws clamp down.

Face it: You probably won’t win the lottery or have a rich uncle leave you a bundle. Your needs and your wants will be met by the dollars and cents that you earn and build.

It can be hard to imagine how the things you give up today will make a big difference decades down the road. But you are responsible for that future, which means being responsible in the present.

More about...Psychology

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There are 40 comments to "Fighting lifestyle inflation: Hopping off the hedonic treadmill".

  1. lmoot says 04 June 2016 at 08:05

    I guess I haven’t had enough of an increase in income to really experience lifestyle inflation the way others have. I do make about 2 1/2x what I made at my first full time job 7 years ago. Same house, same car. As my income went up my savings rate went up and my debt went down as I began paying down my mortgage.

    Maybe it’s just extra sneaky and I don’t realize it, but if I spend more it’s usually because my responsibilities have increased, and not for any controllable reasons. When you have goals that you’re passionate about (in my case, obsessed with), all I can think about is doing things to further support those goals; so I would add “Have Goals” to the list of how to avoid lifestyle inflation.

    The closest thing I think I’ve experienced in lifestyle inflation is when I started working full time again after taking 6 months off. I had to be so spare with my spending because of uncertainty of the future (even though I had savings) that I kind of went crazy the first few months after getting a new job. I don’t think I spent more than I did before my break, but it definitely was an attempt to make up for the spending I didn’t do for those 6 months. I had a whole list of things I wanted/needed. In that case for me though it wasn’t because of making more money which caused me to spend, but rather I had more confidence to spend now that my income was steady.

    I think there are two main ways people use LI. For those who have long-term goals, the extra income allows them to pursue those goals, but it doesn’t affect their wants. Then there is the sort who actually alter their tastes to fit the new income; those, IMO, are the most unfortunate because usually there’s no ceiling and if they have it, they’ll spend it, no matter how much “it” is.

  2. Ken says 06 June 2016 at 07:09

    Good points at the end. Banking your raise or attacking debt are smart moves!

  3. Mike says 06 June 2016 at 11:05

    I combat lifestyle inflation by setting savings goals and spending limits on ‘wants’. If I meet my savings goals, the rest can be used for the wants, and I’m happy.

  4. Katherine says 06 June 2016 at 11:18

    I have never thought of LI in relation to my salary and raises. Instead I think of it in terms of all things that are available to us now in the digital age. I try to avoid LI at all costs, but sometimes I get exposed to something and I make the decision to “upgrade” my experience. For example, after driving the same 2-door car 13 years, and then having a kid, I upgraded to a new four door car. The car came with six months of satellite radio. I was addicted. I tried to resist. I let the subscription run out. But I couldn’t hold out for long. So now I still have satellite radio, three years later. On the flip side, sometimes technology works in our favor and causes prices to drop. I was able to cut my cell phone bill by more than half because of competition. I dropped my land line years ago. I don’t have cable, but I have Amazon Prime. My current lifestyle inflation issue: There’s these new sheets that allegedly have NASA technology to keep me cool in the summer and warm in the winter. I tend to sweat at night and I hate waking up and having to shower again in the morning when I just showered at night. In the end, I try to ensure my spending reflects my values as much as possible. I haven’t had a raise in several years, but I still find cool things I want to buy to upgrade my lifestyle. Grill Gazebo anyone?

  5. Mom of five says 06 June 2016 at 20:16

    I’m 50 now and I’m going to own up to quite a bit of lifestyle inflation since my 20’s. A lot of it is just related to getting older and seeking more comfort. I drink more expensive alcohol, I eat more expensive food, and I have become quite a fan of certain name brands (e.g. Charmin). I remember an early upgrade was paying somebody to mow our lawn. It costs us about six hundred a year. Oh my goodness! I would go back to ramen noodles before I would mow my own lawn again. i think little upgrades are completely ok and are a natural part of life. I think it’s the big upgrades (like mortgages and cars) that can get people into trouble.

  6. CentSai says 09 June 2016 at 09:00

    Wow, really interesting article. Money can go to your head quickly, which can lead to lifestyle inflation and that’s never good. No matter how much you make, you should definitely stick to that frugal life!! Thanks for sharing!

  7. getagrip says 10 June 2016 at 06:50

    In the end the guy who dies with the most money…just dies, pretty much like everyone else.

    Money is a tool for you to live your life. The beauty is you get to decide how to live it. I’ve always thought the point of being frugal is to be conscious in your spending to ultimately give you the best chance of living the life you want and reaching the goals you want. I see nothing wrong in “upgrading” as long as it is a conscious choice and not an unconscious activity, because then you will have thought about it, considered it, and worked it into your budget and future plans. This assumes, of course, that you are also able to “downgrade” if your circumstances change (e.g. you lose that high paying job and have to take a lower paying one).

  8. Baz from Australia says 14 June 2016 at 21:22

    Interesting subject! Nearing retirement (I hope) our expenses are assessed on a need rather than want basis. My experience is that as soon as you give in to a little LI something happens, like the GFC, to bring you back down to earth and you’re actually worse off for a while. Cars, boats and overseas trips can be the worst value LI indulgences in my opinion.

  9. Sam says 23 June 2016 at 08:09

    I hate lifestyle inflation, of course it can’t all be avoided. For example, we have a small child now and that child needs pampers, food, and most expensive child care. That is lifestyle inflation based on a change in lifestyle, addition of child to our household.

    On the other hand, I do my best to avoid creeping lifestyle inflation. That means, that when I review our monthly expenses from year to year when working on our annual spending plan, I address why there are increases if there are. For example, utility bill, is the increase due to rate increase or usage. If its due to usage where, when and why. Can I do anything about it, and if yes we do. DirecTv bill is up, so its time to call about discounts and the like. I look at each of our bills and address how I can keep the expense flat from year to year. I also do my best not to add bills, no new subscriptions or monthly services, etc. For example, why we use a cleaning service from time to time we pay by the time and we do not pay for a monthly service.

  10. kiki says 29 June 2016 at 08:22

    I combat lifestyle inflation with what I call “the trailer test”. If I lost my job or retired or won the lottery, and had to/got to/wanted to live in a trailer driving around the country, would the item I’m considering purchasing fit in the trailer? If not, well then, I don’t want it as badly as I think I do. I’m a Williams-Sonoma addict from way back, so this is a big change for me.

  11. M155P says 24 September 2016 at 10:07

    LI to me is like a disease of the modern age.

    If anything I like simplifying my life. I downgraded my house from a 5 bed house, to a nice 2 bed house with a sized plot. This became so cheaper for me in many ways. This in turn allowed me to down grade my job, to something much closer to home, less expense in fuel and less travel time, so more time at home, yet still with the same lifestyle standards and the same abilities to invest and save.

  12. Jason@WinningPersonalFinance says 10 January 2018 at 05:51

    Your so right about how being frugal can add enjoyment to something. I cut my budget a few years ago. Eating out was drastically reduced. At the time eating out was a way to fill my stomach, not a special event. These days the once in a while that we do go out it’s really enjoyable.

  13. Matt Spillar @ Spills Spot says 10 January 2018 at 13:08

    Great post about hedonic adaption, lifestyle inflation, and delayed gratification. These concepts are so important in our current society. Delayed gratification has become a lost art. Living a frugal lifestyle is intentional and freeing. It lets me know that we have enough money to pay the bills and pursue the areas we value most.

    • Donna Freedman says 10 January 2018 at 14:30

      Delayed gratification is what my dad would call “a useful life skill.” He’d use that phrase whenever he wanted us to do something we didn’t want to do: “I’m going to teach you a useful life skill called (carrying cinder block/tying up bean vines/holding pipes while he soldered them), so pay attention.”

      He and my mom taught delayed gratification by example. They worked hard and dealt with various financial crises (hint: they had four kids in five years, right out of high school) and showed that waiting for what you wanted was a good thing.

      As for pursuing the areas you value most, that’s my frugal mantra: “I save where I can so I can spend where I want.” It works if you work it.

  14. Dave @ Accidental FIRE says 10 January 2018 at 16:25

    Delayed gratification was my main secret weapon to achieving financial independence. I like to think I straddled the line between delaying things while still maintaining happiness pretty well. I didn’t always get it right, but I think if you get that balance right most of the time you’ll be winning.

  15. Sequentialkady says 10 January 2018 at 16:50

    My supervisor and I blew our student workers’ minds the other day:

    1) She has never paid more than $200 for a phone, me — $300.
    2) We have never paid more than $35/mo for cell service.
    3) For the first time in over a decade last year, I purchased a brand spanking new computer as opposed to a certified refurbished or used.
    4) We get plain old coffee or tea when we go for drinks, not fancy frou-frou drinks.
    5) We buy most of our clothes on sale/off the clearance rack & we wash in cold water on gentle cycle to keep things looking new as long as possible.

    Well … at least they’re learning it somewhere?

  16. Rosa says 10 January 2018 at 19:32

    this is most obvious to me with cars. They change so much in a decade, if we hold on to one until it dies and then upgrade to a pretty basic model, it is astonishingly nicer.

    Replaced a 1994 Camry with a 2001 (in 2007)- got a CD player! WHOOHOO.
    Replaced the 2001 Camry with a 2014 Prius (this year) remote door unlocking! USB charging ports!

    It’s been six months and I’m still happy every time I drive the thing.

  17. Jennifer says 10 January 2018 at 20:08

    Hey, I didn’t know JD bought the site back, until I saw you mentioned on Facebook! Yay! I look forward to lots of good money smarts reinforcement to come!

  18. S.G. says 10 January 2018 at 21:20

    My YouTube education included an interesting psychology lecture about how we think that something will make us happy, but what really makes us happy is the PURSUIT of the *thing*. The lifestyle inflation happens when you don’t understand and your life plus *thing* is your new baseline.

    I wonder if you had a system where you traded your *thing1* for *thing2* rather than *thing1+thing2* if youd have the happiness now and later.

    • Donna Freedman says 10 January 2018 at 21:41

      That’s definitely an aspect of hedonic adaptation: You eagerly anticipate getting *thing1* because you just know it will change your life forever. Once you get it, the bloom goes off the rose surprisingly quickly — at which point you realize that *thing2* might be the item that you really need.

      Lather, rinse, repeat.

      For another viewpoint on that: Go back to the story and click on the “anticipated their purchase” hyperlink. The writer of that piece was impoverished and it took her about a year and a half to research the item she wanted and to save up enough rewards points to buy it. No hedonic adaptation there: It made a huge difference in her life and she used it regularly, always feeling glad she had it. At one point it became lost and she describes the real reason she mourned it.

      • S.G. says 11 January 2018 at 14:28

        Absolutely. My point is I wonder if you have a mindset of letting *thing1* go before you get *thing2*, if that would help.

        Specifically I think of this in terms of subscription services and other items that incur regular expenses. For example I’ve done it with cable TV a few times in my life. As I miss TV I work it into my budget, then after a couple years I find I’m not watching it so I cancel it. Then a few years later I’m missing it again. If you consciously program in a cycle of contraction getting rid of the stuff you don’t care about anymore, you can enjoy the expansion cycles without the lifestyle inflation.

        There are actually plenty of mental tricks you can use to do this. For example my kids want to go to Disneyland, and I’ve told them we can go when we can save enough from other budget categories (like eating out) to pay for it. We aren’t going to stop eating out permanently, but it doesn’t have the value as a treat that Disneyland has right now. Then once Disneyland is paid for and we eat out more, eating out will be a treat because we haven’t been doing it much because we were saving for DL. We have gamed the system by trading *thing1* and *thing2* then back again with no additional spending.

        • Susanne Nielsen says 10 March 2018 at 23:35

          Smart! I love the idea of empowering the kids to make what they want happen because they worked and sacrificed for it. Delayed gratification at its best!

  19. Debbie says 10 January 2018 at 22:33

    Great article and perspective! Glad to see you back here at GRS!

    • Donna Freedman says 11 January 2018 at 10:54

      Thank you!

  20. Michael says 11 January 2018 at 05:13

    I feel like this can be a spectrum and you don’t want to be on either end and you probably want to be closer to the end of not increasing spending increase when you get more money. I will say though some things may be worth it especially if you cross over into good amounts of money. This is because as you become richer say you win a lottery your limiting resource starts to be time. So, in my opinion, you shouldn’t blow all the money but, most worthwhile things will be to save time. The other thing is health as you gather more resources you have an ability to eat/be healthier.

  21. Lady Dividend says 11 January 2018 at 06:01

    Delayed gratification doesn’t have to hurt!

    I agree with this! I also feel flustered when I have too many things around. I’ve been trying to reprogram myself to buy less things. Thanks for providing additional motivation and reasons!

  22. lmoot says 11 January 2018 at 06:54

    I’ve been doing a big purge over the last several weeks, and going through things which at one point many years ago, were much desired, even though I ended up not using much of the items, and some even still in the packages. Seeing them made me sad and reflective.

    Today they are just junk, collecting dust, literally, and taking up space, and invading the organization of my life. Since then I’ve become more particular about what I buy. Now I purchase with the intent to buy things for the long-haul. I get attached to items, even electronics, so I am learning it’s better to purchase quality. When I know something is going to be around for a while, I tend to research it until I am sure it’s what I want to be stuck with, and I also tend to take better care of it.

    I also think there is value in buying at today’s prices and then taking yourself “off the market” for as long as possible, since the price of things tend to go up, even though the quality goes down.

    Over the last few years, I’ve also begun to make purchases from a more utilitarian standpoint. Marketing tricks such as additional features which have a minimum impact to how I would use the item, new colors and designs, drop in price (unless it’s something I already planned to buy) etc, have no effect on me.

    Keeping a need/want list on a whiteboard in my room, and only purchasing from those pre-meditated items, helps also.

    I’m striving to reach a point where I am intimately aware of every object I own, and I am getting there soon.

    • S.G. says 11 January 2018 at 14:19

      “I also think there is value in buying at today’s prices and then taking yourself “off the market” for as long as possible, since the price of things tend to go up, even though the quality goes down.”

      Depends on the item. TVs, for example, have been the opposite. Right now I am holding off on a couple purchases and telling myself if I wait six months I’ll get a better one for a better price because the technology and marginal production costs are still driving prices down.

      • lmoot says 11 January 2018 at 14:56

        You are right about the opposite being true typically, with electronics. I was thinking more along the lines of cars, furniture, yes, cookware and flatware (if it’s something you will be using a lot), even houses (depending on when it was purchased), rugs, towels, inexpensive and simple but classic home finishings.

        Many of our grandparents or parents have had the same items for decades, which stood the test of time. Unfortunately, more and more it seems like quality was cheaper back in the day, because it was more of a default. Nowadays, you have to pay and pay a lot for quality, and even then the companies known for quality are slowly declining in relation to their own quality.

        I have started taking to Ebay for vintage versions of items because things today are being designed to be semi-disposable, so we can’t really blame those people on rhe repurchase circuit.

        All of those things seem so little on their own, but they really add up. Personally, the only thing I should have to re-purchase every year or even every couple of years, is underwear.

  23. Kingston says 11 January 2018 at 08:06

    Just need to say I am so glad to see the excellent Donna Freedman posting on this blog. A huge Yay!! to the revival of Get Rich Slowly.

    • J.D. says 11 January 2018 at 08:34

      I should point out that while Donna’s return is welcome, it’s a one-time thing for the moment. A writer of her caliber needs to be paid to publish here. At the moment, I can’t afford to pay writers. But I have high hopes that will change by the end of the year! And when it does, Donna is top on my list to recruit back over to GRS.

  24. Sean @ FrugalMoneyMan says 11 January 2018 at 12:52

    “Frugality does not translate to a life of joyless self-denial.” If only more people understood this. There are times that I feel that people honestly view frugal ways as being poor. Even though the vast majority of wealthy individuals became wealthy through originally being frugal with their money.

    Thanks for the share! I always love reading about fellow frugal individuals out there in the world!

    • S.G. says 11 January 2018 at 14:16

      To be fair sometimes frugal people contribute to the mis-characterization. There are plenty of frugality blogs I can’t read because it’s just as much of a race as buying designer clothes, just in a different direction.

      And some of them can come off poorly [I noticed that pun on reread. Ha!] when they talk about people who aren’t frugal or the stuff non-frugal people buy. It’s like talking to someone who is part of a religion who can’t understand why you don’t find donating all of your possessions to the church and shaving your head appealing when it will so obviously lead to a better life.

  25. Mr. Piggy Bank says 12 January 2018 at 09:44

    Lifestyle inflation is definitely something that can happen, and should be avoided. While I believe it’s fine for someone to occasionally indulge in something they can afford, when it becomes the ‘norm’ for them, the ‘special-ness’ can go away.

  26. FrugalStrong says 13 January 2018 at 12:32

    Great article, Donna (as always). I just talked about this on one of my recent Instagram posts! I also related how finances were related to fitness (my IG focuses on my dual passions of fitness and frugality, so many of my followers are fitness-minded). Anyway, I said that like health & fitness, financial success is in the details. If you have a H&F goal, you track your weights/sets/reps if you lift, splits/pace if you run, track your calorie intake, macros, or dietary goals if you’re trying to gain muscle or lose fat….so why wouldn’t you track you spending, follow a budget, etc to hit you financial goals. Too many people just cross their fingers and hope for the best. Anyway, it was cool that several people mentioned they’d never thought of it that way before and it was a lightbulb moment.

  27. Kim k smith says 14 January 2018 at 22:53

    Donna I don’t think I’ve missed many of your articles over the last few years. You’ve helped me so much…thanks. sacrifice is holding on to my trusty 99 Corolla and using the “not car payment” to slowly extend my home to allow for income property. When I upgrade one day,the thrill will be that much sweeter.

  28. Leona Werezak says 18 January 2018 at 22:29

    “Delayed gratification doesn’t have to hurt”–I couldn’t agree more! In fact, I find that delaying gratification often makes me that much more excited & pumped when I finally DO get what I want because I waited so long & patiently until “just the right time” came to have it.

  29. Susan says 10 March 2018 at 17:01

    Sure wish they taught this stuff in High School. I think I got my values from my parents and grandparents. House is paid off, I just put some big repairs into the 22 year old jeep because it meets my needs and we can actually work on it if we have to. Got a shed for free last week for fuel storage. Got a used table for deck and some used outdoor furniture for sunroom that will look good when I line up cushions (at a discount or on sale). We cook and eat out rarely. Clothing goes into the trash when it is falling off of us. Got a big savings account so we can drive the RV to Alaska or the East Coast this Spring. No debt. You are so on the right track.

    • Donna Freedman says 10 March 2018 at 17:43

      Meeting one’s needs doesn’t always have to cost a bomb, does it?

      And hey, if you’re coming to Alaska you better let me know when…! We’ll have some frugal fun.

  30. cls in Fresno says 11 March 2018 at 12:26

    I am ecstatic to see Donna Freedman as a contributing writer for this site. She is absolutely my favorite writer and continually reinforces our shared philosophy “to save on where I can now to spend where I want later.” That philosophy saved our family when I was laid off my job of 33 years at the age of 58 and it took me 4 years to finally find a job- even though it was half time and for 2/3 of what I had been earning before. When my children would nervously ask if we were going to lose our home, I could confidently say we were going to be ok, since we had paid our mortgage off in 13 years and had a sizable savings to get us through tough times.
    I am so grateful for that. I am grateful as well to read the inspirational stories of Donna, our Alaskan Renaissance woman, who weaves her tales of thrift and struggle, all the while making us believe it is fun to be frugal.

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