How I Fought Lifestyle Inflation — and Won!

This guest post from Michelle is part of a new feature here at Get Rich Slowly. Every Sunday will include a reader story (in the new “reader stories” category). Some will be general “how I did X” stories, and others will be examples of how a GRS reader achieved financial success.

In 2001, I got a new job. Not just any job — this job was for a former employer who wanted me to come back to work for them after about two years of working for a nonprofit agency. Their offer was very, very tempting. It meant a 50% raise. (Yes, 50%. Take your current income, divide it half and add it to your salary. Fun, huh?)

The money got to me, and I left my nonprofit job for this new opportunity. I was happy with my old job and had good friends at both organizations, so my motivation for the change was purely the increased income.

The lure of money
About four months into this new job, I was sitting in a beige cube and wondering where all my money was. I had been collecting checks that were indeed 50% more (in terms of my gross income at least — I was paying more in taxes, so it didn't calculate out as a 50% raise in my take-home pay). But it was still significantly more money than I thought I would ever earn, and I couldn't figure out why I still felt broke.

Looking around those beige walls, I despaired at the idea of living the rest of my life like this. If this huge salary increase wasn't the answer to happiness, what was?

I went home and went through my financial statements. My husband and I have joint accounts and have used Quicken since the beginning of our relationship, so this part was easy. After looking through Quicken for about 20 minutes, I could see where that extra money had gone. We'd taken a couple of trips. We were eating out a lot more. We joined a gym. We bought a new car. We were spending my 50% raise almost as I got it.

My husband and I had struggled with credit card debt early in our marriage and overcome it. When we spent money, we used debit cards and had cash in the bank to cover it. Big expenses (those vacations) went on a credit card, but were paid off right away. But we had $20,000 in student loans from both our college educations and a new car in the driveway with a $21,000 loan on it. Those debts felt like anvils hanging around my neck.

My job was okay, but I was finding the work a little tedious and dull. The bigger paychecks did not completely make up for the loss of creativity and the corporate hassles that came with my new responsibilities.

I thought what I wanted my life to look like: It wasn't sitting in a beige cube.

Debt is slavery
I realized that I'd basically sold myself into slavery doing a job that paid well but didn't give me a great deal of satisfaction in order to have more money to spend. But spending the money wasn't bringing me happiness. I felt worse, not better.

So I decided my best option was to reconfigure my life so that I didn't need to earn as much money as I did currently, thereby giving me more freedom to pursue work that made me happy, no matter what my paycheck looked like.

And that's what I did. Over the next two-and-a-half years, I paid off the student loans and the car loan by reducing my expenditures and doubling my monthly payments (using the same advice you can find right here at Get Rich Slowly). Every extra bit of money my husband or I got in from freelance work or bonuses went straight on the loans.

After three years at that job, I got laid off in 2004 when the company moved our office to the East Coast. Instead of being stressed and worried about finding a job that would pay well enough to replace my income level, I rejoiced in the fact that I had no debt except my reasonable mortgage payment. I was free at last to do what I wanted to do.

I happily collected my unemployment insurance and severance pay while I worked on setting up my own business. Now I work as a writer, editor, and website developer for small businesses. I'm doing things I enjoy, and after five years, my part-time income matches that full-time salary I earned while staring at those beige walls.

Buying freedom
What I'd done was decide to spend my increased income from that job on buying myself freedom. It took more than just money. It took a paradigm shift on my part to determine what I really wanted from my life and my money. It turned out that what I wanted wasn't more money after all. Helping my clients succeed and spending more time with my family bring me more happiness than money can buy.

I'd like to say that this process is a journey, not a destination. I still struggle sometimes with strong desires to have more money to buy things like vacations for my family or a slightly bigger home. Remembering this experience helps keep me grounded, and I can refocus on what I truly value. I've recently decided more freedom is more desirable, and my husband and I are working towards paying off our 15-year mortgage early, too. I know that nothing I can buy is going to feel as good as holding the deed to my own home in my hand. I'm looking forward to working towards that goal next.

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Twiggers
Twiggers
10 years ago

Good for you!!! We are almost done paying off 66K in credit cards and the freedom we are feeling is amazing!!! We are traveling and enjoying life and not incurring more debt. It’s fabulous!

Robert
Robert
10 years ago

Congratulations at overcoming lifestyle inflation. I went through something similar in the late 90s, when I worked my way up (in pay) through a series of career moves and job changes. When the Dot-com bubble burst and I was laid off, I realised how I’d allowed my spending to keep pace with my raises. I had to learn to prioritize my spending and cut back or eliminate the things I wanted but didn’t really need. I’m now working in IT for a smaller firm that pays quite a bit less than I used to make. But thanks to the habit… Read more »

elena
elena
10 years ago

yea! I paid off debt in response to inflation and to get out of a numbing job. I’m trying to figure the what’s next part and it’s not easy. I’m envious that you are there.

Ron
Ron
10 years ago

What a fabulous and inspirational story. I’ve had a similar story, but I’m still employed at the new company. My income increased a great deal and we began spending every bit and more. One day I looked at my wife and asked why we had less in savings than when I made 65% less! It was JD who kicked me in the pants as well! Now I have 6 months in salary saved, a healthy six figures in my retirement accounts, and no debt (except the mortgage). But unlike you, I’m quite unfulfilled at my job and I’m hoping to… Read more »

TosaJen
TosaJen
10 years ago

A close coworker from my early career told me that aphorism that “expenses expand to fill all available pay”, which seemed to be true for a while. You were smart to realize what was going on before it went on for years and years. Realizing that debt was slavery was a huge wake up for me. No thanks! We also went through DH being laid off when we were first married, and we didn’t like worrying about next month. We learned how to reduce spending on less-important stuff, and to hang out with people who live frugally. Reducing our costs… Read more »

Scott
Scott
10 years ago

Nice job. I really like the idea of viewing a raise in income as an opportunity to “buy your freedom”. I left a job a couple of years ago I really enjoyed because I was moving for personal reasons and was found a job that pays me 25 percent more. The more money was nice but my lifestyle inflated because of it and I hated my new job. My goal has now become to reduce debt and save so I can start doing something I get more statisfaction out of. Ironically, this has made me like my job(maybe tolerate is… Read more »

Joseph
Joseph
10 years ago

Great Story,
Agree with you that without debt you have the freedom to do what you want to. Glad that you paid off the debts. If you are debt free you can work the job that you enjoy instead of doing it for money. We are hoping to pay off our huge student loans and start saving.

Lisa
Lisa
10 years ago

I really enjoyed reading your story, which can give so many people inspiration. By reading books on these philosophies in my early twenties, I was able to save money even when I had low paying jobs by living below my means. I even saved enough (and made a decent enough wage at the time) to pay off graduate school while attending. I’m always happy to hear about other people who enjoy life more by finding financial sanctity.

Nicole
Nicole
10 years ago

Wonderful story! Thank you!

Michael Crosby
Michael Crosby
10 years ago

Thank you Michelle.

What a pleasure being debt free. I’m a new member of Toastmasters and I’ll be giving a speech on “Being frugal and living below your means”.

While preparing for the speech, I’ve come to realize the huge freedom we can enjoy by just applying a few simple principles.

I have my own business and yesterday was the first day I’ve worked all week. I had a total blast working, I love my job, but I’m not stressed out having to work the standard 40 hours. Usually 2-6 hours per week and I’m a happy LBYMer.

Amy
Amy
10 years ago

JD, hopefully there shouldn’t be any worry about the responses. The last article in this vein contained a lot of controversial discussion triggers – most likely planted, in order to attract attention and potential clients to that author’s latest business venture.

On the contrary, Michelle’s story reads as real and honest. Thank you, Michelle, for sharing your story, and I wish you continued success. 🙂

Sharon
Sharon
10 years ago

I absolutely LOVE this post. I think many people would relate to the beige walls, and I’m sure many people can relate to spending increases instead of saving them.

I also am encouraged by the ending of this story. I hope to be in Michelle’s situation someday…and I’m diligently working towards it by lowering my monthly expenses.

Thanks for sharing!

CalLadyQED
CalLadyQED
10 years ago

“What I’d done was decide to spend my increased income from that job on buying myself freedom.” Great principle, Ms. Michelle. While I don’t have any debt (I use credit cards but always pay the full balance during grace), I am just starting to use a similar principle in saving. For my career, I have to take a series of professional exams. While my company will only pay the fees for two tries, it’s not too uncommon for people to have to take one of these exams 3 times. Also, should something happen with my current job, I will want… Read more »

Keelermom
Keelermom
10 years ago

Kudos to you! Great article, great thinking behind it…thank you for sharing your story! Very inspiring. My husband & I are in the middle of our second ‘lifestyle downsizing’ (decided we didn’t take it far enough the first time)…it’s great to read about people who have already come out the other side!

Tyler Karaszewski
Tyler Karaszewski
10 years ago

Why all the cubicle hostility? It wasn’t the color of the office furniture that caused your problems. If they’d given you a proper office and painted the walls white or yellow or blue, you wouldn’t have been any happier. I also don’t see a problem with “lifestyle inflation” unless it happens faster than you can actually afford it. If lifestyle inflation is so horrible, why aren’t we all still sharing bunk beds with our younger brothers in our parents houses? You could survive just fine like that, you know, and it’s be plenty cheaper. Everyone gets to choose their own… Read more »

KZ
KZ
10 years ago

I’d be interested in a future article about the process you went through to start your own business. Not just logistics but dealing with any confidence and motivation issues.

Mary
Mary
10 years ago

I loved your post, it was just what I needed to reaffirm things I have been feeling too. I am glad you got your financial freedom I am working toward the day I can claim that too. Thanks for the inspiration.

Piccolina
Piccolina
10 years ago

Thank you for sharing this inspirational story! I had a similar income increase with a new job three years ago. After the first few paychecks, I reminded myself how much I was used to taking home each pay period and decided to still live off that same amount. I had lived comfortably off my old salary, so I knew I didn’t need to spend much more. I upped my retirement withholdings and had the difference automatically deposited in a savings account for a downpayment on a house. All of this was deducted from my paycheck, so I never saw the… Read more »

Stacy
Stacy
10 years ago

This was a great story we can relate to… thanks for sharing!

Adam
Adam
10 years ago

Thanks for the story! Really hit home for me. Last September I switched my relatively easy/unchallenging work from home job for a job that paid about 40% more but required me to go into an office every day. The money and the room for advancement were the primary motivators, and so far its worked out well. But despite all the extra money, I don’t feel like I’m getting ahead with my saving. Like you, I don’t do debt, but I have a strict saving schedule and I’m not hitting it despite all the extra money coming in! Lifestyle inflation is… Read more »

deb
deb
10 years ago

thanks Michelle

I have had the same experience as you, – only it took me a lot longer to realise.

I am now taking 3 months off work to take time to think what I want to do and to try my hand at a small business to see if I can make it pay.

cheers
deb

Kim
Kim
10 years ago

The problem with lifestyle inflation is that the symptoms are often silent until you realize you have the disease. Michelle showed great insight to diagnose the problem so quickly – and find the proper treatment!

I believe fighting affluenza is a lifelong battle for those of us mired firmly in the middle class. It will recur – trust me on this. There is no vaccination but early detetction is key!

Michelle
Michelle
10 years ago

Well done. I have followed a similar strategy in the last few years where I have re-directed increases in income to paying off my debt, and now I just have a mortgage which I’m trying to pay off within the next year. Once the mortgage is gone, I can’t wait to start piling up a bunch of savings with the monthly payments I will no longer be making 🙂 While I’m mostly excited about paying off debt and saving, I often struggle with the competing forces (friends, family, neighbors) that make me want to take a big vacation and undertake… Read more »

mapster
mapster
10 years ago

Good for you!

We are currently at the point where we have decided that we survived comfortably at last year’s pay level and are snowballing old debts. This year’s pay raise goes directly to the debt snowball and once the debts are all gone, the money will go directly to savings/retirement/kids college funds.

Mike
Mike
10 years ago

“I happily collected my unemployment insurance and severance pay while I worked on setting up my own business. Now I work as a writer, editor, and website developer for small businesses. I’m doing things I enjoy, and after five years, my part-time income matches that full-time salary I earned while staring at those beige walls.”

You’re an inspiration!

Molly On Money
Molly On Money
10 years ago

Obviously from all these comments there are a bunch of us on this same path. It’s great to feel like this is becoming the norm rather than a radical new way to live.
My husband and I are weeks away from paying off $70,000 in credit card debt. In the past few months I have also had a paradigm shift and what an amazing awakening its been!

mick
mick
10 years ago

This is a great story, and some great comments.

I agree with TosaJen that it is good to associate with others who are living frugally as it really helps keep focus.

mimi
mimi
10 years ago

Congratulations! It’s a powerful insight to realize that spending less, choosing to live more modestly and avoiding debt are actually HAPPY things that result in more pleasure in the present and in the long-term because they equate to freedom, choice, control over your life, and the ability to spend on what really matters. People who are caught up in consumerism and debt often can’t imagine this is possible. I am amazed that you last so long at the job you hated. I would have much rather quit within a year or two, switched to doing a job I loved (which,… Read more »

Lisa
Lisa
10 years ago

When we got married, we had healthy incomes and lived in an apartment. Life was good and we spent money on take-out and clothing.We didn’t save much. Then the kids came. Our expenses rose considerably. We used credit cards on most items. Then lay-offs and moves to find jobs came along! It was crazy. We ended up moving to a different coast! DH took a full-time AND part-time job. I took a part-time job that paid 65% LESS than what I made previously BUT I also stayed home when DH was working to watch the kids. So we saved on… Read more »

Samurai
Samurai
10 years ago

Congrats! This is the great thing about being debt free. Small bumps in the road like a layoff can barely be felt!

Thanks for reminding us that helping people is more rewarding than money.

Best,

Sam

BIFS
BIFS
10 years ago

Whoo-hoo for debt freedom!

My husband and I are in our late 20’s and only have a mortgage and one car loan to go. We’re on track for being 100% debt free by age 35, but that could be cut down a few more years with any pay raises…we’re crossing our fingers.

Congrats on your happiness!

Sanjeev
Sanjeev
10 years ago

It does take some wisdom to realize what you have (so early in life)! Its a beautiful post, and thank you for sharing it. Its’ true, an increase in salary usually does’nt mean much if we have an equal increase in lifestyle expenses. What you are doing to reduce your mortgage is a great step in the right direction! God bless!

Andrea S.
Andrea S.
10 years ago

Fantastic story Michelle, thanks for sharing. My husband and I are also determined not to let lifestyle inflation beat us, and are banking every increase in pay we get.

Luke
Luke
10 years ago

Lifestyle inflation is a pernicious beast and I’ve struggled against it (in a sense) since I was a child. Many people (myself included) who grow up in households where a fairly meagre income was the norm go through life wanting the trappings of wealth which they have felt deprived of during their childhood, some are (I suppose) just greedy! Personally, I think I fell into the ‘just greedy’ camp (as did my elder brother) and am only just paying off debts accrued 8 years ago as a university student. He wasn’t so lucky and now owes £15,000/$23,000 and is soon… Read more »

basicmoneytips
basicmoneytips
10 years ago

Very good story. I think it is a well known fact that we tend consume what we make, unless we closely examine things (like the writer did).

I like the idea of getting your financial house in order like you did, so when your layoff happened you were able to transition to something you could do on your own.

While I do have a job, I would like to transition in that direction myself. I hope to be there in a few years. Thanks again for the post.

Kathy
Kathy
10 years ago

I find that when I’m paying off my debt, every little bit more of my salary that becomes ‘mine’, money-wise (since it’s being directed elsewhere in my repayment goal), gives me a little bit more sense of my own personal freedom. Someday it will all be gone, but for right now, I think “hey that money I earned is no longer that particular credit card company’s, it’s mine.” It is a good feeling and I will rejoice when it’s all over.

Lauren H.
Lauren H.
10 years ago

Thanks for your candor Michelle!!! The story is very inspirational and I look forward to the day when I too will be debt free and working in a career I love.

Sam
Sam
10 years ago

Yay for fighting off lifestyle inflation. This is what we did/do. (1) We also paid off all our non-mortgage debt a couple of years ago. Having no debt makes a big difference. (2) We also only use debit cards for day to day expenses, and we track our spending in Quicken. Those pie charts are brutal when you start wondering where your money has gone. (3) We do have a credit card that we use for travel, but when it comes to vacations we save up for travel/vacations first and we only put our airplane tickets, rental car, hotel on… Read more »

Strick
Strick
10 years ago

I have a goal of always experiencing lifestyle inflation. Seems like the only way to have a high probability of this working throughout life is to start with an extremely high savings rate and then inflate expenses very slowly, slower than your increase in income. This early high savings also tends to lead to early financial freedom.

Dan
Dan
10 years ago

I think Tyler K is right on this one. I think Luke is right, too. I know I didn’t bust my hump through grad school (and take on that additional debt) for the sole purpose of renting a room in someone’s house and eating ramen noodles all of the time. (My wife and I rent a one-bedroom apartment and eat pretty well…) Between a job loss without a sufficient emergency fund (just got out of grad school) and getting married, the last year has been an exercise in debt management. This month marks the elimination of $15000 in debt that… Read more »

Shara
Shara
10 years ago

I’m with Tyler, my lifestyle has inflated quite a bit for multiple reasons. I don’t consume for the sake of consuming. But I appreciate a larger house, steak dinners, and new furniture and don’t deny myself if they are things I can afford with money left after paying my bills and savings. The problem is when you spend unconsciously. You have $X in your checking account and that’s what you spend, and you usually can’t tell what you spent the money on. It’s there, money is for spending, so off it flies. I agree with Michelle that it’s disheartening to… Read more »

Lynn B
Lynn B
10 years ago

Thank you so much for writing this post! I am inspired by your story and agree that freedom is the ultimate goal beyond the bare necessities. I have been working myself to live beneath my means so that I too can have the freedom of choice with my work.

Meg
Meg
10 years ago

I definitely enjoyed reading this post & all of the comments as well. I plan to keep my lifestyle inflation in check… Or, really, just to make sure my spending remains conscious. Last year I netted $16k in my part-time college job. While I know where a lot went, there’s also a lot that slipped through my fingers. I feel pretty confident that securing a $30k/year job after college would be quite enough for me to manage on, if I’m okay with how much I can spend right now. (Everything down to the $6 purchases on ebay are mostly planned,… Read more »

Michelle
Michelle
10 years ago

Hi all, I’d like to add that I agree — a certain amount of lifestyle inflation is not necessarily a bad thing, as Dan and Shara pointed out. I believe most Get Rich Slowly readers are working towards a certain level of financial independence while maintaining a comfortable lifestyle, and obviously living at home and eating ramen doesn’t qualify for most of us. I should add that my lifestyle (both now and then) is hardly miserly. We tried to strike a balance between paying off debt and living comfortably during this process. J.D. has talked about this topic several times,… Read more »

Gia
Gia
10 years ago

Thank you for sharing this story! It is very inspiring.

Goose
Goose
10 years ago

The thought of framing a home deed is pretty frickin sweet.

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