Don’t Let Lifestyle Inflation Ruin Your Major Goals

​Inflation is a major topic these days. You can’t access your TV, radio, or internet without hearing about it…let alone view your expenses without noticing an uptick. Here's what you can do about it…

​Everyday expenses have no doubt gone up in price at historical levels. Last week’s CPI report posted a January inflation level of 7.5%, the highest in more than 40 years.
 
There’s nothing you can do to control this inflation.
 
But serenity comes in accepting the things you can’t change, having the courage to change the things you can, and the wisdom to know the difference!
 
So what can you control about inflation? You can control your Lifestyle Inflation!
 
What is Lifestyle Inflation?
In short, Lifestyle Inflation refers to increasing household spending as you experience income increases.
 
Lifestyle Inflation is a subtle creep in expenses over time as pay goes up. It’s the nicer car you get after learning of a salary increase. It’s the nicer more expensive dinners you attend after getting a bonus. It’s the idea that bigger and better lifestyle follows more pay.
 
The danger of Lifestyle Inflation is that a gradual increase in expenses can jeopardize one’s larger financial priorities such as retirement savings, financial independence, being more selective with jobs, etc.
 
To avoid luxuries becoming necessities and eating away at your financial future, it’s advisable to clearly establish your priorities and purpose. Include those in routine checkups and in your spending plan. Put investing on auto-pilot. Automatically transfer funds from each paycheck into separate accounts for designated larger purposes (experiences like vacations with family, paying for kids’ college, caring for aging parents, etc.).
 
And remember a $10,000 salary increase doesn’t mean you have $10,000 more to spend. Uncle Sam sticks his hand in the hat first. So be sure to budget on the real net income increase.
 
These are just a few tips to ensure you are purpose-driven in your money handling, and not impulsive to the point of having regret down the road!