Let me begin by getting one thing straight – I am decidedly not against lifestyle inflation. A few years ago, I wrote about why I’m actually a fan of upgrading your lifestyle a little bit every now and then. And just a few months ago, I posted about my plan to indulge in a little bit of lifestyle inflation by trading in my iPhone 4 for the new iPhone 5.
But sometimes, people take lifestyle inflation to extremes. We’ve all met them – the coworker who gets a modest raise and shows up for work the next Monday driving a new sports car; the friend who buys every new gadget the instant it comes out, whether he needs it or not; the neighbors who move from your moderately-priced neighborhood into a fancy new house in a feeble attempt to keep up with the Joneses.
Lifestyle creep is tempting – who doesn’t want the biggest, the best, the newest? And while living below your means can feel restrictive, blowing your hard earned cash on things you don’t need can be just as painful. That’s why I’ve come up with five questions to ask yourself before making the upgrade.
#1: What’s My Motivation?
Before you head to the store to buy the latest, greatest whatever, you need to understand why you feel compelled to make the purchase. Maybe your kid smeared permanent market all over your only sport coat, making a stain so big even the dry cleaner can’t remove it; that’s a viable reason to buy a new one. But maybe you want a new big screen just because your best friend/neighbor/college roommate has one. That’s the kind of motivation that leads to buyer’s remorse.
#2: Have I Done The Research?
Whether you’re buying a new car or taking a vacation, you need to do the research before you make the purchase. You’ll want to make sure whatever you’re buying is a quality product, that it has the features you’re looking for, and that it’s at a fair price. Look for reliable product reviews, not simply opinions from your friends. Just as misery loves company, people who have already succumbed to lifestyle inflation usually like to have a partner in crime too.
#3: What Am I Going To Do With My Old ____?
When I decided to upgrade to the iPhone 5, I started searching for ways to get rid of my old iPhone 4. Just giving it away wasn’t an option; I wanted to make a little money off the deal. You should always have a plan to discard of your old things – whether that’s selling them, donating them (for a tax write off, if possible), or lending them to a friend. The only unacceptable answer? Leaving your old gadgets or cars around to collect dust – and lose value – when someone else could find a use for them.
#4: How Am I Going To Pay For This?
Paying for your new wardrobe on credit (because you have to, not because you want the cash back rewards on your credit card)? That’s probably a sign you shouldn’t be buying it at all. Living below your means requires that you don’t pay for things you can’t afford. If you have the cash already set aside for the purchase – and can make it without affecting your monthly budget, your emergency fund, or your investments – then you’re probably in the clear.
#5: Can I Hold Off On This Purchase?
Sometimes, holding off on a major purchase will answer a lot of the above questions for you. But there are other reasons to hold off, too. Big screen TVs usually go on sale just before the Super Bowl – so if you decide you must have a new one, waiting a few months could lessen the damage to your bottom line. Holding off may also make you realize that something you thought you needed isn’t all that crucial after all.