I’ve read a lot about the dangers of lifestyle inflation on other blogs, and it makes sense: As I make more money, if I keep my spending the same, I’ll be increasing the amount I save without giving up our quality of life.

This logic may be hard to argue with, but I’ll try.

I think lifestyle inflation is natural, can be used as a reward, and we should all allow ourselves to let go every once in a while, even if it means forgoing some of our savings.

I recently received a raise at work. It wasn’t large, just about a 3% increase in my bi-weekly paycheck. It felt nice to be recognized for a job well done, but I suddenly had a decision to make: What should I do with my extra coin?

Around the same time, I signed up my first advertiser for the blog. Again, not much, but I’ll hopefully get more advertisers and I have to make a decision about what to do with my extra money.

First, I thought about just putting it in savings and over the course of a year, I’d have a couple thousand extra dollars the bank. Nice, right?

Then, I let my mind wander. I’ve wanted an iPhone for awhile, but that’s ridiculous, right? I don’t actually need one, do I? My phone works fine for phone calls and text messages, isn’t that enough? Of course, being connected all the time would be cool. But is it a realistic option?

For awhile, I’ve lived like a college kid. I live in an apartment where two of the occupants live in closets (we had to remove the shelves so they could fit their beds. All it is is a bed), I live in a room with no windows (not the closet, but I won’t be bragging anytime soon), and I eat pasta about 6 times a week. I don’t live a lavish life, but to be honest, I don’t mind it because I know I’m saving $300-$400 a month in rent alone.

Now is my time to slowly move away from living like a college kid. I should afford myself something nice every once in awhile. Now is once in awhile. And that something nice is an iPhone. I’ve worked hard the past 9 months and taking a look at my budget planner, it looks like I’ve been saving about 50% of my income each month. I’ve been up a healthy emergency fund, fully funded my 2009 Roth IRA, and now I deserve to be rewarded.

The iPhone cost $200 plus $30 a month for the service. That comes $920 for two years of service. Sounds like a lot, right? Well, between my raises and my blog income, it will account for a little more than half of my income increase. Sounds reasonable, right?

I know that I could simply increase my savings and that I don’t NEED an iPhone, but after weighing the costs and advantages of this, I’ve decided to go for it. I’m rewarding myself for a job well done, and I’m still able to save a significant amount of my paycheck.

Readers, how do you feel about lifestyle inflation? Am I right or am I being silly and simply justifying a ridiculous purchase?

Of course, I’m not one to throw money around without thinking about minimizing the cost, so I did my research and realized that the $200 iPhone could be mine for…free. Want to know how? Come back tomorrow and find out how I snagged a free iPhone and 2 free months of service.

There are many ways that people save money, and many people are very effective and saving loads of money because of them.

But this list details 5 ways people try to save money that just are not worth it. They either are ineffective or have negative consequences that outweigh the savings.

1. Stay in and Watch TV

When presented with the option to go out, some people decline with the idea in mind that they’ll save more if they sit on their couch. It’s true, they won’t be temped to spend money on drinks or food, but what they don’t realize is that they’re also missing out on experiences which brighten their day and interactions that lift their spirits. It’s hard to put a price on human interaction and the value of going out with friends, but in my opinion, it’s a no-brainer.

2. Skimping Out on a Bill

When you do go out with friends and buy a sandwich and drink, don’t just pay for the actual price of your food, but throw in extra for tax and tip. Sure, it’s very likely that someone else will pick up the extra two dollars, but if you cheat people out of money, it will come back to bite you. It may seem like you’re being smart at the time, but is your friends harboring ill will towards you worth it?

3. Passively Looking for Great Deals

When there’s something you need and you find a coupon, your action is rewarded in a lower price. But when you constantly check sites for great deals, and when the items you see are for things you don’t really need, you could get yourself into trouble. You’ll very often see such great deals that you’ll be more prone to make purchases. If it’s not something you’re already looking for, no matter how great of a deal it is, you’ll spend more if you buy it.

4. Eating Fast Food

That burger may only cost you a dollar and those fries and soda may fill you up for a cheap price, but you may be costing yourself in the long run. Eating unhealthy food may have future consequences that include higher medical costs. It may cost an extra dollar now, but making food for yourself at home could benefit you in a number of ways.

5. Consumer Traps

When buying bulk means you have extra you won’t sure, it’s not really such a great deal. When “get one free when you buy 4″ means you’re buying 4 when you only wanted 2, it means you wasting money, not saving it! Think really hard before you get that “great” deal that’s making you think you’re such a genius.

What other saving tactics are effective but simply not worth it?

Daily Yakezie Short Carnival:

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Every morning, from as far back as I can remember until I left for college, my parents would have a cup of coffee in the morning. Occasionally they would have a cup in the evening as well, and I can only imagine how many cups they drank at work (My mother is a fourth-grade teacher, my father occasionally deals with insane criminals).

I hate the smell of coffee. I’ve never had a cup in my life. Out of the four sips I’ve ever taken, I’ve wanted to vomit after each one. I don’t support Starbucks. In fact, I boycott Starbucks as much as possible. It’s not hard considering that I don’t drink coffee, but it gave me a great excuse when my mother asked me to go out and get her a cup.

Dropping the Habit

I tried everything to get my parents to get rid of the awful stench at home. I told them it would ruin their teeth, I told them it was a gateway to opium, and I told them they wouldn’t be able to retire because of it.

Clearly none of my efforts worked, but recently my mother started drinking instant coffee exclusively and it made me think about that third excuse I gave them: how much drinking coffee really cost them.

Calculating it Out

My conservative estimate was two cups of coffee a day. Every single day. For 20 years. I’m sure they drank more than two cups sometimes, and I know they did it for more than 20 years. But we have to start somewhere, and I don’t want to be the guy who completely blows things out of proportion to try and prove a point. This is not a scientific study. Actually, I haven’t done the calculations yet, but here we go:

A few more assumptions:

• Each week consisted of 11 home-brewed cups and 3 cups at Starbucks (or Dunkin Donuts, or wherever).
• The average cost of a pound of coffee is $10 and provides 32 cups of coffee.
• The average cost of a cup of coffee is $2. My parents would laugh at people who got the “tall.”

So the average week was 22 cups of home-brewed coffee and 6 cups of store-bought coffee. That comes out to $6.87 for home brewed per week and $12 for store bought, for a total of $18.87.

My first thoughts are WOW, that’s a lot of money for 6 cups of coffee. The home-brewed stuff was a bargain!

Their coffee habit was costing them about over $75 a month, or about $985 per year, or $19,683 over 20 years. Damn.

But how much would it have been for the instant stuff? It costs about $7 for a can, which makes 21 cups. So $0.33 per cup. Slightly more than home brewed. Still, it comes out to $486 per year, or $9,733 over 20 years.

After all of this, it looks like $486 per year for coffee is rather insignificant. If you do anything for 20 years, the costs are going to look high, but I honestly expected the costs to be higher.

Early Retirement? Not Quite

My conclusion is that my parents’ drinking habit didn’t cost them an early retirement. My focus should have been on them brewing their own coffee instead of buying it 3 times a week, but the trade-off of having that stench in the house more often may have been too much for me.

The main takeaway is that people are getting ripped off every morning when they drink coffee. There is barely any difference between home-brewed and instant coffee (home-brewed is actually cheaper!), but there’s a HUGE difference between home-brewed and store-bought!

Brew it yourself! Why pay $2 per cup when you could pay $0.33? Is the convenience worth the 500% markup?

I spoke to my grandmother last week (she reads the blog on her snazzy new computer she just got) and she told me the advice her boss gave to her many years ago.

He said that before you pay the bills and before you go spending your paycheck, pay yourself first. Put 10% aside and then go pay the rent, utilities, etc.

I’ve heard this advice a million times on various blogs, but as much as people come up with creative ways to save a few bucks on taxes or search the weekly circular to save a few cents on pasta, nothing can replace the best way of saving and making sure we have enough money in the future.

Sure, you may make more in the future as you get a better job and more opportunities open up, but saving now can have a lasting impact. There is always enough to put a little something away. Even if you think that money won’t make much of a difference, it definitely will.

I’ve seen this graph several times, but for those who haven’t seen it, look at how much of a different putting money aside now is compared to waiting.

Taking a look at the numbers, it’s astounding how much of a difference paying yourself first makes. Consider this example:

Alex is 25 and saves $5,000 a year for 10 years, and after 10 years, has a cool $73,000 in his bank account from his $50,000 in contributions. Then he doesn’t contribute another cent until retirement.

John is 25 but decides that he’ll be able to make up the difference later. he waits 10 years, then contributes $5,000 a year for the next 30 years, for a total of $150,000 in contributions.

Who do you think has more money at age 65?

Despite contributing 3 times as much as Alex, John has about $55,000 less at retirement, assuming a 7% return on investment.

And what happens when Alex doesn’t stop saving at age 35, but keeps investing $5,000 a year for 30 more years? He ends up having over twice as much as John. Can you believe that those ten years delaying cost John over $600,000?

There really is no replacement for saving. As you get older and make more money, you will also have more responsibilities and saving will be just as hard. So do yourself a favor: start saving TODAY by making your “pay yourself first” bill more important than than the rest, and you’ll be doing yourself a half a million dollar favor.

If you reached this site with questions about AT&T, I can help you. I can help you get free minutes, free text messages, and your cell phone bill reduced, even if they are legitimate charges. Just send me an email, I’ll respond quickly and we’ll get any unnecessary charges removed.

My sister-in-law owns an iPhone, but when she went away on a business trip a few months ago, took a cheap international cell phone her mom had and left the iPhone at home for the week and a half she was away. My brother, Not thinking that his actions would have any consequences, took his sim card and put it in his wife’s iPhone and suddenly he had thousands of apps at his fingertips.

He was probably pretty amused by it for that week and a half, but what he didn’t realize is that if you’re going to use an unlimited service, you should probably sign up for the unlimited data plan. For those 10 days he was happy as a clam, but every time he checked his email or downloaded an app, it was costing us money. And it wasn’t just a few cents here or there, it was over $900 for the 10 days he had the phone.

When the cell phone bill came out, I saw a $600 overage and realized something was wrong. I scanned the bill and found that one number used a ridiculous amount of data. I called my brother make sure it was a mistake (surely he didn’t actually use that much data), and when I told him that our account was messed up and it said he had an iPhone, he paused for a second and said, “O crap.” He really did it. I’ve had my share of negotiations with AT&T, so I told him not to worry, that it wouldn’t be a big deal, and that I would take care of it. But first I called him a few names and made fun of him quite a bit.

I called up AT&T to explain what happened and get the charges reduced, and got a customer service representative who listened to my problem and agreed to try and resolve the situation. The conversation went something like this:

Customer Service Representative: Hi, my name is Tracy, how can I help you today?

Me: Hi, I just got my bill and saw that there are some ridiculous overages for this month, so I wanted to try and get that reduced.

Tracy: I’ll be happy to help you. It looks like the 0480 number has a lot of data usage this month.

Me: Yah, my brother put his sim card in an iPhone and didn’t realize that he should have signed up for a data plan first. Is there a way to remove the charges?

Tracy: Well, unfortunately it looks like the charges are valid because he didn’t sign up for a plan before the billing cycle began, so there’s not much I can do. If he had called up in advance to get a data plan before doing so, it would have only been the $30 cost of unlimited data for the month.

Me: Yah, I know that the charges are technically valid, but if you looked what happened, it was obviously a mistake. He doesn’t have an iPhone usually and it was a temporary mistake. We’ve been loyal customers for 10 years and we’ve liked our service a lot, so I’d hate for this to give us a bad impression of AT&T. Is there anything you can do? I’d like as a courtesy to have the bill changed. Can you apply the $30 a month data package retroactively?

Tracy: Well, we do appreciate your business, so as a one-time courtesy, this is what I can do: While I can’t remove all the charges, I can retroactively apply a $30 data plan to that line so you’ll be charged only the $30 and not $600.

Me: Wow, that would be great. You just saved us $570!

Tracy: It’s not a problem. Actually, I can apply the data plan from the date he started using data, which was 7 days before the end of the billing cycle, so the charges will be prorated. So for those 7 days, it comes out to $7.32.

Me: Thanks, I really appreciate it. Since we just realized what was happening, can you do the same thing for this month as well? He’s been using it for the past few days, while the bill was coming out, but after the billing cycle started, so I’m sure he’s racked up some more charges.

Tracy: I’m unable to remove charges from a bill that hasn’t come out yet, but what I can do is keep the data plan on for this month. When your next bill comes out, you will see the charges on the account, so you’ll have to call back next month and a customer service representative will see my notes and make the adjustment for you.

Me: That’s not a problem. Thanks so much, I really appreciate you helping me out!

I called my brother and told him that I got the bill reduced to $300 and that he should send me a check because I already paid the bill. Just kidding. He was pretty relieved that he didn’t cause our family such a large, unnecessary charge. He felt bad about using the data, so he took out the sim card and put it back in his regular flip phone.

I called up AT&T again to have the data package removed since he stopped using the iPhone, and the prorated charges for the month totaling just $3. Then, when the next bill came out with $300 in data charges, I called up again, told them to reference the notes, and they were able to credit our account. So instead of paying over $900 for 10 days worth of data, we paid only $10.

While I like to think that I have special powers and just plain good at negotiating, the truth is that I’m nothing special. Customer service representatives are there to help you. They may not always jump at the opportunity to reduce your bill, but ultimately they are willing to help if you ask the right questions. If you think you’re paying too much for your phone, cable, or internet, call up and ask if they have any promotions that could save you money. You definitely won’t save money by sitting on the sidelines.