Tag Archives: lifestyle inflation

Lifestyle Inflation – What To Consider Before Telling Yourself Yes

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.

Readers, what steps do you take to combat lifestyle creep?

Why I’m Not Upgrading to the iPhone 4S

When I had a chance to get an iPhone 3G S about a year and a half ago, it was a no-brainer to me. I wanted the new phone with the coolest features, even if it came at the cost of a little lifestyle inflation. The cost would be offset and then some, so I was getting the iPhone for free.

Then, it came time to upgrade to the iPhone 4. Again, it made a lot of sense. It was a significant upgrade, and more importantly, it didn’t cost me a dime. Actually, I made money, even though it was a lot of hassle.

Now, the iPhone 4S has been released, and guess what? I’m not getting it this time.

There’s a little pressure because everyone likes the latest gadgets and there are certainly some nice features that I’d like to have. But the desire just isn’t there for me. I don’t think it’s a wise purchase and burning through an upgrade on our family plan for it doesn’t seem like the best decision.

Sure, I could probably sell my iPhone 4 for $350 and buy the iPhone 4S for $200, but that would mean using an upgrade, something that we’re saving up for. If something were to happen to one of our phones, we’d be on the hook because I think cell phone insurance is a scam. Phones are getting more expensive to replace, so having an upgrade is a priority at the moment.

Add in the fact that while the improvements to the phone are nice, they aren’t groundbreaking. The screen is just as clear (something I valued during the last upgrade), it’s the same size, and the camera has been working well for me so I don’t see an immediate need to get something better just for the sake of getting something better.

For me, the value just isn’t there. I’ve been very frugal with my iPhone, and right now, my iPhone is perfect for me. Since there’s no burning desire to get something new, I guess I’ll wait for the iPhone 5 and evaluate whether its features are worth it.

Why I’m a Fan of Lifestyle Inflation

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.