This month, my husband and I committed to being a bunch of spendypants. In addition to home renovation costs (flooring is in the cart at Home Depot, but I have to research the "other" stuff that goes into laying laminate), we are paying for other people to eat for nearly 1/3 of our meals this month (My parents for 12, 5 meals with our community group from church, 1 graduation party, 3 grill outs with friends, and 3 meals camping). On top of that, we are going camping (on the beach- first time ever!), and I'm about four hours away from buying my husband new sneakers if he doesn't promise to buy new shoes this weekend. And we spent money on a babysitter, so that I could go out for a girl's night the same night that my husband went bowling with friends.
So, yeah, at the end of the month we should be a bit fatter around the waistline and a bit slimmer around the wallet. It's a good thing these balance each other out.
Do we have a lifestyle inflation problem?
One month of spending might be an anomaly, but I'm wondering if this spending has become a habit.
On the one hand, outside of the two months that we bought a house (6 months ago, and 24 months ago), our spending in a given month has not exceeded our take home pay (after 401k and HSA contributions) from the previous month for the last 30 months. Any changes to our cash position have been the result of us allocating cash to investments sometimes in a rather bumpy fashion (since we use a spreadsheet and not software to track these things).
This is a pretty great track record considering that our take home pay dropped by about 60% 22 months ago (which is why I believe babies aren't net worth killers). This means that we've consistently invested for retirement for 30 months (the retirement streak is actually much longer), and as our income grew (nearly reaching the soaring heights of 2 years ago thanks to astute real estate moves and a fat pay bump), we've banked most of the extra income (either in the actual bank or in investments).
But we haven't banked it all. Since moving to our new place, we've spent quite a bit more money on food because we are entertaining much more (we are located much closer to our friends), "lawn care", and home decorating (not just home renovation which I count in our spending reports but think of as an investment). We've also loosened the purse strings when it comes to date nights, clothing, and other "miscellaneous" spending (miscellaneous spending is iPads and makeup). We're allocating more money towards bike and car maintenance, and we've faithfully spent it.
I think its pretty clear that we've inflated our lifestyle. What's not so clear is whether or not this is a problem.
Lifestyle inflation is for mindful consumers too
Our current spending closely aligns with our values. There is not a single spending cut that I think of as low hanging fruit (except on days that I'm fed up with home repair, I consider living in a tent). Additionally, we have the income to support our spending, so its not the foolhardy debt-fueled spending of a young college graduate that you read about on a lot of blogs.
Now that we are in the habit of spending money (to the extent that we can) only on things we value, I don't often experience spending guilt. I enjoy spending money on the things that we value, and our spending priorities are clear (tools, opportunities, then luxuries), but how can I know if our spending has gotten out of control? Am I spending too much and investing too little? Will I enjoy our compounded money tomorrow as much as I'm enjoying spending the money today?
Even if you're a mindful consumer, it's easy to spend money today when the value to cost proposition is high. I'm no longer an idiot, so I don't spend money on things that make me unhappy (like fast food, or amusement parks), but there are a lot of things/experiences that seem to have a good value right now. In a sea of good value, it's easy to decide to increase your consumption.
Is there any way to control my lifestyle inflation?
There are three effective methods that come to mind for keeping lifestyle inflation in check:
1. Get paid to do what was formerly costing you money (or at least do it for free). For example, Mrs. Frugalwoods talks a lot about exchanging front desk time for Yoga classes, and Tonya from Budget and The Beach got to run a race for free because she wrote a blog post review of the race. J Money $, gets to add to his coin collection just by taking a walk.
2. Don't nickel and dime yourself to the poor house. When I spend $50 here and $50 there, I don't feel it. When I spend $2500 on flooring (especially if its all one purchase), I feel the cost, but I also yield the enjoyment. There's actually a really good reason for this.
Humans suffer from a problem which is that our emotions are not logical- in particular we actually incur our greatest enjoyment prior to consumption. When we attempt to use "Retail Therapy" or really any spending to boost our mood, we actually are seeking the pre-consumption high, but almost nobody is strong enough to resist the urge once you've mentally given yourself permission to treat yourself.
When we spend money less frequently, spend our time within our real marginal utility curve, but when we spend money more frequently we are chasing the elusive high. I suppose it's true that the feeling is as "real" as the enjoyment on the real utility curve, but it's a beast that requires being fed. By focusing on increasing our enjoyment by being more present in our consumption (thereby elevating the overall level of our utility curves), we can reduce our desire for the chase.
To help us prioritize our spending we put a lot of money towards the thing we value the most. Right now, we're spending a lot of money on our house and very little on travel. We spend a lot on entertaining but not a lot on entertainment. If our friend group changes, then we might swap the spending. In a few years, we hope to spend much less on our house and a lot more on family activities.
3. If lifestyle inflation is caused by impulse control consider how you can eliminate the need for self control wherever possible (ie eliminate processed foods from your house, don't go near fast food places, work to improve your sex life, etc.). Lifestyle inflation that is caused by a lack of impulse control sucks because its not making you any happier. I fall prey to this, but I hate it. For example, I bought beach towels and chocolate when I was shopping with my mom recently. Especially when I'm shopping I need to take a list and stick to it.
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.