I’m in debt. I have student loans up to my eyeballs and a car loan. I hate my debt, and I’ve been working hard for the past twelve months to get rid of it.
I’ve cut my expenses, I’ve increased my income and I’ve poured every last dollar I have into debt. Now, a year into my little “become debt free” project, I’m starting to see some serious results. I’m projecting that I’ll have paid off over $16,000 in debt this year, and with a little luck I’ll get that much paid off again next year, bringing me slowly but steadily closer to my goal of debt freedom.
It’s been tough though. As much as I’m proud of myself for my accomplishments, and as driven as I am to get out of debt before anything else, I’m tempted. I’m tempted by lifestyle inflation.
With my increased income comes the increased temptation to improve my living situation. I’m tempted to start saving for a house payment, maybe buy a second car. Some bloggers will make lifestyle inflation sound like a quaint little story. They’ll paint it as having one too many coffees or taking an extra expensive vacation every year. They’ll make lifestyle inflation sound like an inconvenience that must be ignored, even though it’s something that might be nice to indulge in.
For me though, lifestyle inflation represents something a little bit more substantial than an overall increase in my spending. For me, lifestyle inflation is part of the act of becoming an adult. Right now, I live in a 400 sq. ft. one bedroom house, and drive one car between my fiance and I.
I’d really like to save for a downpayment on a house, or even upgrade to a larger apartment with a second bedroom and maybe even space for a kitchen table. I’d love to have a second car so my fiance and I don’t need to constantly coordinate our work schedule because we live in a rural area that has no public transportation. These things aren’t extra coffees or a shopping spree. These are real, genuine temptations that would make my life easier. These are things that to me represent adulthood.
As much as I’d like these things, I can’t have them. I want to get out of debt, badly, and I’m not willing to take on these extra expenses at the cost of an extra six months of debt repayment. That’s a slippery slope that I don’t even want to set foot on. I feel like if I did, before I know it, I’m a homeowner with an extra couple hundred thousand in debt and another 45% of my income tied up in minimum payments. It is, however, very, very tempting.
How I Avoid Lifestyle Inflation
Avoiding lifestyle inflation has been tough, but I think I’ve done a decent job at keeping my spending in check, even as my income has increased. Here’s how I’ve done it.
Visualize It – Instead of justifying these things by saying “It’s only a few hundred extra a month.” Instead I visualize the overall impact that few extra hundred a month will have on my goal to become debt free. A few hundred less a month towards debt repayment, for example, would push back my debt free date nine months.
Beyond that, with regard to savings, the results are even worse. $200 per month put into a retirement account starting at my age would easily yield over $300,000 by the time I retire. All in the name of a second car? I think I’ll deal with the inconvenience today.
Enjoy the Little Pleasures – Yes, I live in a small space to save money. That doesn’t mean that I need to live in a hole though. I spend money on making my small house more comfortable to live in.
That includes things like investing in paint, better bedding, and new furnishings. These small investments will make this place more bearable to live in, resulting in me staying here, and thus saving money, longer.
Remember The End Game – I spend a lot of time focusing on what I want. I want freedom. I want freedom from debt, and freedom to make decisions based on what I want, and not on what’s going to get the bills paid.
Being debt free, and eventually having substantial savings will afford me that freedom. In the mean time, buckling down and avoiding lifestyle inflation is a necessary means to that end.