Lifestyle inflation is the basis of the phrase “more money, more problems.” It means that as your income increases, so does the cost of your lifestyle. So instead of becoming more wealthy when you get a raise, instead you accumulate more stuff/more payments on stuff. It’s the driver behind buying too much house, a fancier car (that you don’t need), a boat, or any number of “luxuries” that are supposed to make life more pleasurable. But the happiness that new stuff brings is temporary. So how can we, as people seeking financial independence, resist the temptations of lifestyle inflation and the false happiness it offers?
Materialism lead to Lifestyle Inflation
Lifestyle inflation is intrinsically linked to materialism. It’s a mindset based on accumulation and consumption. The pursuit for constant luxury is a hinderance both to our financial lives and our spiritual ones. This is the mindset that leads to “I can afford this payment.” After acting on that thought a few times, materialism springs its ugly trap: now we can’t escape those payments. The payments and maintenance of a huge house, fancy cars, and expensive toys takes significant amounts of our most precious capital: time. The vast majority of us who make money by working a job are doing a direct trade: our time and energy for money. When we realize that we’re trading our lives for money, expensive luxuries make a lot less sense.
Defeating Lifestyle Inflation
It’s easy to get caught up in others’ lifestyle inflation. Keeping up with our neighbor’s luxuries inhibits our own happiness and financial health. After all, if we cannot be happy if others have nicer stuff than we do, how can we ever expect to be happy? Defeating lifestyle inflation comes down to mindset and intentions. It means avoiding the big unnecessary purchases as well as the smaller impulse purchases that always add up. It requires cultivating a mindset of Enough, which is a secret to happiness. A lifestyle of enough doesn’t necessarily mean minimalism, but I see its benefits. I like minimalism because it shows that a lot of stuff is unnecessary for happiness. And for me, a simpler life is ideal.
Where Financial Independence Comes in
There are many paths to FI, and many of them do not include minimalism. In every success story though, there’s a concerted effort to avoid lifestyle inflation. It takes great discipline to get a raise and put the extra money into savings. That’s how most wealth is built: deliberately over time. A FI lifestyle is a lifestyle based on enough. Chasing after ever more expensive liabilities luxuries doesn’t lead to a fulfilling life.
This is going to be a two part-er. The second part is going to be about avoiding a scarcity mindset and embracing a mindset of enough.
Good food for thought!