Last week we covered the basics of what lifestyle inflation or lifestyle creep is, and how you can identify areas of your life that have experienced some lifestyle inflation. This week we are going to look closer at how we can intentionally manage lifestyle inflation, rather than letting it just “happen” in your life.
To start this post, I want to remind you of the keys to learning about lifestyle inflation. Intentional spending is personal and there is no judgment, shame, or guilt here! How you choose to spend your money is up to you.
Secondly, lifestyle inflation is not bad, as long as you are getting increased value and enjoyment from the increased spending! So let’s focus on how we can maximize that value with our intentionally managed lifestyle inflation.
How do you know if your lifestyle has inflated?
In our last post, we looked at some different ways to identify lifestyle inflation in various budget areas of your life. By comparing your spending to the same month in previous years, or in previous months, you can watch your spending increase and decrease. Many budgeting apps and software have graphs that will help you with this if you are already using them. Otherwise, some quick graphing in Excel will give you a pretty picture to look at!
By identifying the areas your spending has increased, you can target those at the start as you determine what lifestyle inflation you are willing to accept and help manage lifestyle inflation.
Identify your values and important spending areas
The first place to begin with intentionally managing lifestyle inflation is to identify your values and what areas of your budget are of the highest importance to you. This is all a personal, values-based choice for you and there will be no judgment allowed!
Some ideas of how this works to get you started are:
- My health is important to me, so I will be comfortable spending more on areas of my life that directly affect my physical health.
- I value friendship and connection, so I am willing to spend more on activities or times that allow me to spend time with people I care about.
- Wellness is important to me, so I will be willing to spend more on lifestyle choices that promote balance and my overall wellness.
- Video games are important to me, so I will spend more on the tools and equipment that allow me to enjoy my hobby to the fullest.
Some questions that may help you identify areas of importance in your life:
- I feel happiest when I….
- I feel refreshed and excited about….
- My favorite memories of life are……
- I am the best version of myself when…..
Total up your spending into budget categories
Take some time to look over your spending and total it up in relevant budget categories. This can be for a period of time like last month, last week, or the year to date. If you already use budgeting software, it is the perfect place to start.
Categorize your spending
Now we are going to look at your spending in line with your values. For each budget category, list the total spent for the period you identified earlier next to the name of the category. Now, with the values list you came up with earlier, go through the categories and assign them to the following spending levels:
- Very important to me (aka spend more freely)
- Important to me (Have an affordable baseline, and splurge occasionally)
- Neutral (look for areas to cut)
- Unimportant (cut out completely or do as cheap as possible)
This can be a challenging task! Remember, we are looking to identify how important the spending is, in line with the values you identified earlier. As you go through this process, you should have a few that are very important, a few that are unimportant, and most of the rest of the spending categories will fall in the middle somewhere.
The very important and unimportant levels are the key to values-based spending. You want to look for ways you can do more of the very important spending categories, and you want to cut as much as possible from the unimportant category.
This will lead you to sacrifice things that don’t matter to you, for more of the things that are very important in your life. That is a pretty good tradeoff!
Make them specific!
An important key in identifying target areas to focus on is to make specific statements that you can use to guide your spending. Here are a few examples based on the values identified above:
- My health is important to me, so I will only buy organic fruits and veggies knowing my grocery budget will be higher than average.
- I value friendship and connection, so I will be willing to have a slightly higher dining out or coffee budget so I don’t have to turn down invitations to spend time with friends.
- My wellness is important to me, so I will continue to pay for the gym that seems expensive as long as I am attending a certain number of times a week.
- Video games are a significant part of my life, so I will spend more for faster internet service so I can play the games I want without interruptions.
The trade-off
You cant have it all (Unless you are a Kardashian!), so there have to be areas of your budget that you need to compromise and cut so you have the funds for these priority areas. Let’s look at the trade-offs for each of these high-value areas.
- My health is important to me, so I will limit my eating out in order to afford to eat primarily organic at home.
- I value friendship and connection, so I will only eat out when I have a friend with me. I am not allowed to have take out and eat at home by myself.
- My wellness is important to me, so I will look for free yoga classes online to do at home on my rest days when I am not at the gym, rather than joining a separate yoga studio.
- Video games are a significant part of my life, so I will not have any paid TV subscriptions or cable to afford my higher-quality internet speed.
Does that give and take make sense? If you have a high priority spending in one area, then another area must be reduced. The areas don’t have to be related. You can eat organic and cut the cable to pay for it.
How do I Manage Lifestyle Inflation?
That is coming up next week! Or if you are reading this later, you can jump to it here! Next week we are going to look at lifestyle deflation. Don’t panic, I am not going to suggest you revert back to living like a college student, owning only a used futon to sleep on (unless that is in line with your values, then you do you!)
Instead, we are going to focus on the Neutral and Unimportant budget sections to cut those down so you can use the excess funds on your most important areas.
What areas of your life did you identify most of your lifestyle inflation in? I would love to hear what you saw when you did this exercise about how to manage lifestyle inflation. Leave your thoughts in the comments below!
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