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Lifestyle inflation: never, ever, ever (like, ever)

UntitledRecently, The Hubby had his annual performance review at work. He transferred from one department to another over the summer (not a pay increase, but better working conditions), so he wasn’t expecting to be eligible for a raise. But, he got one! Are you ready for how much?

An extra $50 a month.

If you’re like I was before I became a PF nut, you’re sarcastically thinking “Woohoo! Fifty whole bucks!” If you’re someone who scrimps and saves and really appreciates how much each dollar is worth (like I know B&B readers are), you’re probably thinking “Fifty extra dollars! I can coupon my way to 100 tubes of toothpaste with that money!”

(Or something like that. You may not be that extreme.)  :)

So naturally, the time came for “The Discussion…”

As budget master (mistress?) of our household, it was time for me (with The Hubby’s input, of course) to decide what to do with that extra $50/month.

We could have one nice dinner out (or two of our usual discount meals out).

We could increase the “misc.” category on our budget to give us a little extra wiggle room. (Always dangerous, because “misc.” expenses are usually the impulse purchases we don’t really need but talk ourselves into justifying in a moment of weakness.)

We could get some of the many home repairs we need done now, on financing, and use the extra $50 to make the payments. (Financing instead of paying cash is one of my big “avoid whenever possibles,” but you see how a little extra money gets my wheels spinning?)

In the end?

We decided that the extra money from The Hubby’s raise is going straight into our emergency fund. We’re going to keep going by the budget we had before his raise, and putting away the extra for the things that always do come up when you least expect them…vet bills, health care expenses, car repairs.

Why are we going this route?

Because we’ve seen too many friends and family members fall into the trap of  “lifestyle inflation.” They get a better job, and suddenly they’re leasing a sports car and wearing designer clothes. They get a big promotion, and instead of using it to pay down the debt we know they have, they go out and celebrate with flat screen TVs and expensive vacations

Which means they never really get ahead, even though they’re making more money, because their expenses just get bigger as their income gets bigger.

We’re perfectly happy with the way our life is right now. Sure, we make a few sacrifices, but we don’t feel like we’re suffering by any stretch of the imagination. I don’t mind continuing to live a frugal lifestyle if it means we’ll be covered in the future if something unexpected pops up. And once our emergency fund hits the number we’re aiming for (currently $2,000), that money can start going towards something else, like those big home repairs or our retirement.

Have you ever been tempted by lifestyle inflation, or known someone who has? Have you fought it, or given in?

 

~Heart,

Em

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photo credit:  Nathan Congleton

Comments

  1. Our main goal has always been the mortgage (could you guess from the name?) So any increase in wage is easy. $50 more per month? That’s $50 more per month that goes into the mortgage in order to kill it quicker. I do sometimes wish that friends would do the same, it’s difficult watching them just pack on the debt.

    • Em (The Blonde) says:

      That’s an excellent way to spend any overages. Once our emergency fund is in good shape, maybe we’ll start putting some more towards big things like our mortgage or our student loans. We don’t have a large amount of credit card debt (we’ve been very careful about that), but those student loans kill me every time I have to pay them!

  2. Yes!! Lifestyle inflation kills a lot of people’s money habits, so DEF good to plan and stick to it before you get used to that extra money coming in :) If you do that every time over the years, you not only save a BUTT TON but you also keep your expenses normal too. Life always tries to get you to increase it over time, but if you can hit pause for as long as you possibly can, then you’ll be thanking yourself forever for it.

    Great post.

  3. Thanks for sharing this great tip! I learned years ago one of the easiest ways to get ahead financially is to automatically put any additional money from a salary increase into savings.

    Websites like Paycheck City (www.paycheckcity.com) have a paycheck calculator and employees can determine what their new net pay will be before receiving their first paycheck so they don’t get used to the new check and start spending it before upping their savings allocation.

    I’ve heard the same is true for extra cash like bonuses, cash gifts, and tax refunds, though I will say don’t always put extra cash straight into savings. Sometimes I allow myself to spend half and I save the other half. Sometimes I give the entire amount to charity. Sometimes I spend the entire amount to invest in an asset like one time I bought myself a nice, not-plywood desk for my home office.

    As far as home improvements are concerned, my husband and I have one savings account for emergencies and a second savings account for home improvements. We put a much smaller amount into our home improvement account so it accumulates slower but we do like having an extra account earmarked for sprucing up the house. We use that account to pay for non-emergency repairs and redecorating like topping off the mulch in the yard or a fresh coat of paint in the living room.
    Have a grateful day!

    Chrysta

    • Em (The Blonde) says:

      That’s a really cool site, Chrysta. Thanks for sharing…I’ll definitely have to check it out!

      We try to do the same with unexpected money as well. If we’re not counting on it already for the monthly budget, then into savings it goes. It helps a lot when we get unexpected EXPENSES that aren’t in the usual budget, like birthday gifts, repairs, etc.

      I like your idea of having a separate home improvement fund. The way our poor little house goes, that might not be a bad thing for The Hubby and I to start thinking about once we’ve got our emergency fund in shape.

  4. Great article. Just found your blog from J$ and I really like it.

  5. This is such a great post, but so hard for me to actually realize and put into practice! If there’s money in my pocket, I can’t help but spend it!

    • Em (The Blonde) says:

      I know, that’s the temptation for so many people. (Myself included, I’ll admit.) That’s why I love automatically shifting that extra money straight into savings…it doesn’t give me a chance to touch it or even “realize” it’s there. Sometimes your best way to keep on track is to safety proof yourself from being able to screw things up!

  6. It’s so hard not to be like… YAY we have so much!! and then go all crazy and buy a 200 dollar pair of boots only to realize that’s 4 months of your raise gone already…

    Nice choice with the emergency fund :) Perfect Idea.

    • Em (The Blonde) says:

      Thanks, Cat. Yeah, it is hard. That’s why I don’t even let myself see the extra money, hahaha. Straight into savings it goes!

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