Build Financial Resilience: How to Avoid the Pressure of Lifestyle Inflation

Admin • January 12, 2024

Your brother-in-law and his family took a luxury vacation in Europe, and you’ve been meaning to take your own family there. Your cousin bought a house on a beach you love to visit. Your neighbor bought a new boat, and you’ve always wanted one. Your friend from college bought a new, bigger house in a highly desirable neighborhood that you’ve been eyeing.

It seems like everywhere you look, someone you know is “winning” at life and enjoying the trappings that come with it, and you don’t like the feeling of missing out.

Keeping up with the Joneses is a phrase you’ve certainly heard – the pressure to keep pace with the lifestyle of your friends, family, or people in your social circle. It can be difficult to resist the feeling that you also need to maintain a particular standard of living, and it’s easy to fall into a cycle where you’re spending more – and possibly overspending – to keep up with your peers.

The stress of upholding a certain status in society can be mentally (and potentially financially) exhausting, coupled with lifestyle inflation – the pressure to spend more as you make more to maintain this status. It can feel like a race where you’re continually spending to keep up with or one-up others. But with the right mindset and strategies, you can avoid lifestyle inflation, escape the race, and build resilience to support your mental and financial well-being.

What is Lifestyle Inflation?

Lifestyle inflation is the tendency to increase spending as your income grows, on things like larger homes, upgraded cars, ultra-expensive vacations, and other material items. Lifestyle inflation, if unchecked, has the potential to become greater every time you receive an income increase: the more you earn, the more you spend.

Maybe you’ve received a raise or a large bonus, or perhaps you’ve started a new job with a higher salary. You feel like you deserve a bigger home, a nicer car, a fancy trip – especially if it seems everyone else is also enjoying those things. It’s hard not to constantly compare yourself to others, particularly with the influence of social media showing you an ideal lifestyle that everyone you know seems to be living. 

You might think to yourself: Why do they have such nice things or (what looks like) such a good life? You should be able to have all that, too; you should be able to have just as much, if not more. You might feel like having these things will reflect your successes, and maybe even make you happier.

The Consequences of Keeping Up With the Joneses

Spending to maintain a certain idealized standard of living can hinder your financial goals and your long-term objectives. When you increase your spending with every increase in your earnings, it’s easy to overspend because you think you can afford it with a higher income. This can cause financial stress and challenges down the road.

Getting caught up in lifestyle inflation can prevent you from reaching your long-term financial goals, such as paying off debt, building your savings, growing your investment portfolio, or saving for retirement. You may be so focused on spending in the present to keep pace with others, that you put off saving for the future.

There’s also an emotional and mental toll to always striving to maintain a certain status and meet perceived societal expectations. If you’re in a constant state of trying to outdo, outshine, and outspend your social peers, you can feel stressed and anxious and you’ll never give yourself the chance to be happy and appreciate all that you do have. 

Change Your Narrative: Strategies to Avoid Lifestyle Inflation

There are a few strategies you can use to help you resist the pressure of lifestyle inflation:

  • It can be helpful to identify your personal triggers that lead you to want to overspend. If you know what affects you, you can be mindful and ignore or avoid reacting to these pressures. It’s also important to remember that what you see may not always be reality – those large purchases and lifestyle choices may be putting your peers into debt or causing them to avoid other financial responsibilities.

 

  • Monitor your spending habits, or create a budget to track your expenses, so that you can see where you may be tempted to potentially overspend. Developing and committing to a budget is a practical and effective way to manage your finances and resist the pull of lifestyle inflation. While your budget can evolve as your earnings grow, it’ll help you increase spending in a controlled manner.

 

  • Use your extra income to build your savings, boost your emergency fund, or grow your retirement accounts and investment portfolios. Purposefully using that money before you can spend it can help you avoid lifestyle inflation while adding to your long-term financial stability.

 

  • Set realistic short-term and long-term financial goals for yourself and your family, and focus on achievable objectives and priorities that align with your values. Your goals will provide a foundation for financial well-being, as well as motivation to refrain from unnecessary spending. 

 

  • Invest in experiences, rather than possessions; value the memories more than the material goods. Shifting your mindset will allow you to experience a deeper satisfaction than the fleeting happiness that comes with spending on things you may not really need. Make sure to take a moment to appreciate all that you do have; building gratitude into your daily life will empower you to resist the draw of lifestyle inflation and help you live a more balanced and fulfilling life.

Cultivate Financial Resilience in Your Life

You can resist and overcome the pressure of lifestyle inflation by concentrating on your financial well-being, both now and in the future. Skip the short-lived gratification of overspending to maintain a certain status, and instead focus on the long-term, lasting achievement of having a secure financial future. 

Consider working with a financial advisor who understands your needs and objectives and can help you create a roadmap for financial success. Having a holistic strategy in place to meet your financial goals will keep you on the right track to building your wealth and planning for the future.

At Five Pine Wealth Management , we’ll work together with you to develop a financial plan with your needs and objectives in mind. As fiduciary financial advisors, we are dedicated to acting in your best interest, offering guidance and advice that is specific to your individual circumstances. We can help you cultivate the financial resilience needed to achieve your financial goals – to find out more, send us an email or give us a call at: 877.333.1015.

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