When Lifestyle Inflation is A-Okay - The Broke Professional

When Lifestyle Inflation is A-Okay

Don’t spend it all in one place.

What to do when your business revenue is going up or you finally get that promotion you’ve been angling for?  Most people will use that newfound money to go on a nice trip or take the family out to dinner.  Others will stick the extra money into a savings account or pay off some outstanding debts they may have.  And there are those who will use that new high income to inflate their lifestyle (appropriately called lifestyle inflation) by buying houses which are bigger than they can afford or cars that are just a step above their pay grade.

Ask any financial expert about lifestyle inflation and they will tell you where you can stick your inflated lifestyle.  It is generally looked down upon in the financial community (including my own little community here).  If you tell me you just got a 10% raise, I will most likely ask you to increase your debt payments by 10%, increase your investment contributions by 10%, or some combination of the two.  This is usually awesome financial advice that will get you a lot closer to financial freedom.

But financial advice is usually not so black and white (or shouldn’t be anyway).  This got me thinking, what are some things to spend new money on that can bring value to your life beyond  paying off your debts and investing your money?  Here is a list of things I thought of:

Vacation:  As I mentioned before many people will use a raise as an excuse to go on a vacation.  I’m actually fine with that as long as it doesn’t become an excuse to go on an expensive vacation year after year.  We need a little break now and then, and a one time vacation splurge can help us recharge and refocus.

House Cleaning:  Okay, just hear me out.  Maid service is usually the first thing to hit the chopping block when expenses are being cut, but there can be some value in it for some.  It’s all about opportunity cost and peace of mind.  Most people love coming home to a clean house.  If things are dirty or out of place, it can be a distraction.  But if outsourcing that job to a cleaning service will provide peace of mind AND give you time to do something of personal value, then I think it can be justified.

Improve your skills:  Skills can be improved to increase money and/or time.  Taking some classes to improve your skills could be well worth it in terms of return on investment.

Network:  Conferences can be expensive, but they can be extremely motivating and lucrative.  They usually have great speakers and influential leaders in attendance, so there are lots of opportunities to get ahead.  But it’s important to get the most out of a conference and not be the guy sitting by himself all weekend eating from the buffet every chance he gets.  The Muse wrote a great article on things to remember when attending a conference.

On a personal note, one short conversation I had at a conference allowed me to get a promotion at work.  I had expressed some interest in the position and provided some ideas.  A few months later the position unexpectedly opened up, and my name was the first one on the list as a potential replacement.  All because of one little conversation.  So use your time at conferences and networking events as efficiently as you can.

Gym membership:  When January 1st rolls around, gym parking lots are full and and clubs are filled with lots of people lifting things and running in place.  After a couple of months, most of those new people aren’t there anymore.  If you’re one of those people that signs up for a gym and doesn’t show up, don’t bother spending money on a membership.  But if you are self motivated enough to incorporate a cardio or weight training program into your life, a gym membership can be a good value.  Monthly prices vary, but most good gyms have rates around $40-50/month, which can be valuable if going to the gym is helpful to your health and sanity.

I typically wouldn’t recommend doing anything other than investing or debt payoff with any type of raise.  But there is no one size fits all rule, and if you can create time or money by spending your raise on one of these things, then that may be the best use of your extra money.

What are some things you spend money on that bring extra value to your life?

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Comments

  1. We hired someone to come and clean earlier this year, but I should have done it sooner. She only comes once every three weeks, but it is absolutely amazing! Totally worth the money considering the fact that I make a lot more than I pay her to clean during those four hours.

  2. I love having a clean house. I love my new Roomba too! In one word, Epic. I’m also a big fan of the gym but here lately I’ve felt extremely guilty for having a membership. It costs us around $900 a year and I own my own workout equipment at home too. One has to go… Maybe I’ll flip a coin?

    • Just pick what’s more important for you guys at the moment. Sometimes cuts have to be made. But I agree a clean is house is definitely awesome.

  3. If we had more money, I might hire a cleaning service. But right now there are too many other fish to fry.

    As for raises, we generally just divvy those up between our various goals: $100 more on the mortgage, $100 more into the retirement account, etc. But when I get a bonus, we take a little bit of the money and splurge on something.

    Liz Weston suggests you spend 10% of a windfall, but I can’t handle that much. So usually we splurge with $100-200. Enough to feel like we’re whooping it up, but not enough to feel like I’m flushing it down the drain.

    • Yeah it seems nice and responsible to apply a raise towards any of our financial goals. But it can be tempting to splurge from time to time.

  4. If you showed my wife this list, she’d put a check mark under the wanted box for all of them (except for maybe the networking). Just a few weeks ago she was asking if we could do a maid service after she talked to just ONE friend about it and then tried to tell me EVERYONE has a maid service! I couldn’t bring myself to get on board with it though, not now anyway. Our lifestyle hasn’t inflated that much yet.

  5. Great conferences are totally worth it. Besides, they are a business expense and good excuse to get out of the house and see the world. I’m hoping there will be more relevant finance conference is in Hawaii and maybe even Thailand! Wouldn’t that be fun?

    Over the past five years I’ve actually downgraded my expenses by renting out my old house, and then buying a new house is smaller and cheaper. It really feels amazing to live well within your means.

    Sam

    • Conferences can be fun. I’ve been combining them with family vacations from time to time so we can spend time together.

      You’re right being able to cut down on expenses is a great feeling.

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