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How do you best combat lifestyle inflation?

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Software Engineer at Government2 months ago

With each pay increase by getting a new job or levelling up there is a hugely common tendency to increase your lifestyle as a result of this.

What are some methods to prevent this from happening?



  • 6
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    Team Lead (people manager) at Mistplay
    2 months ago

    Amazing question, I've been thinking a lot about this too! I addressed this for myself with a mindset shift by re-understanding what money is when you are fortunate to have a higher paying career. Here is an example video I found super helpful for that understanding: Why I am a Financial Minimalist

    Summary: Money is for buying time not luxury goods

    • There is a sense of tranquility with no huge mortgage/lease payments weighing you down
    • Money buys you options in life and to pursue creative ventures and to find purpose and meaning
    • Money is not for feeling a sense of superiority to someone else by buying a Gucci belt and fancy house

    Of course you can and should treat yourself but personally I'm trying to just not do every treat every month, rather picking and choosing based on a pre-thought-out budget. And the budget can change, but not just because your income did. I'm choosing to save more so that I can fund myself to say take a year working on my own business. But pick what is meaningful to you, and not just saving for retirement in 40 years.

    More resources:

    • NerdWallet Advisors I use them to get a CFA's help with financial planning for $30/month
    • Financial Mastersheet this is a free excel sheet I use to track my monthly expenses and total investments over time from another favorite creator of mine
    • FIRE Investment Calculator this an Android app I built and would love feedback on BUT I recommend that before you ratchet up your spending another $1k per month from that next raise, you can play with your numbers here to see how investing that would allow you to retire sooner (even if you're not really doing FIRE)
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    Tech Lead/Manager at Meta, Pinterest, Kosei
    2 months ago

    I don't have a great answer here since I feel I've gone in the other direction. When I first graduated from university, I was extremely frugal:

    • I'd track every expense in a spreadsheet
    • I'd almost always spend more time if I could save money (e.g. taking public transit instead of Uber)
    • I'd turn down events if the time/cost was too high.

    At some point, due to a combination of earning more and getting married, I started to relax a bit more. Even if I spent more, I thought I could still save enough money to be comfortable for the future.

    This is kind of a non-answer to your question

    but my mindset has shifted away from lifestyle inflation and more into a goal for savings. Then I figure out if we're trending correctly.

    For the most part, I've stopped thinking about smaller purchases < $10.

  • 4
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    Team Lead (people manager) at Mistplay
    2 months ago

    That’s super fair Rahul, there are many different approaches. I think if one can live ones dreams like having a business with revenue, family, house and save that is ideal and worrying to much about money doesn’t help.

    The one thing I realized is just that if I do want to be supporting myself independently of traditional work in the next 10 years, then every $1000 extra I get used to spending each year is another $25000 that I need to have saved and invested to support that lifestyle by the 4% financial independence rule. (Or $1000 more to earn each year as a small business/creator/artist which might be way less consistent than a normal job)

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    Tech Lead @ Robinhood, Meta, Course Hero
    2 months ago

    This is admittedly not a problem for me as I am Asian and so is my wife. 😅 Both of us grew up with parents that really taught us how to be frugal and get deals.

    My main advice is that if you find yourself spending frivolously, give yourself a hard budget every month:

    • Make all the access go into a savings account that is hard to withdraw from
    • The strict budget will force you to think about getting the most out of your money, like a game (which engineers tend to love)