{"id":12380,"date":"2018-04-06T13:20:04","date_gmt":"2018-04-06T20:20:04","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=12380"},"modified":"2018-04-06T13:20:04","modified_gmt":"2018-04-06T20:20:04","slug":"lifestyle-inflation-tame-this-money-beast","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/lifestyle-inflation-tame-this-money-beast\/","title":{"rendered":"Lifestyle Inflation: Tame This Money Beast"},"content":{"rendered":"

If you work hard and do well, it’s likely that your income will rise over time. That’s a good thing, right?<\/p>\n

It is, but people often fall victim to what’s called “lifestyle inflation” as they get those raises. They make more, but they also spend more.<\/p>\n

Lifestyle inflation is a big problem. More money doesn’t necessarily mean more security. The number on your check changes but the percentage spent on consumption vs.\u00a0saving don\u2019t look that different.<\/span><\/p>\n

Regular monetary inflation<\/a> can\u2019t be helped. Money loses\u00a0purchasing power over time. That’s why we invest, to offset long-term damage from\u00a0inflation.<\/p>\n

\"\"<\/p>\n

Lifestyle inflation, however, is a choice. It’s spending more than you make, regardless of your income.<\/p>\n

A lot of times it happens because of\u00a0the crowd you run in, the classic “keeping up with Joneses” conundrum. They get a new car, you get a new car. They get an in-ground pool, you get one. And so forth.<\/p>\n

If you have a shopping problem, that\u2019s an obsession if it’s\u00a0not out of control. Going out to eat all the time\u00a0is another concern\u00a0but not unconquerable.<\/p>\n

Things can get out of hand, however, if\u00a0your friends make more money than you. When we\u00a0socialize, the urge to spend freely is strong.\u00a0It\u2019s a financial problem rooted in\u00a0social pressure. You don\u2019t want to look like you can\u2019t keep up.<\/p>\n

There is a solution: Be the one who suggests things to do, instead of the ringleader friend who makes more than you and maybe others in your circle.<\/p>\n

If she says “Let’s cruise Europe!” your suggestion could be “Let’s drive to the beach here!” Most likely, the others in the group quickly will agree with the lower-cost option.<\/p>\n

Social pressure<\/h2>\n

The most dangerous lifestyle inflation, however, comes\u00a0when your fixed cost of living is rising at a very high clip. This is the cost of your housing and cars, but mostly it’s\u00a0housing \u2014 the mortgage, upkeep and property taxes.<\/p>\n

People often buy a bigger house or a more expensive house than they truly need. It then takes more money to maintain. If something breaks, it\u2019s going to be more costly to fix.<\/p>\n

I find that a lot of people have trouble retiring because of housing choices they made, rather than simply going out to eat too much.\u00a0<\/span>Once you\u2019re in a comfortable house\u00a0you don\u2019t want to move. Nor do you don\u2019t want to look like you can\u2019t afford it.<\/span><\/p>\n

The other spending areas are easier to pull back on.\u00a0<\/span>Going out to eat less often is not necessarily\u00a0obvious to others.<\/p>\n

But if you get a lesser quality car, that\u2019s visible. If you move into\u00a0a smaller house, that\u2019s visible.\u00a0<\/span><\/p>\n

When I sit down with people whose houses are wildly inappropriate to their incomes, it\u2019s hard. People say they\u2019ve put a lot money into a home, they say “When I come home I feel like I\u2019m on vacation.”<\/p>\n

Nevertheless, those\u00a0housing bills have to be paid. It\u2019s like a business with huge overhead. There’s no room for error, and no\u00a0comfort in your financial life<\/a> as a result.<\/span><\/strong><\/p>\n

MarketRiders, Inc. is a registered investment adviser.\u00a0 Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.\u00a0 Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and\/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.<\/i><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

If you work hard and do well, it’s likely that your income will rise over time. That’s a good thing, right? It is, but people often fall victim to what’s … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":12419,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[],"yoast_head":"\nLifestyle Inflation: Tame This Money Beast | MarketRiders<\/title>\n<meta name=\"description\" content=\"People often fall victim to what's called "lifestyle inflation" as they get raises. 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