At the end of the month, having far more than half of the income is difficult to imagine for many people. How can I do that? One important step is that I avoid lifestyle inflation.
Of course you can say I just have it all for myself. I do not have to feed a family and even though I am just a beginner, I am getting by as a bachelor.
But many who live in a similar life situation and earn just as much (or even more) save just 10% of their income. Or even have nothing left at all at the end of each month. Part of this is because they’re spending too much.
The typical start to professional life
After graduation and the first job you suddenly have real money in your pocket.
This changes your life: You move out of the shared apartment into a more spacious apartment. Of course, the newly won space also wants to be filled. So, you’re acquiring new furniture, kitchen appliances and a stylish flat screen TV.
Because your time is now tight due to the 40-hour week job, you buy yourself a car for the commute. In the short lunch break, you’ll get something from the bistro next door. At the weekend you can relax, on a shopping spree or a good movie at the theater, from the busy work week. And you will not spend your few holidays at the lake as you used to do as a student, but instead you spend your vacation in Thailand or in the Caribbean.
It’s a good feeling that you do not have to spend much money on these activities anymore. And although you now have three to four times as much of it available, your account is still at zero at the end of the month.
That would not be an issue at all, if you now lead a happier and satisfying life three or four times over.
Strangely enough, as a student I always heard from the “working adults”:
Enjoy student life! This time is the best of your life and it will never come back!
Then I would think to myself: wait, that’s it? That would mean that my life does not improve much as soon as I earn money.
Hedonic adaptation or you get used to everything
And indeed, the first few months, your new life with more money is great and exciting.
But because we humans are so customizable habitual animals, you get used to your newly won luxury in a short time. Then the pointer of your “Satisfaction Barometer” slowly lowers towards the initial state. This effect is called hedonistic adaptation and has even been scientifically proven.
You’re already standing with one leg in a dangerous vicious circle of lifestyle inflation.
Your own apartment and used cars are soon nothing special anymore. Next you move into an apartment in a better location and with a spacious roof terrace. And instead of the old small car you treat yourself to a year-old luxury car with all the bells and whistles.
But you got used to it again after a few months. Then you might eventually want to have a big house of your own and a tangy sports coupe.
But you can update your standard of living as often as you like. It is in our nature as “Homo Sapiens” to adapt to the most different conditions again and again. That is why we were able to colonize the whole earth with its different living conditions from the jungle to Greenland. And that’s why you’ll just get used to your higher standard of living again and again – without your life thereafter feeling noticeably better than before.
Your long-term happiness is therefore largely unaffected by a larger apartment and more expensive hobbies.
Make better investments (not just financial ones)
Unfortunately, this does not apply to your financial situation. Because your constant lifestyle upgrades cost you real money. And not just a few hundreds or thousands, but simply all the money you have.
If you’re adjusting your lifestyle to your growing income in one go, you can earn as much as you want. You have to keep working every day and your account is empty at the end of the month. Even if you earn a lavish managerial salary for years, nothing is left of it, but everything went to finance your inflated lifestyle.
So, I’m doing a big turn around this vicious circle of lifestyle inflation.
As a student, I’ve had a good living from $650 a month. I’ve always had a lot of fun and never really missed anything. Now I earn more than three times as much money. Does that mean that I have to spend also three times as much? No.
Instead of using my money to continue to inflate my lifestyle without sustainable benefits, I prefer to use it for something that really does bring me something in the long term:
More freedom and self-determination. More time for things and activities that are close to my heart. That’s why I save my excess money. In order that I can live without money worries in the future and hopefully I may not have to work for money at all anymore.
Turn the tables and live better than before
If you get used to getting bigger and bigger and bigger without your long-term satisfaction rising, why couldn’t you reverse that effect?
How about you do not let the hedonistic adaptation that works against you in lifestyle inflation work for you instead? Simply by trying to get used to a little less and less?
Live more frugally
So how about lifestyle deflation instead of lifestyle inflation?
Instead of just buying the next washcloth comfort upgrade, you’re breaking out of the comfort zone and experiencing something else.
You shouldn’t clutter more and more instead reduce and sell some of your possessions. As an alternative of renting an even larger apartment, how about you move into a slightly smaller one instead.
You leave your car or even better you just sell it completely and instead train your physical condition on the bike. First you make ten, then fifty, then a hundred kilometers.
You learn to cook something new instead of being served three times a week in more and more expensive restaurants. Then you invite your friends over to dinner on the weekend.
Instead of the new mobile phone, you keep your old phone. The time you have previously senselessly spent, you now prefer to spend with your family and friends or you just read a great book.
What is a challenge in the beginning feels completely normal within a short time-span and it becomes a routine.
Your trivial friends make sure to shake their heads and swear that you will certainly lose quality of life without constant lifestyle upgrades.
But in truth, exactly the opposite is the case. With lifestyle deflation, you automatically do the things that bring you real long-term satisfaction. You take your life into your own hands, learn new skills and develop your personality. You become physically fitter, eat healthier and spend more time outdoors. You say goodbye to the things that do not take you further and put the time and energy you have into your real life social contacts.
By the way – while you’re only busy leading a better life – you’re saving many hundreds of thousands of dollars that would otherwise have sank into meaningless lifestyle upgrades throughout your lifetime. You can now invest this money in your freedom so that you can spend more time living a great life.
Have you already made acquaintance with lifestyle inflation? Did you increase your standard of living simply because you suddenly had a higher income?
Even if the TV commercial and your work colleagues pretend that this is the way to a successful and happy life, the opposite is in fact the case.
If you want to achieve something in your life and not step on the spot forever in the hedonistic hamster wheel, then you have to fight that little devil. Your income and expenses should remain two independent variables.