Lifestyle Inflation

18 May

Raysha Duncan, Financial Aid Administrator
www.purdue.edu/mymoney

hot air balloon; text overlay: Beware Lifestyle Inflation

You’ve graduated. Hooray!

You’ve landed a dream job. Hooray!

And best of all…that dream job comes with more money than you’ve ever had before and now you get to plot out how you’re going to spend all of your riches. You can finally get that car you’ve been eyeing (and ditch your old beater car). You can update your ENTIRE wardrobe because you can’t wear sweats/yoga pants to a real job every day. You can finally buy all organic food and eat out at great restaurants more often. You can get a great apartment with an extra bedroom…because why not? You’ve got money now!

But wait…If you do all of these things, then you’re quickly going to run out of money. And what’s the point of having a regular, decent income if you don’t actually have any money at the end of the month?

It’s important to remember that just because you can afford all of these things doesn’t mean you should actually buy all of them. You want to avoid the deathly trap of lifestyle inflation. Lifestyle inflation occurs when you’re making more than you were before and you spend accordingly (i.e. more money earned equals more money spent). But wait…that doesn’t sound too bad, right? Again though, it isn’t bad (and it may even be fun) until you find yourself living paycheck to paycheck just like you did in college.

If you’re making bank right out of college, invest some of it! Save for a big goal! Don’t starting spending like crazy because now you can buy all the stuff you ever wanted and didn’t even know you wanted. You’ll run out of money fast if you’re not careful.

So…how do you avoid spending every last dime of your new income?

Set a BIG Savings Goal

Now that you’ve graduated college you have more freedom to decide what to do with your time and since you’ve scored your dream job, you have money to play with. What’s something big you want to spend your money on? Some common things would include a house, a wedding, a vacation overseas, your dream car. Some uncommon options could include retiring early or starting your own business. Whatever your goal, own it! Save for it.

Spend Below Your Means

Don’t blow your money on pointless purchases. You don’t have to eat like a college student anymore, but you also don’t need to eat like a King. Maybe you can just have one roommate instead of three. Keep your spending low so that you have room to save your big goal.

Budget

This is what it all comes back to. You need to have a plan for spending your money. If you don’t have a plan for where your money is going every month then you’ll quickly run out of money before the month is up.

 

Do you have any tips for avoiding lifestyle inflation? Let us know in the comments below!

4 Responses to “Lifestyle Inflation”

  1. howtostuffyourpig May 19, 2015 at 9:17 AM #

    This is great! You did a great job of teaching people the importance of saving! I look forward to reading more! 🙂

    Like

  2. Mrs. Frugalwoods May 28, 2015 at 7:52 AM #

    All great points! Avoiding the lifestyle inflation trap early on is such a great way to set those frugal habits for life.

    Like

    • MyMoneyPurdue May 28, 2015 at 8:08 AM #

      Thanks, Mrs. Frugalwoods! We’re so excited you took the time to read our blog! You and Mr. Frugalwoods are one of our favorite inspirations for frugal living.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: