Lifestyle Deflation

You often hear about lifestyle inflation. It’s the common pattern of increasing your spending throughout life. Leading to little or no savings each month, despite often making more money.

But what about lifestyle deflation? Is it possible to do the opposite, and actually decrease our spending relative to our income?

The Challenge of Cutting Back

Lifestyle inflation is easy to do. In fact, it’s so easy that oftentimes we don’t even realize that we are doing it. We start to make more money each year, and we naturally start to spend more. We “upgrade” things like our cars, eating out, and our homes.

The challenge is cutting back. It’s not natural for us to suddenly decide to downgrade things. We don’t want a lesser car or a smaller home. So the odds are stacked against us. This means:

• Admitting you are spending more than you should.
• Lowering the amount of luxury in your life.
• Being afraid of the perception of peers.
• Fear of “missing out” on lifestyle perks.

But once you realize that these are just internal fears, you can easily overcome your internal “roadblocks” and start improving your life.

The Benefits of Lifestyle Deflation

So why go through the trouble of trying to deflate your lifestyle?

Well, if you are part of the near majority of people that struggles to save any money at all, the answer should be obvious – you need to. Spending less than you make is the only way to save money and build wealth.

But even if you are saving some money already, deflating your lifestyle has some benefits to enjoy.

Lowered Cost of Living – As you deflate your lifestyle, your ongoing expenses will be lower. Requiring less money to finance your lifestyle means you are lowering your “needs,” and making life more simple.

Financially Independence Faster – Becoming financially independent is 100% a factor of how much money you save relative to your income. So as you deflate your lifestyle, you’ll gain financial independence more quickly.

Freedom to Do More – You’ll have mo’ money and mo’ opportunities. A low cost of living life means that you can put your wealth towards other goals besides costly living luxuries.

Increased Contentment – The hidden psychological benefit of lifestyle deflation is the increased contentment that comes along with it. As you cut back, you’ll quickly learn that you didn’t need all the additional stuff in the first place.

How to Deflate Your Lifestyle

Lifestyle deflation is an ongoing effort. At multiple points now in my life, I’ve had to step back and commit to a little bit of deflation.

As big life events happened, such as job changes or when children were born, our lifestyle went through some inflation. But with some intentional effort, we’ve done a fairly good job at keeping costs in check.

Here are 7 ways to encourage lifestyle deflation:

1. Understand Happiness – You need to understand that stuff doesn’t make you happy. Spending money on increasingly nicer “things” will not make you any happier than you were 5 years ago.
2. Track All Expenses – Keeping track of your expenses is how you can view a report of whether your life is inflating or deflating. There are a lot of great free tools out there that do this automatically.
3. Budget Your Money – For the ultimate control of your expenses, you need to be budgeting. By telling your money where to go, you’ll be able to actively keep your lifestyle in check.
4. Increase Paycheck Contributions – If you have access to tax-advantaged retirement savings through your job, increasing your withholdings is a quick fix to force yourself to save.
5. Avoid Debt – Not only does buying items with debt encourage you to spend more money on the purchase, but it also increases your ongoing monthly expenses through principal and interest payments.
6. Consider Big Changes – If your lifestyle has gone through serious inflation, it may be time to consider big changes. The larger line items in your expenses like cars, housings, eating out, etc., are a place to look for major impact.
7. Set Financial Goals – Having goals for your money will help you be more intentional with finances. Instead of increasing expenses, you can put money towards the next goal you have (emergency fund, debt paydown, long term savings).