The Dangers of Lifestyle Inflation

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The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.

Have you ever wondered why, no matter what you manage to accomplish financially, you can never seem to “get ahead”?

You could get a raise, pay down a debt, receive a sudden windfall, but it never seems to make a difference in the grand scheme of things. No matter how much better off you are than you were a few years ago, it never feels like you’re better off. You keep finding yourself waiting for that hazy time in the future when you finally feel like you’ve “made it.”

Well, I’ve got some unfortunate news for you: you’re never going to “make it,” at least not as long as you define “making it” as reaching some perfect point when you have more—more money, more luxury, more stuff that will finally make you perfectly satisfied.

Because it’s that “more” mentality that will keep you from ever reaching that point. It’s a mentality leads to a phenomenon known as lifestyle inflation, and many of your friends and neighbors have succumbed to it.

Have you?

Forget Keeping Up with the Joneses

Lifestyle inflation is more like keeping up with yourself—with the idea in your head of a future self who will be wealthier, savvier, cooler, than the you of today is. You always feel like there’s more out there, and you know that if you can just get it, then you’ll be happy. So as soon as you find yourself with a little extra money in hand, you’re off like a shot chasing that goal.

The thing is, like the proverbial carrot on a string, that goal will always be one step ahead of you. Because no matter how much your standard of living improves, it can always be better. And constantly using all your resources to chase that never-ending goal will only make you less happy in the long run.

When you were in college, scraping by on Raman noodles and stale cafeteria coffee, getting together a few extra bucks to see a concert feels like a real treat, even if you have to cram into a junker car with six of your friends to get there. Then you become a member of the full-time working class, and suddenly a shoestring concert seems like nothing. Now you can afford concerts, concert merchandise, occasional road trips to out-of-town concerts, etc…You’re bringing in real money now, and you can start living a little. So you do.

Except the thrill of a snazzier concert experience fades after a while, and then you’re left envying your friends who are starting to go on week long vacations to sandy, sun-dipped locales. Some day, you think, when I get that promotion, I’m booking my own Caribbean vacation! And why not? You’ll have worked hard to get to that point, so why shouldn’t you enjoy the fruits of your labor?

The problem is that, as your standard of living increases with each pay increase, your sense of enjoyment fails to increase along with it. You might feel momentarily happier as you adjust to your new, cushier lifestyle, but it won’t last. New things and new experiences get tired quickly, and eventually you’re back to barely getting the bills paid, staring at your sad savings account, and wondering how anyone ever manages to put aside for retirement.

Because that’s the other problem with lifestyle inflation: not only does it ultimately fail to make you happy; it also keeps you from ever reaching a place of financial security and freedom. Because when every spare dollar is being put towards chasing that end of the rainbow, none of it is being put aside for the future.

What’s a Dreamer to Do?

The temptation to live larger as your paycheck grows is only natural. Our culture is saturated with images of celebrities and strangers on TV commercials living the high life and loving the heck out of it, so we can’t help but feel like if we can only get to where they are, we’ll be truly happy, too.

But if you really want to achieve happiness with your money, the secret is in finding a sense of balance.

By all means, enjoy an extra dinner out or take that sunny vacation if you can afford it now. You have worked hard for your money, and you certainly deserve to enjoy it. But at the same time, make sure you’re also putting aside a healthy amount towards an emergency fund, your kids’ education, and whatever other savings goals you have.

By using your money smartly, you can still enjoy the occasional live-it-up splurge without sacrificing your future financial happiness and security. Plus, if you treat yourself strategically instead of maxing out your lifestyle every time you get a raise, those treats are more likely to leave you feeling satisfied, pampered, and truly “rich.”

How about you all? Have you been tempted by lifestyle inflation? 

How have you dealt with it?

Share your experiences by commenting below!

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About the Author Jacob A Irwin

Hi folks! My name is Jacob. I am the owner and operator of My Personal Finance Journey. I started this blog in January of 2010 and have enjoyed the journey ever since. Since finishing up graduate school in Virginia in 2014, I have been working in biopharmaceutical development in Colorado. You can read more about me and this site here​. Please contact me if you have any questions!

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Leave a Comment:

rjack says May 13, 2013

“The problem is that, as your standard of living increases with each pay increase, your sense of enjoyment fails to increase along with it.”

This is a really good point.

I've been a practicing Zen Buddhist for over 4 years and I have found that this reduces my desire, in general, and lifestyle inflation, in particular. There is something about daily meditation, my Zen Sensei's teachings, and the rest of the Sangha (Zen community where I practice) that makes it easier to see that stuff does not make you happy.
My recent post Should You Tilt Towards Value?

    CordeliaCallsIt says May 13, 2013

    I really admire people who practice Zen thinking and have resolved to be more mindful and minimal myself. The happier you are in the moment, in the things that really matter, the less all the trappings and trimmings of “stuff” really matters to you.

    Good for you!
    My recent post Reader QUIT: Self-Harm (by Brittany Marie Carlton)

Jenny@FrugalGuru says May 13, 2013

Right now, we're inflating our lifestyle by 10% of any given raise, after inflation. The rest is going to “inflating” our donations and our savings, plus keeping up with inflation.
My recent post The High Cost Of Free

    CordeliaCallsIt says May 13, 2013

    That sounds like a really smart way of doing it–rewarding yourself for your hard work, while also making smart financial choices. I'll have to keep that percentage in mind for myself!
    My recent post Reader QUIT: Self-Harm (by Brittany Marie Carlton)

myfijourney says May 13, 2013

A lot of people treat lifestyle inflation as it's a bad thing. Sometimes it's necessary, like when I switched from being a grad student to a post-doc. There's nothing wrong with inflating a crappy lifestyle to something more on line with an adult. I would really like to inflate my lifestyle again now that I've shifted from being a post-doc to having a real job. But the cost of living increase was so high when I moved here that my inflation dreams had to die in order to keep my savings rate up.

I'll probably inflate my lifestyle as time goes on while keeping my savings rate the same or gradually increasing it.
My recent post Safeway (SWY) Dividend Stock Analysis

    CordeliaCallsIt says May 13, 2013

    You're right–there's nothing wrong with inflating your lifestyle a reasonable amount as your pay increases. If you made a doctor's salary but were still living on Raman noodles and stale coffee, you wouldn't be a smart saver; you'd be a miser. We need to allow ourselves to enjoy the new opportunities that working hard and getting paid for it have granted us–within reason.

    You've hit on the key–increasing your savings and other measures along with your lifestyle. I like the reader above's policy of increasing her lifestyle 10% for every raise, then using the rest to raise her amount of savings and count for inflation. As long as you're making improvements across the board (instead of funneling all your new funds towards your standard of living), that seems like a perfectly reasonable way to go.
    My recent post Reader QUIT: Self-Harm (by Brittany Marie Carlton)

SimpleFinanz says May 13, 2013

Someone said the wishes are unlimited while the resources are always limited.
My recent post Apple financial results Q2 2013 cosmetic update

Squirrelers says May 14, 2013

I've been tempted in the past, but now I'm trying to take on lifestyle “deflation” 🙂

It seems like people feel entitled to buy more material things, or upgrade, when they earn more. Very, very shortsighted!
My recent post Japanese Stock Market Up Sharply: Interesting Historical Trends Emerge As Well

KC @ genxfinance says June 13, 2013

When we started to increase our income, we try so hard not to go astray to far from our current lifestyle. Of course there are additional expenses to make our lives more convenient and they’re all worth it.

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