5 Ways We Avoided Lifestyle Inflation To Reach Financial Freedom

After high school, I was dying to get my hands on a brand new car. I had my adolescent sights set on either a colorful GEO Tracker or a sporty Mitsubishi Eclipse. After all, I landed myself a job soldering small components together at a local factory that paid me a little bit more than the minimum wage and even came with benefits. It was the kind of job the older generation held onto for decades and retired from. I was young and didn’t have much financial prowess in my arsenal. So there I was at 18 years old having never heard of lifestyle inflation, yet falling victim to it. I bought the Eclipse.

After payments, insurance, maintenance, and gas, I was left with less than half of my take-home pay for everything else. My first real lesson with lifestyle inflation was a Mitsubishi Eclipse and lasted 60 months. By the time I pulled out the last statement in the payment booklet (yes, it was that long ago), I was 5 years older and a little wiser. I ditched the factory job around the same time and started taking classes at the local community college. Over the next decade, I met many people from all walks of life and tried to garner as much knowledge as possible from each one.

What I realized during that chapter of my life was that it didn’t necessarily matter how much money you made. What mattered most was how much money you saved. And avoiding lifestyle inflation was key to building wealth and reaching financial freedom. 

Lifestyle Inflation Won’t Get You To Financial Freedom

In our consumer-driven world, it’s not surprising that lifestyle inflation happens to the best of us. We’re constantly bombarded with targeted ads for stuff we should want. It’s not practical to believe you’ll always make the best decision for your money, but if you’re smart about most of your money moves, you’ll avoid exorbitant lifestyle inflation and be well on your way to financial freedom. 

I can’t say I always avoided lifestyle inflation. I had many financial and emotional ups and downs throughout my adult life. My first taste of lifestyle inflation was that car, but it certainly wasn’t my last. I also went through cycles of racking up credit card debt whenever I thought dinners out with friends and designer clothes were more important than making financially responsible decisions. 

Lucky for me, I have always been coachable and always had an interest in personal finance. To this day, I can remember the money mantras my mom would drill into my head over and over again while growing up. 

Here are some of her favorites:

“Every little bit helps” 

“Pennies make dollars”

“Save as much as you can as often as you can”

“Always have your own money”

“Never depend on anyone else”

“Start saving for retirement as soon as you start working”

There’s nothing earth-shattering in those mantras but, as a child, it did make me think about money and how it related to my life. And although my mom and dad never built wealth, they always set an example of living within their means.   

So when my husband and I found ourselves in our 30s and 40s succumbing to lifestyle inflation by trying to buy a home that was outside of our means, we were disappointed in ourselves and vowed to make big changes. Those changes started by nixing all lifestyle inflation traps, including the big house. So without further ado, here are the top 5 ways we reached financial freedom by avoiding lifestyle inflation. 

5 Ways We Avoided Lifestyle Inflation

1. We Drove Reasonable Cars:

Since I opened up with the ridiculous purchase of that pricey car, I figured I’d make this #1 on the list. Aside from a few early mistakes in the automobile department, my husband and I have always driven reasonable cars. 

We currently have two 2012 models that we purchased pre-owned. The one car is a Mazda 3 that I bought in early 2014. I took a low-interest loan on it because I was still a single parent with a single income and couldn’t afford to buy it outright. After meeting my now-husband and making our money a priority, that car loan was one of the first things to go.

Our other car is a BMW X5. Now, I know what you might be thinking. Why on earth would we have a luxury vehicle if we’re so frugal and financially conscious? The answer is a ridiculous one. The answer is that I have wanted a BMW since I was in middle school. For some reason, that was the brand that got stuck in my head and associated with success. I blame the movies, but can’t pinpoint the exact one.

On some level, there is a hint of lifestyle inflation in that car, and that’s ok, because after many years of good financial decisions, I treated myself and paid cash for it. The total cost was $16,800. That was the most money I have ever paid for a car in my life. And for comparison, I paid $14,000 for the Eclipse and financed it.

Despite our 2012 luxury SUV, my husband and I have driven reasonable cars for the entirety of our marriage. And when we did have payments early in our relationship, they were reasonable too. 

2. Our Home Is The Right Size:

After we pulled the contract on that lifestyle-inflated home, we hunkered down in the house I bought as a single parent for the next four years. During that time, we focused only on debt-repayment and investing. When we reached financial freedom a few years in, we did upgrade our home.

We followed all of the best home-buying advice out there. We didn’t buy more house than we needed – although I really wanted to – and we bought the crappiest house in a nice neighborhood.

Our original house was on a dead-end street with a few other small houses and no other kids. Since we wanted a nice neighborhood with other children for our daughter, the only choice we had was to move to one of those neighborhoods. But, in our area, it’s not so easy to find a reasonably-priced home in a nice neighborhood. After a couple of years of searching, we hit the jackpot. 

The house was exactly our style (a 1980s cedar contemporary), in a great neighborhood, and in the right school district. It was also on sale because it hadn’t been upgraded or even maintained very well since it was built. There ended up being multiple offers, but thanks to our hard work in recent years, ours was the strongest. 

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• Why You Should Feel Fabulous Even If You’re Deep In Debt

3. Our Consumer Debt Has Never Been Out Of Control:

I should probably clarify this one. Since my husband and I made that pact to build wealth, our consumer debt has never been out of control. In the past, before we were together, we have both cycled in and out of credit card debt. 

These days, we will go without a want before we pay for anything with a credit card that can’t be immediately paid off at the end of the month. That means we plan our purchases for things we want or places we want to go. Any vacation of ours is a vacation paid in full with cash. 

4. We Didn’t Blow Extra Money On Stuff:

Again, a little clarification. My husband and I have both blown extraordinary amounts of money on unnecessary stuff in the past.

When my husband was in his 20s he charged film equipment to the tune of thousands of dollars (he wanted to make movies). When I was in my 20s I wasted tons of money on getting my hair and nails done and buying new clothes. I was also a tech junkie, so I always had the latest phone and coolest gadgets. 

Thankfully, we learned our lessons and now we couldn’t care less about having new clothes or the latest tech. I even surprised myself in this category. There was a time that I would get up in the middle of the night if it meant I could order the newest igadget. Now, I have zero desire to even go into the store to check things out. I simply just don’t care anymore. And my husband is the same way. 

Having been blogging about money since 2015 and interacting with others in the personal finance space with similar mindsets also helps to reinforce this behavior. So when we have extra money, we either spend it on something we need or have wanted for some time, or we invest it. The cool part about our newfound financial attitude is that investing extra money gives us a bigger rush than spending it. Now that’s progress.

5. We Regularly Increased Our Savings Rate:

Speaking of investing extra money, whenever I get a raise or bonus at work, we increase our savings rate accordingly. We did this until we finally maxed out contributions to all retirement accounts.

It’s easy to take a percentage of any pay raise or bonus and save it. Some employers that offer tax-advantaged savings plans like 401k’s and 403b’s even offer the ability to automate increases in your savings rate. This means you can set it and forget it.

Even if you can’t afford to max out your retirement accounts, save what you can when you can. Like my mom used to say, every little bit helps. You’ll be amazed at how quickly you start to feel less anxiety and more freedom.

Our Roadmap To Financial Freedom

Our roadmap to Financial Freedom probably looks a little different than yours. And that’s ok. Everyone blazes their own trail and has different needs and desires. Just because I don’t spend a lot of money on getting my hair done, doesn’t mean that you shouldn’t. If spending money on getting your hair styled makes you feel fabulous, go for it. Just save money in another area. 

Warning: You Have To Enjoy Your Life Too

Although it’s true that avoiding lifestyle inflation helped us reach financial freedom, it’s important to not get so caught up in reaching your financial goals that you forget what’s really important in your life – like the people in it – including yourself. If you think going too hard too fast will be a first-class ticket to a loss of motivation, give yourself permission to slow down and take the scenic route.

Cut back in areas you don’t value and save the difference. Funnel any windfalls into debt repayment and investments. Then, sit back and enjoy watching your money grow on your own path to financial freedom.  

What does your journey to financial freedom look like?