Lifestyle Inflation
03/25/21 • 27 min
Welcome to the Financial Independence UK podcast! Join your hosts Tom and Alex as they talk about Lifestyle Inflation and how it impacts your FI journey.
Lifestyle inflation can sneak up on you, to define it, your outgoings increase as you earn more money. Most people will earn more over their career, this can lead to higher outgoings due to upgrading your lifestyle with the extra money. A good example of this is mobile phones, the manufacturers release new versions each year and effectively say their old thing is rubbish, you need this new one. Ever wondered why Apple is the most valuable business in the world? Also see; cars on 3 year finance cycles and luxury watches.
Pressure in life can make it very easy to spend all the money you have to feel like you ‘fit’ in.
Delayed gratification can help with making intentional purchases. Allowing a gap before parting with your money you trade hours of your life for will enable clarity as to whether you would really value a purchase rather than it being impulsive.
Lifestyle inflation will keep you forever on the hamster wheel. You get off when you retire or you die.
Tips for combatting lifestyle inflation:
1. Budget
2. Assess the net impact of a raise, after tax, NI and expenses
3. Increase savings
4. Declutter, assess the need for new things
5. Think long term, what can this extra money be used for?
6. Will your future self thank you for your actions?
As always, if you have any questions for the team, feel free to email us at [email protected]
Links featured in the show:
The Hedonic Treadmill.
Diener, E., Lucas, R. E., & Scollon, C. N. (2006). Beyond the hedonic treadmill: Revising the adaptation theory of well-being.
Financial Independence calculator:
https://playingwithfire.co/retirementcalculator/
Piano music for intro and outro licensing:
Heroic Reception by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3871-heroic-reception
License: http://creativecommons.org/licenses/by/4.0/
Ecossaise in E-flat (WoO 86) by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3700-ecossaise-in-e-flat-woo-86-
License: http://creativecommons.org/licenses/by/4.0/
Welcome to the Financial Independence UK podcast! Join your hosts Tom and Alex as they talk about Lifestyle Inflation and how it impacts your FI journey.
Lifestyle inflation can sneak up on you, to define it, your outgoings increase as you earn more money. Most people will earn more over their career, this can lead to higher outgoings due to upgrading your lifestyle with the extra money. A good example of this is mobile phones, the manufacturers release new versions each year and effectively say their old thing is rubbish, you need this new one. Ever wondered why Apple is the most valuable business in the world? Also see; cars on 3 year finance cycles and luxury watches.
Pressure in life can make it very easy to spend all the money you have to feel like you ‘fit’ in.
Delayed gratification can help with making intentional purchases. Allowing a gap before parting with your money you trade hours of your life for will enable clarity as to whether you would really value a purchase rather than it being impulsive.
Lifestyle inflation will keep you forever on the hamster wheel. You get off when you retire or you die.
Tips for combatting lifestyle inflation:
1. Budget
2. Assess the net impact of a raise, after tax, NI and expenses
3. Increase savings
4. Declutter, assess the need for new things
5. Think long term, what can this extra money be used for?
6. Will your future self thank you for your actions?
As always, if you have any questions for the team, feel free to email us at [email protected]
Links featured in the show:
The Hedonic Treadmill.
Diener, E., Lucas, R. E., & Scollon, C. N. (2006). Beyond the hedonic treadmill: Revising the adaptation theory of well-being.
Financial Independence calculator:
https://playingwithfire.co/retirementcalculator/
Piano music for intro and outro licensing:
Heroic Reception by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3871-heroic-reception
License: http://creativecommons.org/licenses/by/4.0/
Ecossaise in E-flat (WoO 86) by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3700-ecossaise-in-e-flat-woo-86-
License: http://creativecommons.org/licenses/by/4.0/
Previous Episode
Ethical Investing
Welcome to the Financial Independence UK podcast! Join your hosts Tom and Alex as they talk about ethical investing and how it impacts your FI journey.
Themes in this episode include reasons for ethical investing’s growing popularity, potential downsides of this strategy and Tom and Alex’s personal take on socially responsible funds.
As always, if you have any questions for the team, feel free to email us at [email protected]
Piano music for intro and outro licensing:
Heroic Reception by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3871-heroic-reception
License: http://creativecommons.org/licenses/by/4.0/
Ecossaise in E-flat (WoO 86) by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3700-ecossaise-in-e-flat-woo-86-
License: http://creativecommons.org/licenses/by/4.0/
Next Episode
Motivation and Discipline for FI
Welcome to the Financial Independence UK podcast! Join your hosts Tom and Alex as they talk about the motivation and discipline required on your FI journey.
Initial motivation can make starting any new venture seem easy, the enthusiasm can enable you to throw yourself into a new project. But how long does it last? It is the discipline that keeps you on the right path. Especially when this sort of idea goes against what everyone else appears to be doing.
The learning curve is steep, there is a plethora of information out there, it can be hard to filter out the less useful information. Our reading list can help with this, we did the research, so you don’t have to: https://fiuk.org/reading/
What can keep you optimistic?
1) Having more than one method of earning money, the choice, the different challenges and other social circles can help keep you motivated.
2) One page financial plan for you to read back to help keep you on the right path when life gets in the way and it will.
3) Celebrate the smaller milestone. Hit a figure on the way to your FI number? Celebrate it. Made a positive change in your life, celebrate it. Worked smarter to get promoted or new idea becoming profitable, celebrate it!
As always, if you have any questions for the team, feel free to email us at [email protected]
Piano music for intro and outro licensing:
Heroic Reception by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3871-heroic-reception
License: http://creativecommons.org/licenses/by/4.0/
Ecossaise in E-flat (WoO 86) by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3700-ecossaise-in-e-flat-woo-86-
License: http://creativecommons.org/licenses/by/4.0/
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