To me, it actually seemed easiest to avoid lifestyle inflation when I was younger since I still had yet to partake in many of the finer things in life. Plus, many of those frugal habits that came along with college life were still fresh in my mind. Eating Ramen noodles, not taking vacations, and generally doing without wasn’t so bad since I was already used to delaying gratification. Therefore, as my wife and I worked throughout 20s, we found it quite easy to maintain a frugal lifestyle and avoid many of the pricier trappings that can come with lifestyle inflation.
A focus on debt freedom
Most of us will experience living with debt at some point in our lives. Whether it’s by way of student loans, credit cards, or a mortgage, debt will likely have to be dealt with eventually. And creditloan.com puts the average American’s interest payments on debt at $600,000 over the course of a lifetime.
However, by putting additional cash we had toward debt rather than fun – dinners out, new cars, vacations, etc. – it gave us more leverage over our debt. We’ve never been what you might consider “high earners”, but by making extra payments against our debt rather than spending it on consumer trapping, it allowed us to pay off our student loans in less than three years and become mortgage free in about the same timeframe. It also greatly reduced the amount of interest we had to pay on this debt over time, saving us tens of thousands of dollars in the process and allowing us to become debt free in our 30s.
Even as our income began to climb – and eventually double – as we moved into our mid and upper 20s, we kept our apartment budget close to what it had been right after college. During the decade following college, our rental costs ranged between $600 and $800 a month, and with the exception of one location that came with a small den, we limited ourselves to one bedroom, 600 to 700 square foot apartments.
While it would have been nice to spread out a little, the extra room would have cost more and would have provided us with the opportunity to fill it with more consumer purchases we didn’t need.
We even kept our focus on reducing lifestyle inflation in our 20s when it came to our vehicles. While my wife got a new vehicle after graduating from grad school, I stuck to low-cost used vehicles. While this wasn’t an ideal situation (especially for me), it worked out well since we had one reliable vehicle and one somewhat reliable vehicle and neither of us had car payments.
USA Today reports that, “The average transaction price for a new vehicle set a record of $31,252 in August (2013), according to TrueCar.com, up 3.2% from a year ago.”
By avoiding the hefty costs (and the associated payments and interest) that can come with two new vehicles at a time when income and discretionary cash was at a premium, we managed to keep costs in check, debt at bay, and limit our lifestyle inflation…at least until we bought a home and started having kids, but that’s another story.
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The author is not a licensed financial or real estate professional. This article is for informational purposes only and does not constitute advice of any kind. Calculations have not been verified by a professional. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.