When we first started working, we didn't make much money, but we still had enough to pay the bills and spend the rest of it enjoying life. As we get older and make more money, we also spend more and more. Saving and investing are put on the back burner as we work harder to pay for luxuries. That's lifestyle inflation, which is a huge problem for many of us. Here are four ways to minimize lifestyle inflation:
Housing. Housing is the biggest monthly expense for most of us. One way to minimize housing costs is to live in a smaller space. A smaller house in the same area almost always costs less than a bigger house. Fifty years ago, a family of five could live comfortably in a 1,700 square foot home. Why is the ideal home size so big these days? A smaller home will cost less to furnish, maintain, heat, and cool. If you can resist the McMansion syndrome, you can save a lot of money.
Car. A car is a necessity to many of us, and we spend a lot of money on the privilege of driving. My proposal is to only buy a car with cash. If you do this, then you won't have to pay for financing. Paying cash will also limit the vehicle selection to what you can really afford. If you don't have much money, then you can buy an older used car. If you are well off, then paying cash for a Mercedes shouldn't be a problem.
Food. The easiest way to control food expenses is to learn to cook. It is much cheaper to cook at home, and it is also healthier than eating out all the time. Restaurant food usually has high fat and sodium content, and this is bad for long-term health. More than a third of Americans are obese. It's much easier to control your food intake if you cook at home.
Save first. The best way to control lifestyle inflation is to save first before you spend. Do you have an emergency fund in case your car breaks down or you have a medical emergency? Are you saving enough for retirement? Many employers offer a retirement plan that you can contribute to with pretax dollars. This is a great way to save because the money goes straight into your retirement account, and you won't have to manually save the money each month. You will only see the take home paycheck, and you won't even miss the contribution. If your paycheck is small, then you can start out small and increase the contribution as you get raises.
It's hard to reduce your expenses once they get out of hand, so it's best to keep them as low as they were when you were just starting out. It's important to save for the future, and putting saving first will help keep lifestyle inflation down in the long run.
Joe Udo is planning an exit strategy from his corporate job by reducing expenses and increasing passive income. He blogs about his journey to early retirement at Retire by 40.
More From US News & World Report
