Ask the Money Lady: Is your lifestyle inflation up too?

 In Opinion

Dear Money Lady Readers,

Inflation is up to a 30- year high. So, is your lifestyle inflation up too?

Canada’s current inflation rate is 4.8 per cent, which is mainly due to our pent-up demand for consumer goods and the current global supply chain disruptions; but what about your personal lifestyle inflation rate? Could we have let that get out of control too?

Lifestyle inflation is a term used when people of all ages and income levels have a tendency to adapt quickly to changes in their lives and return to a baseline level of happiness, regardless of how many good or bad things may have happened to them. Put another way, if we set our sights on a new item, let’s say an expensive watch or even a new car; we think that this purchase will make us happier in some way. The reality is that the initial happiness boost from buying something is usually short-lived. As we settle back into our life, we find that we really are no happier with the new car than we would have been without it. This is called “hedonic adaptation” which means we are running toward something, (material things we wish to buy), but never making real forward progress in terms of our personal happiness.

Consider looking at your life today compared to what it looked like a few years ago or even when you were first starting out on your own. What do you spend your money on now, that you would have never spent on years ago? Have these new expenditures improved your life and made it better or are there some items that you could have cut out to save more?

Lifestyle inflation usually disguises itself as needs that we convince ourselves is not a want, but rather a necessity. Let me give you an example. Are you the type of person who feels they must have a new car every few years – because if so, I must tell you that a brand new car is not a need. A cheaper, used car or even your current 20-year-old car may get you to work just as effectively as that nice new car and repairs on your old car will cost a lot less than a brand new vehicle. A new car is a want, masquerading as a need, and for those that replace their vehicles on a regular basis, this I’m afraid, is a textbook lifestyle inflation example.

Money must be viewed as a tool not an emotion since it should provide for your basic needs and your life priorities. The reality is most people in Westernized countries are all consumption junkies and even more so now as we move out of the Covid restrictions. Impulse buys, subscriptions and memberships you never use and forget about but keep paying for, and every convenience that you pay for in the moment that you didn’t really need, all add up to increased personal inflation costs. Try to recognize the leaks in your finances. Eliminating the mindless spending is one of the easiest ways to find extra money to save without sacrificing. Once you change the way you think about money, you will find that you are more apt to keep it. I know that temptation happens, and we can easily fall prey to an impulse buy or succumb to consumer marketing. But if you really want to trim down your lifestyle, you most likely already know what expenditures are non-negotiable and those that you can reduce or eliminate to save more. Being happier won’t come when you make more money, get that promotion, or make that big purchase. Happiness is a daily mindset and money is for long term security not just for luxuries and conveniences that you feel you deserve. Remember, it is not any one overindulgent expenditure on its own that creates a problem, but rather the gradual increase of unnecessary costs that pile up over time and make your lifestyle too expensive to maintain, let alone save for a future. You must work at keeping your lifestyle inflation in check if you plan to retire debt-free and wealthy.

Christine Ibbotson is a national radio host and author of three finance books plus the Canadian Best-Selling Book “How to Retire Debt Free & Wealthy.” Visit or send a question to info@askthemoneylady. ca.

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