Approaches

This guest post about lifestyle inflation on Get Rich Slowly inspired me to address some of my own attitudes here.

I think the poster is very insightful in addressing a possible mechanism for lifestyle inflation. However, I think the overall approach is flawed. The poster above is approaching his finances from the point of view of spending. I like to approach my finances from the point of view of saving.

I budget for necessary expenses, then pick a realistic level of saving and debt repayment to meet my goals. I plan each of these on a paycheck or monthly basis. The money that is left over is “free” money that can be spent on anything I want.

I think this is the better approach because it prevents me from feeling deprived. If I put every penny of my money towards paying off my debt until it was gone, I would pay it off faster. But afterward, I would feel so deprived after having bought nothing and had no spending money for a month or three, that I would go on a charging spree and end up with even higher bills. This is what happened to me throughout college. It is like yo-yo dieting, but for your finances.

With my new approach, I get to buy whatever I want, but within limits. So I have to pick what I want “the most.” Everything else has to either wait or (usually) gets forgotten. For example, in one month I might be deciding between a pair of shoes or seeing a play and decide on the play. In the next month, I had forgotten about the shoes and am now considering a sweater or a night out with cab money. Each month, I don’t get everything that I want, but I get whatever I want the most. And I’m still making strong progress towards my financial goals.

I can, of course, decide to use my “free” money to pay off debt or save. But the point is that I don’t have to and I will not feel guilty if I do not.

Binge saving and binge debt pay off will inevitably result in binge shopping, at least for me. Slow and steady wins the race.

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