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There are times when it makes sense to increase your expenses
When Is Lifestyle Inflation Okay?
As long as you remain in the driver’s seat of your financial situation, you can increase your lifestyle as it makes sense.
The question is, when does lifestyle inflation make sense?
It makes sense when you can afford to increase your expenses.
When you get a raise or get an increase in income, this doesn’t mean you need to increase your expense load automatically; instead, you could add to your investment accounts or pay off debt.
The Answer
The best time to consider increasing your expenses comes after you pay off your debt and after you get on track with your savings and investments.
Emergency Fund: Do you have 6–12 months of expenses stacked away?
Savings & Investments: Are your accounts loaded or looking skim?
Retirement: Are you on track to have your nest egg by your target date?
After you respond to these questions, you can then decide and ask yourself, does it make sense to increase my expenses, or do I need to put my money into debt, savings, or investments?
When Is Lifestyle Inflation A Bad Idea?
The easiest way to tell you’re not ready to increase your lifestyle includes any of the following scenarios:
Your debt is growing.
You can’t afford your current lifestyle.
Your savings are not moving closer to your goals.
You need someone else to split your expenses to handle your current expense load.
If you continue to increase your expenses and you’re in any of the following scenarios above, you’re not ready to proceed.
Now, if you decide to proceed forward anyway, you will find yourself reaching a dead-end at some point. For some people, that dead-end could include: bankruptcy, maxed out credit cards, foreclosure, too many bills to pay, and getting behind on your expenses.
Before you consider adding another expense, ask yourself do I need this now, how will it improve my life, will this add stress to my life, and will this negatively or positively impact my financial goals?
Trust your financial situation; your finances will tell you everything you need to know to make prudent decisions with your money. Don’t trust your heart on this one because it might lead you astray. More is not always better, and more doesn’t always make sense.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.