A recent financial study found that 74% of Americans felt ‘at least okay’ about their finances. That’s not too bad! But this is the exact same study that also found nearly half of all American’s couldn’t afford to cover a $400 emergency.
How can the majority of people in the US feel good about their finances, but nearly half couldn’t cover an unexpected $400 expense?
It’s because many of these people are living paycheck to paycheck. As long as they keep getting paid these folks can afford a big house and a nice car and fancy vacations, but they can’t afford anything else. They certainly can’t afford to build an emergency fund or save for retirement (that’s also according to the study; not my opinion).
Something’s gotta give.
Lifestyle Inflation is the Root of Many Financial Problems
Over the course of a life and career, its easy for a lifestyle to become bloated. It happens without even realizing it. As your income grows, wants that were previously out of reach are suddenly within your grasp. So we upgrade our cars, clothes, eating habits, entertainment choices, vacations, homes, and everything else as well. Nothing is safe from lifestyle creep.
Before you know it you’re making more money than you’ve ever made in your life, but you can’t seem to make any real financial progress.
This is lifestyle inflation and it’s the root of many financial problems.
Lifestyle Deflation is the Answer to Your Financial Problems
At some point those suffering from lifestyle inflation begin to realize what is going on, but by that time the damage may have already been done. That’s because once we become accustomed to a certain luxury, suddenly that luxury is something that you can’t live without.
The way out of this mess, they think, is to make more money. That could work if you keep everything else in check, but there’s another way to fix your financial problems, and the results can be immediate.
Lifestyle Deflation is the process of removing the unnecessary and/or unwanted items from your life. According to The Minimalists, some of those benefits include:
- Improved health
- Better relationships
- More creativity
- Sense of fulfillment
- Stronger finances
Examples of Lifestyle Deflation
Allow me to introduce you to five people that have seriously improved their lives, finances and overall happiness just by deflating their lifestyles.
These are just five examples of people that traded inflation for deflation. These people are married. Single. Range in age from 30-somethings to 50-somethings. Some of these examples might be too extreme for you right now but hopefully they at least show you that there is another way to live a rich and fulfilling life.
And yes, I realize that none of the people in these examples have kids but don’t let that minor detail get to you. It’s still possible to deflate your lifestyle even if you have kids. I’m an example of that. My wife and I have four kids and we’re thriving on a single income, partly because we’ve made the conscious decision to deflate our lifestyle.
How To Deflate Your Lifestyle
A main objective for many people that simplify their lives is to minimize expenses and maximize savings. There isn’t a faster way than lifestyle deflation to get your financial life in order if you’re already making a decent living but struggling to get ahead.
Track Your Expenses – Do It Old School Style If You Have To
Start by going over your expenses very carefully. Go old school if you have to; each day write down all of your expenses on a sheet of paper. Going through this exercise forces your to account for your money. If you’re not already tracking your expenses I guarantee that you are overspending on something that you don’t realize.
If you don’t want to go old school, then let technology be your friend. I use Personal Capital to monitor my expenses. This free app connects to your financial accounts and then categorizes your spending. I was SHOCKED to learn that I was spending an AVERAGE of $800 per month eating out at restaurants. $800!?!?
Had I not tracked my expenses I would have continued to live with this out of control behavior. But now that I’m aware of this, I can attack the problem and fix it.
Minimize Your Expenses
After you’ve looked for ways to improve your spending look for areas where you can make permanent cuts. Recurring monthly payments are your target. Things like car payments, loans on toys (like boats), or monthly subscriptions. Anything in your budget that gets deducted automatically should be scrutinized and questioned.
- Do you really need a new or new’ish car? Can you downgrade to a cheaper, older vehicle that you can afford to pay cash for?
- If you’ve got two cars, can you go down to a single vehicle temporarily while you turn your finances around?
- Are you paying paying for cable or satellite TV and Netflix, Amazon Prime and Hulu. Then something can probably be cut without you suffering at all.
If you want more ideas then check out this list of unusual ways to save money.
Trim The Fat
Odds are that you’ve surrounded yourself with stuff. And the dirty little secret about your stuff is that it’s garbage – all of it! De-clutter your home (and your mind) by separating yourself from all of this trash.
Most of your stuff has been accumulated gradually over the years without you even realizing it. Do you really need it? Consider selling it.
Selling will not only let you minimize your lifestyle, but you can also generate some extra cash to pay off existing debts or invest. Receiving multiple benefits from a single action like this is the Personal Finance Multiplier Effect in action. Take advantage of it!
Live a BS Free Life
You don’t have to sell your home and move into an Airstream, live in a tiny home, or even move to another state, but you do need to cut the fat from your life if you want to make rapid financial progress.
You can begin to deflate your lifestyle by pausing for just a moment and taking inventory of your life. Ask yourself where you truly find happiness and what is just noise.
Then begin to relentlessly eliminate the BS from your life and eventually you’ll have a life that’s free of BS.
Is your current lifestyle inflated? If you’ve deflated your lifestyle, how did you do it?