2688: Resisting Lifestyle Inflation by Lisa Harrison of Mad Money Monster on Hedonic Adaptation

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[00:01:26] I have a love affair with real estate, and once again, allowed myself to consider the

[00:01:30] possibility of trading up. After an entire day was spent driving by houses in our target market

[00:01:36] and running the numbers, we started to feel that all too familiar anxiety of the cost

[00:01:42] associated with lifestyle inflation. You know that feeling, right? It starts out in your

[00:01:47] gut and never really goes away. It's worry that is born out of fear. Fear that you

[00:01:53] can't comfortably afford to do something. Sometimes the worry is unwarranted. Most of the

[00:01:59] time, it's not. How We Resisted The Urge To Trade Up

[00:02:05] It was fairly easy to resist the temporary insane urge to sell our home and buy a bigger one,

[00:02:11] considering what we went through last year when we nearly got ourselves into a big financial

[00:02:15] mess. Even though we were considering more reasonably priced homes this time,

[00:02:20] it was still ballooning into a hefty increase in monthly expenses for a very long time.

[00:02:26] Ultimately remembering the events of last year that actually led to the creation of this blog

[00:02:31] and keeping our financial goals in mind, we nixed the idea in record time,

[00:02:36] less than eight hours to be exact.

[00:02:39] Single Mom Complex

[00:02:41] I was a single mom for quite a few years before meeting Mr. Mad Money Monster.

[00:02:46] Even though I had and still have a great high paying job, I had to keep our expenses low if I

[00:02:52] wanted to give us a home, my self-retirement account, and my daughter a college fund.

[00:02:57] When she was really young, she's six years old now, I made sure she saw New York City,

[00:03:02] Washington DC, Baltimore's Inner Harbor, and the beach. I didn't do this because I thought

[00:03:07] she would remember. I knew she wouldn't. I did it to expose her to different environments

[00:03:12] and stimuli in the hopes that it would benefit her developing brain. Yes, I'm a scientist.

[00:03:18] All of those excursions occurred as day trips because I couldn't afford to pay for our home,

[00:03:23] subsidize my mother's living expenses, that's another post, contribute to retirement accounts

[00:03:29] and college funds, and take real vacations. Simply put, I couldn't afford to give her

[00:03:34] the childhood I wanted to give her based on my single, albeit high income.

[00:03:40] I did the best I could for all of us.

[00:03:43] Married. Now that I'm married, I have a second income, even though it's variable and unpredictable,

[00:03:49] in my arsenal. This is a luxury that's not taken for granted. After having lived on a single

[00:03:55] income for so long, the idea that we can actually afford more is tempting at times.

[00:04:00] All too often, I think I'm doing my daughter a disservice if I keep her in our smaller home.

[00:04:05] How will she feel in her 10 by 11 foot bedroom when she's a teenager?

[00:04:10] I feel guilt. It's unwarranted guilt, but guilt nonetheless. I remind myself that the

[00:04:16] guilt I feel is not warranted and not a good reason to be stupid irresponsible with money.

[00:04:21] I also need to remind myself that providing my daughter with a stable, loving,

[00:04:26] easily affordable lifestyle is better than providing a big house.

[00:04:31] Minimalism and wealth contracts.

[00:04:33] Committing to minimalism has given us focus and the ability to say no to unnecessary clutter in

[00:04:39] our lives, but it's still difficult to resist everything. For me, real estate is much more

[00:04:45] than a place to live. Growing up in the original tiny house made me feel inferior compared to my

[00:04:51] classmates. Because of this, the urge to trade up not only proves my worth,

[00:04:56] but provides something for my daughter that my parents could not give me.

[00:05:00] These are emotional issues that I need to actively monitor and keep in check.

[00:05:05] My emotional, arbitrary indicators of wealth really have nothing to do with what we need or

[00:05:10] what makes the best financial sense, obviously. Mr. Mad Money Monster and I acknowledge that

[00:05:16] lifestyle inflation is something we need to continuously monitor. We also acknowledge

[00:05:21] that it's difficult at times to adhere to the tight restrictions we've set for our money.

[00:05:26] Because of this, we've developed a wealth contract specifically stating what we will

[00:05:30] do with our money this year. We've both signed it. It clearly states what our priorities are

[00:05:36] and what is acceptable spending for the year ahead.

[00:05:42] You just listened to the post titled, Resisting Lifestyle Inflation by Lisa Harrison of

[00:05:47] madmoneymonster.com and I'll be right back with my commentary. Have you been using

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[00:07:59] If you'd like to hear another opinion on lifestyle inflation,

[00:08:02] check out episode 1913 where author Kevin Ha talks about participating in lifestyle

[00:08:08] inflation on your own terms. I liked his advice to let loose a bit after reaching a milestone like

[00:08:14] cost-fi. When I think back on how I got myself into a financial rut, it was because I convinced

[00:08:20] myself that I would make more money in future years and make up for all that spending I was

[00:08:25] doing in my 20s. This is a terrible financial strategy by the way. I then did a complete

[00:08:31] 180, got out of 30 grand of debt in 11 months and saved 60% of my income until I reached

[00:08:36] cost-fi status. The likelihood that lifestyle inflation could now damage my financial future

[00:08:42] after all those years of diligently saving are slim because good financial habits are now ingrained.

[00:08:50] This to me is one of the biggest benefits to front loading, saving and investing.

[00:08:54] You give yourself the privilege to relax a bit well before traditional retirement age.

[00:09:00] This could mean spending a bit more or downshifting into less work and less income.

[00:09:05] Also, any lifestyle inflation I participate in now is more likely to be internally motivated versus

[00:09:11] externally motivated. Rather than keeping up with the Joneses as a reason to buy that new thing,

[00:09:17] after a period of financial diligence, I'm more likely to spend money in ways that align with

[00:09:21] my personal values. And that'll do it for today. Have a great day and start to your

[00:09:26] weekend if you're listening in real time and I'll be back here over the weekend where

[00:09:30] your optimal life awaits.