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This is a guest post from video blogger Vik Tantry. He runs the personal finance site Kanjoh.com, and has some pretty wicked videos uploaded there - I highly recommend checking them out. A fun (and different) way to learn!
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It is fascinating how our tastes change. Back in college, I used to happily eat cereal and Ramen Noodles three meals a day. Once I graduated, I was actually able to afford real meals at fancy restaurants. I was earning more, and my spending had increased substantially. This is lifestyle inflation: when your spending starts to catch up with your income.

Lifestyle inflation is dangerous because it can decimate our savings, and it is encouraged by our consumer-driven society. Saving isn't sexy, but it is always exciting to buy the next fancy gadget. When our income goes up, it is very easy to spend it all quickly on things that "we've wanted for a long time but never could afford." Lifestyle inflation often creeps into our lives slowly and steadily. We start eating out a little more, and spending more on clothes. We take fancier vacations and buy more expensive cars and furniture. Before you know it, our increase in income isn't covering our increased costs!

After a few months of working, I realized that I was not saving nearly as much as I would have liked. I also realized that my "improved lifestyle" did not make me substantially happier than when I was in college. I tallied up my expenses and identified several areas of spending that I could do without. I realized that I didn't need to buy new clothes and shoes so often, and I could go out to dinner a little less. After all, I didn't need these things back in college, so why would I need them now?

When faced with lifestyle inflation, take a few days to adjust. Consider your increase in income first and foremost as an opportunity to save more. Then, take a few hours to sit down and prioritize. Make a list of things you've wanted and figure out which ones really mean the most to you. Once you have defined your priorities, stick to them. This way, you can save and invest while still spending money on the things that are truly important.

Controlling lifestyle inflation is more about having the right values than anything else. However, its important to not take it to the other extreme. A balanced approach to saving and spending will maximize both your happiness and your financial stability.

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Editor's Note: One of the best ways to avoid falling in this trap is to up your 401(k) or savings whenever you get a raise or promotion! Getting in this habit will not only help you save more over time, but you'll never miss any of it because you'll never see it ;)

Labels: career, guest post, inflation, life, money management

That's right, instead of getting my usual dime and nickel back from the cashier (they never bothered breaking down the 14 cents), i was handed over 3 measly pennies yesterday :(

What a shame too. I was already sucking it up by blowing 86 cents every day, but 97 cents is pushing it. $hit, i spent like $1.47 on a whole bushel of them the other day at Safeway!

I know it's all in the name of convenience, but my goodness that's quite a jump. $1.00 for 1 banana? What's next, $4.00 for a cup of joe? haha...actually, i forgot that's another addiction of mine, but not one i have to pay for so it doesn't count (work covers it. even the Bux!)

I'm sure our groceries have gone in up in price as well, but i never notice that. In fact, i really never notice any adjusted prices that aren't slapping me in the face. Gas i notice. My all-time favorite hairspray in the world - Aqua Net, i notice...actually, that one i REALLY notice!

Not sure how many of you use that crap (i'm sure it's super bad for your hair), but it used to be the cheapest stuff out there! You coud get a whole 14oz bottle for 99 cents, or even 87 cents on sale! That was the best bang for your buck, not to mention the most hardening stuff out there. I pick it up for about $2.50 nowadays, but it can cost you up to $4 at other places.

And that can't be good for business. They're gonnna make all our rocker-type hair styles go out of fashion! oh wait....

Come to think of it, there was this other type out there that ran $28+ over at CVS! Can't remember the name of it, but i wonder how much that boy is running now...probably $35! But that's enough about hair spray, you're probably getting the impression that i'm a girl. which i'm not. come to think of it, i am REALLY glad this blog is anonymous now ;) I've just spent way too much of everyone's time on hair products. I sincerely apologize for that.

The point of it all is (there's gotta be a point, right?), is that inflation has has finally crept in and got me to realize that it does, in fact, affect everyone. Some may realize the costs in different areas than others, but it doesn't discriminate - it takes all of our money. And that, my good friends, just sucks.

But we can't do anything about it, except budget accordingly. So will i still eat my $1 bananas and spray myself with $3 product? I sure will. After all, that's what American dreams are made of!

Labels: inflation, randomness 3000