The US is in desperate need of a little Lifestyle Deflation. 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
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.
1. California Dreamin’
Scott Rieckens and his wife Taylor were living the American Dream. They had a great life in Southern California complete with a home on the beach, BMW’s, travel, fine dining…they’d made it!
But after the birth of their first child, their perspective changed and so did their definition of the good life. The luxury lifestyle they were living was dependent on two incomes, but Taylor wanted to be a full time mom more than she wanted fancy sushi dinners or living near the beach. Something had to give.
So, they deflated their lifestyle. Slashing their expenses by 70%, and redesigning their life in such a way that they were able to get by on a single income. You can listen to Scott tell his story right here.
The Rieckens were so consumed by the inspiring FIRE movement that Scott is currently producing Playing with FIRE, “a documentary that uncovers the growing community of frugalists.”
2. The Urban Nomad
Geoffrey Westlock was drowning in debt. He was able to make all of his payments but he wasn’t getting ahead financially. So, he seriously deflated his lifestyle in order to fix the situation he’d created for himself.
Geoffry sold his home and moved into his trailer. Cutting his expenses allowed him to eliminated $85,000 in debt and achieve financial freedom.
Even now that Geoffry is debt free, he’s maintaining his deflated lifestyle so that he can continue to make financial progress. You can watch his story here and follow his story via his website, The Urban Nomads.
3. A Two Cup House
Claudia and Garrett Pennington are a couple of Millennials than were able to pay off $240,000 in two years by deflating their lifestyle.
They sold their traditional house and moved into a tiny home, minimized expenses and maximized their savings. Today they are closer than ever to becoming financially independent because of those decisions.
You can read about their story, watch a video about how they did all of this on their blog, Two Cup House, and follow along as they pursue their passions and build side hustles.
4. The Groovies
Lifestyle Deflation isn’t limited to just “getting rid of stuff.” It can also mean leaving a high cost of living area. Mr. & Mrs. Groovy did just they when they left Long Island, NY for the pocketbook friendly confines of North Carolina.
Turns out that Geoarbitrage is a great way to reinvent yourself!
This move to North Carolina allowed them to go from being financially dependent to financially independent in three short years. Selling their mortgaged home in NY meant they had enough cash to by a North Carolina home outright. From there it was just a matter of padding their accounts before enjoying a life of early retirement.
5. A Man. A Van. A Dog and a Blog
Lifestyle deflation is also for the rich and famous. Well, relatively famous anyway. Joe Hawley played in the NFL for 8 years but after ‘longing for something more’ he gave away most of his possessions to charity and took off for a life on the road.
While Joe didn’t deflate his lifestyle for monetary reasons, he’s still a great example of how a deflated lifestyle can lead to a more fulfilling life. You can read more about A Joe and his amazing story on his website, Man Van Dog Blog.
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 free wealth money management apps like Mint 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.
Chime in!
Is your current lifestyle inflated? If you’ve deflated your lifestyle, how did you do it?
4 replies on “Lifestyle Deflation is One Solution for Better Finances and a Happier Life”
I’m in the process of selling my nicer car and buying a friend’s cheaper/older car to help reduce my debt by about $6000 and kill off one monthly payment. I never thought I would do something like that, but when the opportunity came my way, it felt foolish to pass it up.
My goal this year is to go from $60k in debt to about $40k. Praying I’ll be debt free by my 30th birthday in May 2020.
Thank you, sir. I’m honored to be included.
Great that you’ve profiled couples and single people here, sometimes feels there aren’t many of us trying this alone. I’m an example of a single parent who’s working at lifestyle deflation. You’re absolutely right that tracking is the key – my expense for take-out food was the eye opener for me!
I loved this post. It’s a great reminder. Lifestyle inflation around food spending and convenience used to be a big problem for us. We worked hard, made more money, and thus deserved it, right? No – it just started to trap us in the golden handcuffs where we needed to work harder to pay for our stuff. Luckily we realized it fairly quickly and were able to nip it in the bud. Maybe someday we will make some more drastic changes like the people you feature in the article!