As our financial intelligence has grown, our approach has evolved. In this article about advising my younger self and when I talked about reaching the halfway to financial independence mark, I talked about this process. Mr. Vine and I both feel a strong desire to improve. So it’s no surprise that our financial health has gotten better over the years.
But that does not immunize us from temptation. During the year before we crossed the halfway point, we felt a strong impulse to indulge, to treat ourselves. Instead, we diligently reduced spending in key categories like groceries, restaurants and even our beloved travel. I patted Mr. Vine and myself on the back for this repeatedly. I believed we were finally recognizing the power of enough and that we’d more or less slayed the urge to consume. But peer and societal pressure to spend, to consume can be so powerful.
In reality, our good behavior was our penance from prior runaway spending. The power of a 0% interest credit card helped us to delay the inevitable and fortunately we were able to pay without much impact. Many big one-time expenses including a bathroom remodel led to large credit card balances. Our aggressive savings enabled us to absorb these balances, but it was an important reality check. It is so easy to slip into a culture that encourages a paycheck to paycheck life.
Now that we are out of that credit card hole and have put ourselves on a monthly, cashflow positive budget, we started to make real progress towards improving our habits. We are finding that the temptation to make choices that will keep us stuck continues to subside. Nothing we can buy will increase our happiness. It’s possible that a new purchase would provide some happy experiences, but the spending itself will not create lasting happiness.
So how do we avoid lifestyle inflation?
We pay ourselves first.
Several years ago, we started contributing the IRS maximum to our retirement accounts. I highly recommend this. One of my financial regrets is not contributing more to tax advantaged retirement accounts. We also decide on a monthly amount to send to our investments and automate those contributions. We reduce those when necessary, but we’ve found that more often than not, we shrink our expenses to satisfy those automatic investments.
We detach spending from happiness.
Sometimes I feel an urge to spend money-not necessarily to have a thing, but to buy something. It can be hard work to process the underlying emotion. I’m not always successful at that. But what we can usually do is work through the mindlessness. I’ve learned that buying something does not produce lasting satisfaction and often I feel worse because I spent that month.
We make cost-effective substitutions.
During the 2020 pandemic, this arose most often with eating and drinking at home instead of at restaurants. When several weeks passed during which we were unable to go out to eat or drink at bars, we all but eliminated those habits. A beer or glass of wine on our patio costs a fraction of the same drink served at a restaurant. Staying at a timeshare condo instead of at a luxury hotel allows us to travel for less. We continue to enjoy things we love, but spend less on those activities.
We delay unnecessary purchases or distract ourselves.
For things that we don’t need urgently like clothing, we wait at least a day or two before making the purchase. Sometimes we avoid opportunities to shop, like not going to a mall or shopping center. This tactic is especially helpful when coupled with the other habits. We fill our days with inexpensive, free or substituted activities and often we forget about the things we could be buying.
Limit online shopping to certain days and times.
This began as a personal ban on online shopping while I was at work in the office. It was partially motivated to reduce spending and partially motivated to increase my job productivity. The power of this tactic is that now we never shop when we are bored and it significantly reduces the likelihood of making emotional purchases. We shop with intention and only buy what we’ve carefully considered. It shows in our monthly Amazon spending.
On the heels of a couple of high spending months, it’s helpful to remember that we are not making impulse purchases or buying unnecessary things. We are spending to take care of our pets, to go on a vacation, to purchase a new house that is somewhat of an investment property. None of these decisions were undertaken lightly and we are at peace with those choices.
Do you avoid the societal pressure to spend most of what you make? What habits do you practice that help you reduce spending? What are your biggest spending triggers and how do you avoid them?