I just read about “lifestyle inflation” in the recent issue of Money Magazines’ professional issue, and it bears sharing.
Often when people get a new, higher pay job, or a raise, their first thought is “now I can afford”,,, my first thought for my clients is, you need to increase your 401(k) contributions. Taking a vacation, buying an expensive item, or whatever that “want vs need” item is may be fun. The lifestyle inflation you subject yourself to now will hurt you in the future.
When you have an increase in income, I am challenging you to put yourself on a one year moratorium from lifestyle inflation. Resist the bigger vacation, new car, or expensive watch – instead, increase your 401(k). At the end of that year, you can look back and see how much bigger your retirement savings has grown.
Time is the biggest benefit you have right now to make sure you have a secure retirement. Please don’t give in to the “lifestyle inflation.”