Taming the Lifestyle Inflation Lion / Lioness

Taming the Lifestyle Inflation Lion / Lioness

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It does seem to be that most people’s goals are to go bigger and better! It’s almost mindless at some point as everyone around you is moving in that direction. We’ve received countless unsolicited advice gearing us towards this bigger, better concept as well. Bigger in terms of size, title, expenditure, perceived value! Some examples:

  1. Work hard, work your way up the corporate ladder. Get a bigger title, a better pay. Get a bigger desk, a better view. Get a bigger office, a better chair.
  2. Ah your first property! Sell it at a profit and buy one that is bigger, it’s better for you and your family.
  3. Oh your property is in the outskirts. You should sell it and move closer to the city. That’s the right thing to do.
  4. You’ve 2 children now. You should definitely get a car, it’s easier to move around.

Now they may be good advice in their own merit. What irks me, not so much the entire lifestyle inflation, is the cookie cutter approach to assume that everyone should buy into this lifestyle. That’s what everyone does, why not you? Having a vastly different opinion and approach is a jolt to the system to most people. The reaction we get the most – disbelief. That is fine by me though, we are not out to convert anyone, we are just having a healthy debate (we hope!).

I do not want to make broad brush strokes here though and I also believe everyone should do what is in their interest and aligned with their passion and desire – different strokes for different folks! I do think that lifestyle inflation can be most rewarding and at the same time, most draining. We have had our fair share of rewarding instances:

  • Affording to live on our own
  • Indulging in the developing taste buds (eg: October marks the season for our favourite cheese at Le Bistrot du Sommelier that is to die for, along with their red wine and Cote de Boeuf Angus)
  • Frequent holidays!

A case in point is simple, last week I wrote about the 5 ways we saved an extra $18,000 in a year. That extra $18k of spending is simply not sustainable for us to ever hope of retiring by the time we both are 35.

The scary part of lifestyle inflation is that there’s no line in the sand. The more you make, the more you spend. Spending money seems easier than making it. It’s like a game, you keep having this inner need to level up. Done with the parties and clubs? Fancy restaurants and classy wines. Oh yes, I do quite enjoy the gentlemen’s club with cigars and oak-barrel aged whiskey. Ladies, let’s pack our bags for a yoga retreat or a girls getaway! What shall we do this weekend, perhaps we can rent a yacht and have a day on the sea?

It’s quite endless really, we’ve been part of that cycle before we decided what we wanted to work on and break free to pursue our own minds. People who spend a lot never seem to say they have enough, they seem to want more. The secret to FIRE is simple – spend less than you earn. It helps to have a lifestyle designed to support your desired spend. For young FIRE-aspirers, this would simply be to live well within your means so we need to tame that lifestyle inflation lion / lioness, pronto!

It can be a little tricky balancing long ingrained habits with this FIRE mindset. Will you alienate friends who are used to the baller lifestyle? Would your family think you’ve hit a rough spot and are now having to tighten the belts? There’s no one single way to manage this, as some you will be able to have an open conversation about what you are doing and your aspirations. With others, you may just be creative and excuse yourself early / or say you’ve eaten / you’re not drinking today since you need to pilot the helicopter home / anything at all!  Remember your objective. Be the person who throws house parties or BBQs – still loads of fun and a quarter of the cost.

I am going to share the 3 questions that have helped me, the spender in this relationship, to curb my lifestyle inflation consistently:

What’s the annual cost of this habit?

You would be surprised how quickly you change your mind on a “aiya, a few dollars only lah” expense.

Every financial advice article ever written would have a “ditch your daily latte!” in the mix somewhere. It’s the most relatable ‘small’ expense that adds up. For us at SC, one of us was an addict (no names mentioned!) to her daily Kopi C-Kosong (ah, but the gender description gave it away!) and Choc Chiffon Cake. Every morning. The lady at the shop knew her, it was like a drug deal taking place. Ms.K walks in, nods her head and the lady prepares the cake & coffee for her. She hands over the exact amount to the lady and the lady wishes her a good day. That cost Ms.K $3.30 daily, which is $858 per year (taking an approximate of 260 workdays per year). Ms.K also had a coffee habit after lunch, say 2 times a week she would indulge in a Soy Latte which was $4.50. Annually that came up to $468.

(It helps talking about myself in the 3rd person, I feel detached from this spendy lady! Mr.C was mortified when he read this – did you really spend so much???)

Back when I first started working, there was no way I would be spending $858 annually on breakfast! I didn’t have that “luxury”, I was paid as you would expect in a first job and I had lots of overheads to cover. Lifestyle inflation! I started making more and $3.30 a day was perfectly palatable, or so I thought!  

After setting my mind to FIRE, I start looking at expenses on an annual basis. My colleagues would spend an average of $15 a day on lunch. I join them once a week, but normally I’m at the Food Center having a $4 bowl of noodle or rice. The difference between their spend and mine is $11 a day, which is $2,860 a year. How about cut fruit? That’s like $2 a packet on average. Annually that is $520!

Oh are you in on the craze for LlaoLlao? For the life of me, I don’t get it. It’s all sugar yet somehow people think it’s healthy? Ok, let me re-focus on the financial aspect before I go off tangent here. I have seen the secretary at my client’s office have her LlaoLlao every single day. I used to sit behind her so I can monitor her consumption daily. I joke with her about it if I see her getting antsy or yawning, I tell her it’s LlaoLlao time and she’ll promptly tell me that it is scheduled for 2pm. She admits to having it daily along with her friends in office. The medium cup is $5.50, which is what I see them go for. Annual cost = $1,560 (I’m excluding weekends in this count as I’m a truthful scientist, I did not see therefore I won’t include it).

A bit of a shocker when you think about how much a seemingly simple and cheap habit adds up, isn’t it?

How much more will I need in FIRE to sustain this habit?

Here’s where the Power of 25 comes in. As some of you may know, the general rule is to keep your annual expenses to within 4% of your portfolio. Some say it’s too high, a few say it’s too low. Assuming we stick to 4% then the inverse of the rule is that whatever my annual expenses amount to, I’ll need 25x of that amount invested and working hard to deliver returns.

Look at the habits above in this highly technical, awesome-pawsome table:

Habit Annual Cost Required investment when retiring / How much more will I need in FIRE to sustain this habit?
Daily breakfast $858 $21,450
Mid-day coffee $468 $11,700
Lunch Differential of $11 $2,860 $71,500
Cut Fruit $520 $13,000
LlaoLlao $1,560 $39,000

Based on your savings rate / nominal amount, are you willing to put aside that required investment amount now to sustain the habit? If not, snip snip time. Nip it in the bud! The point here is even small but long term and recurring expenses can put a serious dent in your FIRE plans.

How many years is this habit costing me in reaching FIRE?

Let’s take the LlaoLlao example – if I really can’t live without my LlaoLlao on a daily basis then I need to start thinking differently. I need to bake a $39,000 base into my FIRE nest and depending on how much you can save a year, that’s how many years longer you will take to reach FIRE. For simplicity, if I could save $39,000 a year, then I need to work an additional year solely to fund this sweet habit. Or, you can make it at home. You can thank me later – a top rated Frozen Yogurt recipe that doesn’t require fancy machinery.

Your turn! What are your tricks to curb the lifestyle inflation bubble we are constantly in? Let’s dive into it in the comments, it’s all fair play here!

Author: Ms.K

Ms.K is everything that Mr.C is, without the natural interest in investing and company financials! The activity planner for the family, the driver of random ideas and soon to be ‘retiring’ in to full time motherhood – Ms.K has no idea what she’s in for but remains super excited!

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