Lifestyle Inflation Or Economic Inflation – Which Harms Us The Most?

Over the weekend I caught up on some blog reading and found an old post from The Simple Dollar where Trent discussed the differences in today’s budgets from those of our parents. It was an interesting post, and the comments provided more food for thought. I began inventorying our own monthly bills and compared them to the bills I knew about growing up.

These are the types of bills I remember my mom paying:

  • Rent
  • Car payment
  • Power/Gas bill
  • Home telephone
  • Cable television
  • Car Insurance

Admittedly, our situation was somewhat simplified because my mom rented, but it seems everyone’s situation was much simpler back then. Compare her monthly bills to the list I came up with:

  • Mortgage (including property taxes and homeowners insurance)
  • Power bill
  • Home telephone
  • Cable television
  • Car insurance
  • Internet service
  • TiVo
  • Netflix
  • Gym membership
  • Cell phone
  • Onstar

In addition to those recurring bills, you could expand the list of modern conveniences (that cost additional dollars) even further. Divorced Dad did just that in his post listing what he calls, The New “Necessities” of Modern Life. From his list, I’m reminded that things like bottled water, cell phone texting, gourmet coffee, and $200 iPods were not around when I grew up, and certainly not around when my mom was young.

A number of these modern “necessities” do add value to our lives, but they do not come without costs. Because of this larger monthly outflow, most families have to work more, and more members of the family have to work more, to cover these expenses. And that phenomenon has brought about even more “situational” expenses such as the need to for two vehicles, two professional wardrobes, additional childcare expenses, increased commuting costs, etc. Makes you yearn for a simple time, doesn’t it?

So who’s to blame for this lifestyle inflation that led to higher expenses and less time with family? Marketers could certainly share some of the blame, as their artificial hype leads many to products they wouldn’t normally buy. I’m not immune. Those Onstar crash commercials replay in my head every time I consider canceling the service. What if my wife is in a crash and can’t call for help and the kids are with her and…panic sets in. I instantly rationalize the monthly fee.

If marketers are to blame for a portion of the lifestyle inflation we’ve experienced, then we need only to look at ourselves for the remainder of the blame. Let’s face it; we’re a spoiled people in many ways. We strive for the bigger and better, never content with good enough. Over the last few decades, the size of our homes has doubled from 1,400 square feet in 1970 to 2,330 square feet in 2004 (National Association of Home Builders). We build bigger homes just because we can, not because we necessarily need to. Or maybe we do need to. After all, where would we put all our toys in a small home?

These bigger homes come with bigger mortgages, and more expensive furniture, and the need to fill a two-car garage with, well, two cars. You see where this is headed.

In an era where people are beginning to share concerns over inflation (or maybe more accurately, currency deflation), thanks to exorbitant government spending, perhaps we should first consider our own lifestyle inflation. Perhaps we should start voluntarily moving towards simplicity, before we are forced to.

In my own life, I’ve decided to draw a line in the sand. I have nice things, and am perfectly content with them. My desire to have the latest thing will not override the contentment I have with my current thing, and the fact these “things” are paid-for is even better. We plan to stay in this home, keep driving our current vehicles, look at the same television, use the same cell phones, and keep the same basic expenses regardless of what others do, or try to convince us to do.

If you are like me, and have been “unfrugal” at times in your life, you don’t have to sell all your possessions and live the life of a pauper. Simply be happy with what you have now, and let that mantra guide future spending decisions.

Comments

  1. It’s lifestyle for sure.

    What a difference not owning a McMansion has made on the quality of our lives. So much more flexibility on how we live.

    Without it, we could have never moved my mother to town and that means so much more than an extra bedroom, family room and 2 car garage.

  2. I think financially speaking, 100 years ago people were better off. Before TV, radio, internet, autos. they had fewer bills, little or no debt, and likely had money saved.

    As far as us being harmed, don’t forget excessive taxation by our government and it’s unfair/outdated tax system. That harms us in many ways. Does more harm than good. No wonder big business is leaving USA. They can’t afford doing business here.

  3. Our list is closer to your mom’s, but with student loans. What has harmed us the most is the collective “lifestyle inflation” where so many more people are in the market for and willing to pay too much for higher ed and housing and willing to take huge loans that it drives up the cost for all of us.

  4. I’m finding as the years go on and I recess into a more frugal lifestyle that the draw of shiny objects is becoming less and less. Luckily I work online but that does mean I do get a little struck with shiny objects from a certain fruit company! I have resisted that amazing little phone and the ipad looks good but I don’t need it.

    My bills really are minimal now that I have cut back on so much and I am pretty proud of myself for that.

    Great post as always.

  5. Hi,

    Where are the medical bills for either of these scenarios? Great insights to reflect on and act upon.

    Tim Wright

  6. Zoidberg likes this (Y)

    It is very apparent currency deflation is on the cards and moving towards simplicity, “de-leveraging” our lifestyles and being grateful for what we have is the way forward.

    We could also try giving stuff away :)

  7. @Tim: Health insurance/medical bills could certainly have been included, and you could easily make the argument that those inflated costs have also made our financial lives more complicated than previous generations.

  8. I think you hit the nail on the head with the quote:
    “Perhaps we should start voluntarily moving towards simplicity, before we are forced to”
    I find it interesting that more people are not adopting a simplified lifestyle.
    When you have a gorwing family, it is hard not to accumulate stuff. That said, I have noticed that the more restraint that my family puts on ourselves with regard to buying ‘stuff’, the easier it is to see the light at the end of the tunnel. That light being no mortgage, fully funded retirement accounts and fully funded education savings plans – well before they are required.
    That’s the carrot at the end of the “not buying excessive stuff” stick.

  9. Wants vs needs! You identify onstar as one of your wants, which is fine. I just hate giving into the fear angle of such a device. Same with cell phones. Don’t have one, don’t want one. Don’t even get one for my teenage children, despite the fear angle that other parents describe. Too many people consider cell phones a need instead of a want. No netflix for me, no gym membership . . . okay, I do pay for Internet service, but I would never classify it as a need!

    Water, electricity, gas, those are needs. Probably food too . . .

  10. We are absolutely spoiled.

    You can get rid of one thing from your list: gym membership. I’ve already converted many people I know – and readers of my blog – to home exercise DVDs. They’re 20 minutes long and you can do them at home in your underwear! No rushing to the gym and for only a one time payment of $5 per DVD plus some hand weights. It takes discipline, but if you don’t want to be spoiled you have to put in some effort!

  11. I think it is both honestly.
    I agree that we have many bills our parents did not have. For examaple, we never had cable when I was growing up and computers and internet were not even a thought until well into my married years and cell phones, that was also not something availble until I had been married a long time.
    Yet, all of these are things I can not imagine living without. Could I live without them ? Of course, but they help me to have a better life so that gives them value to me.
    However, at the same time, prices are going up fast, food, utilities and interest rates on credit cards are through the roof, Not to mention the price of gasaline that has become a major bill for people who commute to work.
    I think most of us have bills that would not qualify under necessity, but are high priority in our modern lives.
    I think it is very hard to seperate them anymore, they have really turned into things we can’t live easily without and live in the modern world.

  12. Spoiled is the right word.

    I drive past a convienence store each day on the way to work. Parking lot has been expanded twice and you are still risking an accident most times because it is so busy. Once in a great while I’ll forget my breakfast and stop in to pick up a bagle. The place is PACKED with people buying their breakfasts and lunches and spending what I think is a fortune on it. While waiting in line to begrudingly pay the $1.50 for my bagel, I notice some with their breakfast in a bag along with a coffee walking back to their homes around the block. Guess it’s to much work to make breakfast there. Yet I bet these same people would have slew of idea on what the government needs to do to fix the economy and better their lives. Whats wrong with this picture????

  13. “make do.” it’s an expression used by my mother and many others who were growing up during the Depression. it’s also one that not many use these days.

  14. Instead of “Lifestyle Inflation” I prefer to call it “Lifestyle Creep“. Inflation is when the price of the same set of goods increases… but this is not the case with our lifestyles. IMHO, they have creeped to a higher level of consumption, by purchasing more things. The are not necessities, just very desirable and practical wants.

    Which is more harmful?
    Hands down, “Economic inflation“!

    I can still eat and drive when a new ipod/iphone/ipad comes out, but if the inflation of true consumer necessities rise, then I feel real pain in my wallet every time I pay for a gallon of gas or milk.

    Very though provoking post, thx Frugaldad!

  15. A very well written article and thought provoking as well. This comes on the heels of a job loss due to running out of family leave time but not yet healed. I am going to seriously look at my own list and see what could be cut off or trimmed. I have the feeling that I too have many more wants than actual needs. Keep up the excellent articles, I need them!

  16. My favorite book on this subject is The Happy Minimalist – of course, the author is single and has no children, which he acknowledges will bring a certain amount of extra “necessities” into your life – bottle, diapers, etc. But the points are still valid and I have been trying to minimize my lifestyle, even with two small children. It has been very liberating to simplify and minimize. We are being very careful in our decisions of what to own.

  17. I think the key is to remember that a lot of these things do add value to our lives.

    A McMansion might be hard to justify, but I think OnStar is a perfectly reasonable expense. (After having a scary driving experience last week, I’ve decided that my next car must have OnStar)

    I do agree we’re spoiled compared to previous generations, but I’m not sure it’s always a bad thing. At what point does a technological improvement no longer mean luxury?

  18. Some of this “lifestyle inflation” is imposed on us.

    If you work in fields that require you to say, monitor certain news networks and TV shows on a regular basis, you need more than basic cable TV. (You can’t even get more than a handful of channels via antenna in the city I live in, for example. Same with others in more remote areas who have been forced since the switchover last year to get cable to see any TV. Did they want to do it? No, for the most part. And some people are now without TV due to the switchover.)

    The way cable tv
    “tiers” and prices are structured, you’re pretty much forced into the higher prices if you need to watch anything beyond three networks.

    As for broadband, we resisted for many years. But we work from home and have clients who have huge files, etc. We got the more expensive broadband several years ago when a client complained about turnaround time. (We also have a second landline phone line based on client needs–they cannot use skype due to corporate rules. We only got our cells to handle client calls due to their insistence on constant availability. Same with netbook. And the iTouch? We have to write about the apps so we have to be able to download them. We will not buy an iPhone because of the lousy service in our area. )

    We have two computers. Why? because we need a backup in case one goes down as, again, clients want constant ability to work on demand. Plus, we have the need for two different operating systems due to our work.

    FYI: Our home office is basically our one-bedroom apartment. We can’t afford another office or a bigger space. We hate this since our whole apartment is a work space, given the materials we need.

    Could we not spend on cable, broadband and other related office expenses? Yes, but we wouldn’t be able to do our jobs and work.

    So I hardly think of these things as luxuries or as being spoiled.

    Spoiled is two adults, no kids, living in a 3,000 square foot house (five bedrooms, three and a half baths) that doesn’t even include a home office. Spoiled is when you’re in debt to buy high-end TVs and stuff to create a “media” room.

    Some of the stuff in “lifestyle expansion” is necessary and some stuff improves our lives or adds to the quality (We use netflix and have friends over to watch. It’s fun and it’s cheap compared to a nite out). But to be honest, I would almost, at times, prefer to go back to a time when there were no blackberrys, IMs and such because I’d love to have a life back and not have to be available 24/7.

    The other aspect of lifestyle inflation is your social community. Living in a major city (if not THE major city) in the U.S., if you want to socialize, there are expenses involved. Same with doing business. And if you have kids, good luck. The pressure on parents, from their kids and elsewhere, for stuff is amazing. We are shocked at what we’ve seen our families forced to spend on stuff for their kids. (Apparently your kids HAVE to have a cell phone to take certain kinds of school trips! Must wear certain kinds of clothes and shoes, etc. We were lucky we went to school when we did and had uniforms. We’d have been naked otherwise.)

    There are many things we would do differently if we lived in the wilderness, but we don’t. So we will have lifestyle costs.

    FYI: We finally got an LCD TV this year when our 20-year-old set died. We got a great price on a smallish model (32 inches is actually too big for our space!). No one believed we had not had one before this. (Even our building’s super has two 42-inch sets in an apartment the size of ours!)

    The key is always about the value you get for your money. And not convincing yourself you have to have something you don’t, despite external pressure. (iTouch is cool, but we love our old PDAs. If it weren’t for the apps and the fact that you can access free WiFi on the fly, the iTouch would make no sense. It’s a lot cheaper and more functional than the way overpriced and overhyped iPhones. I have to laugh when I hear everyone who owns one complaining about them.

  19. There was a time when people thought that electricity and running water were wants instead of needs. So, yes, times change.

    Also, despite what the popular sentiment will tell you, basic consumer staples have only gotten cheaper (indexed for inflation) than when your Mom was buying you bread and milk and eggs and winter coats and blue jeans. And this also goes for gasoline, believe it or not. For this, we can thank, among many other factors, globalization and the “Wal-Mart” effect.

    So there are plenty of ways to save money now if you’re willing to live below your means; but of course, plenty of people invent newer and better ways to squander that opportunity.

    As for the poster above who mentioned the childless couple living in the 5,000 sf 5 bedroom house…We bought that very house from a childless couple who was upgrading to a 4500 sf house in the same area. And as we found out at closing, they’re flat broke, in debt to their eyeballs. :)

  20. i have a virgin mobile pay as you go cell phone for emergencies:$5 a month, charged to my bank account every quarter, and at present i have nearly a $300 credit balance that i will never use. i got a cell phone in the early 90s, when nobody else had one here much, and when i lost it in the home depot i never replaced it, never developed the habit. ditto cable tv: i got it in the 80s when i mcved from my manhattan crash pad to my brooklyn apartment, and then when The Crash came in the late 80s and i lost my publishing job i cut it out and never bought it again after i moved back to the real world. now the real world has moved on to requisite cable and cell phones, and i am an oddball. but why would i pay hundreds of dollars a year for these things when i got them out of my system early? i’d stop the verizon land phone, too (use up some of that $300 balance instead, if i ever have to make a csll again :) except it provides my internet. i had an ipod, 1st generation: it broke every year until apple stopped replacing it and i realized i was paying some $2-300. For an ipod??? wtf? got a $30 sansa to listen to my audiobooks with instead. i was recently tempted by a kindle, don’t get me wrong, but I can read kindle books on my netbook with the free software, and they’re already the cheapest form of book around (plus the netbook needs no “accessories”–like light!)so then i stopped the audible subscription. ditto netflix. stopped it all. mortgage, food, gasoline (car paid for but 11 years old) insurances,charities, utiities. when lightning hit the central heat and a/c it would have been over five grand to replace it, so i bought fans and a space heater. you’re getting my drift here… don’t need any new “tastes”; i’ll be years getting out of debt just paying for the old ones. but i will get out, and meanwhile have a tiny amount of discretionary to go places with, too. guess i’m too discrete to hand that over to the electronical-pixilated complex!

  21. Great post – I am going to have to check out the post from The Simple Dollar as well. I never thought to compare the bills my parents paid to the ones I currently pay monthly. While I do feel that Netflix and the gym are worth the additon, it is hard to not yearn for a more simple life. Luckily I am currently renting so water, trash and gas are included. I only pay for power and cable – not to mention I have a sweet deal. This is something I want to look into.

  22. Gratefully, contentment has been an important value in our family for many years now. Love your point about making tough choices now before you’re forced to do them later.

  23. Economic inflation is far worse because we can’t control it!

    Lifestyle inflation is bad, but we can also trade down in the kind of car we drive or house we live in, or cut the netflix bill, etc.. but when economic inflation is high you have little choice but pay more for simply living.

  24. You also want to not make your financial decisons based on fear of the unknown. Insurance is practical…but someone before cell phones were invented, we got through wrecks and power outages fine without them. When did having a cell phone become a necessity?

  25. I think “get through” is a bit subjective.

    Cell phones have undoubtedly saved lives, especially in rural areas where there aren’t many people to hear a collision and call for help.

  26. I think that economic inflation is far more problematic. After all, you can cut back on lifestyle inflation. Unfortunately, the Fed no longer takes my calls that demand inflation be halted.

    Seriously, though, there are a lot more “necessities” out there. I actually just finished a post about the government’s new estimates for in-home entertainment: $997.07 a year for TV, Internet & video game services; $1,000 a year for cell phones. Gah!

    I doubt you could pry cell phones out of most people’s hands. Most of us have come to believe that we need them, which I disagree with but get tired of arguing about. But just getting rid of that would cut $50-90 out of most people’s monthly expenses.

    It’s hard, though, in this day and age to avoid lifestyle inflation. It’s more about mitigating it. Sure, there are some people who can eschew cable TV and rent movies only from the library, never go online except at work and avoid video games of all types. But few of us want to live that way. Instead, we try to make conscious decisions about what we will and won’t spend money on.

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