Lifestyle Inflation: The High Blood Pressure of Money

By Victoria Ferguson, CFP® , Financial Advisor    |   Finance 101, Spending

Did you know that about one-third of consumers who earn $250,000 live paycheck to paycheck? It’s true. How does this happen? And why do so many people experience this?

You may have heard about a concept called lifestyle inflation, otherwise known as lifestyle creep. It is the idea that as your income increases, your expenses and standard of living increase as well. This is to be expected and totally normal. However, where people will find themselves in trouble is if their expenses grow at a faster rate than their income. It happens slowly over time and before you know it – you can’t keep up with the expenses you’ve incorporated in your life. This is how dentists often find themselves living paycheck to paycheck.

Here’s some common reasons dentists are at a higher risk of experiencing lifestyle inflation: 

#1 You were in school for longer.

A delay in income combined with watching your friends or family members increase their standards of living while you are working hard in dental school is difficult. It makes sense to feel that pent up demand for a better lifestyle (i.e. keeping up with the Joneses). If not managed well early on, you can easily start to unconsciously build habits that don’t serve you, like overspending. 

#2 You’re busy!

As a dentist, you have so much on your plate – a practice to manage, patients to treat, maybe a family or aging parents to take care of, being involved in your community, your own life to live, etc. With demands for your attention coming from every direction, it can be easy to lose sight of where all your money is being spent. 

It’s called lifestyle “creep” for a reason. It tends to slowly happen over time without you really noticing. I compare lifestyle creep to high blood pressure – it truly is the “silent killer”. Salty foods (french fries please!) every now and then aren’t harmful. But if you indulge every day, you’ll likely experience high blood pressure. And you can probably live with it for a long time before you experience negative effects.

Like high blood pressure, an elevated burn rate (i.e. spending-to-income ratio) can slowly chip away at your goals and, over time you’ll find yourself with fewer options and less flexibility. When life throws you curveballs, you don’t ever want to be backed into a corner and forced to make decisions you don’t feel good about. Your hard-earned money is meant to give you options and fuel the life you want to live – not slowly take it from you.

Now, if reading this did spike your blood pressure – take a breath. The good news is with a little awareness and a few behavioral adjustments, you can create more distance between your income and your spending. 

Let me give you a couple tips to overcome lifestyle inflation and maintain flexibility throughout your career.

#1 Establish your “why”

Why did you go into dentistry? Why did you work incredibly hard in school? Why do you continue to put in the hours you do? Your responses to these questions will likely guide you to your values and your most deeply held beliefs. Keep going and ask yourself – what is important to me? In a time you felt content with life, what was going on? In a time when you were close to tears, what was going on? 

Knowing your values and your “why” can be a powerful anchor when lifestyle decisions emerge.

#2 Automate

Spending within your means doesn’t have to be stressful or require your constant attention. It can actually be pretty easy if you take the time to build in the right support systems. As long as you are saving at least 15-20% of your income, you can feel confident that you are not overspending. Just be sure you aren’t turning to your credit card . You’d be surprised just how helpful automated savings are for dentists. If you want to take it a step further, consider downloading an app to help you track your spending. Then you’ll not only force yourself to set aside funds for the future, you’ll also be able to see over time if you are actually spending in alignment with your core values. 

As a financial advisor, it’s hard for me to think of an indicator with more impact on financial flexibility than personal spending. By giving it your attention, aligning it with your values, and using automation to keep it under control, you’re unlikely to find yourself part of the 30% of consumers living paycheck to paycheck. 

Victoria Ferguson is a Financial Advisor and CFP®. She earned a degree in Finance from the University of Utah and has a background in women’s wealth, holistic financial planning, and building a strong financial foundation. Learn more about Victoria.

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