In the early years of our marriage, the holidays used to throw a wrench in our financial plans.
We’d spend the majority of the year being diligent budgeters and ignoring our desires to take lavish vacations, spend heavily on meals or buy the newest gadget. And then November would roll around. Once the holiday-themed marketing campaigns started, we would be bombarded with messages that we needed more stuff and the fact that we already had one didn’t matter. Sure, we already had a toaster, but now they make them with Wi-Fi.
The enthusiasm we shared about our financial plan would get replaced with the thrill of lots of little life upgrades. Every January, we would find ourselves with a large credit card balance and would have to adjust our goals to make up for it. Finally we turned to our community of financially independent friends for advice, and they understood our dilemma. Most importantly, they assured us that it was in fact possible to have an incredible holiday while still sticking to a financial plan.
They asked a question that changed the way we thought about our budget forever, even beyond the holidays: “What percent of your spending comes from upgrading a perfectly fine thing that you already have?”
We couldn’t answer the question specifically, but we knew it was a majority because that’s how consumerism works.
The term lifestyle inflation or lifestyle creep is used whenever spending gradually rises over time. We’re not here to tell you that you should never buy the newer version of anything. As income goes up, it’s natural to want to treat yourself to something more than what you have, but we’ve noticed that this is where a lot of people get stuck on their financial journey. If you’re like us and holidays are a slippery slope for you, here are a few suggestions to avoid falling in the upgrade trap this season.
Start with a Percentage
Audit your spending and answer the same question that was asked of us. As much as we love nice things, we made faster progress toward our financial goals when we realized that those little upgrades are not just one-time expenses. They add up and increase our overall cost of living.
When we just focus on the cost of something, it’s easy to spin those numbers and convince yourself that you can always afford it. But when you think about your consumption in terms of percentages, you can really see the way constant upgrades impact your financial goals.
Create a Joy Scale
A joy scale is a personal rating system that encourages you to track how much joy came from an item or experience you purchased. It’s completely subjective.
Reflecting on what you’ve already purchased is one of the most effective ways to rein in your spending. Once a month, we go through our transactions line-by-line and measure joy on a scale of 1 to 5, then we take it a step further and ask ourselves what it would take for something to rank higher. This exercise not only helped us prioritize our budget categories, but it also cemented our philosophy to splurge on items we touch every day like sheets, towels, coffee and hand soap because daily doses of delight rank high in our house.
Create a Happiness List
A happiness list is exactly what it sounds like. Unlike the joy scale, which is reflecting on past transactions, a happiness list looks beyond the places where money is exchanged. It has become a reference point that we use to ensure we’re building the life we want in the short term and the long term.
We used to be skeptical when people suggested that the best things in life were free, but keeping this list updated has proved otherwise. Not only has it taught us how to be more mindful and grateful for the things that we already have, but it’s encouraged us to build a much richer life with the things we value at the forefront. As much as we love unboxing the latest contraption, when we take the time to write down the things that make us happy, somehow gadgets never appear anywhere near the top.
This article originally appeared in the November/December 2021 Issue of SUCCESS magazine. Photo by @chloeboulos/Twenty20