For ages, I’ve been writing to you about why you should never fall into the “lifestyle inflation” trap. The dangerous trap of upgrading your lifestyle too prematurely. Before you incomes can properly handle it.

And sure, it all sounds like loads of sense. Because once you’ve upgraded your lifestyle, stuff that was once “luxuries” (like driving a Rover) is now something so normal.

So normal it’s morphed into your new life you can’t even tell it apart from the other soon. You’ll end up working harder to pay for this new – and much more expensive – way of living. 

But it wasn’t until recently that I saw the reality of it smack me in the face. And it made me realise how truly dangerous it is and why you should never do it. Not only will you be paying that lifestyle inflation tax for the rest of your life, you’re also putting a ceiling on your happiness. 

A family I’m close to recently moved to a big house. They sold their old one (which was big just not in a fancy neighbourhood) and they upgraded. They took on some debt to do that thanks to a fully-functioning banking system!

And are paying something like 5.7% on their mortgage (yowch). But that’s really beside the point. They own a small biz that’s grown a lot in recent years. But instead of, say, staying in their old house and paying off their mortgage to enjoy more discretionary spending, they decided to upgrade their life – even more.

They have more sq ft to pay for, clean and look after. It means they’re working harder than they were previously. 

I’ve always remembered them being ultra-loose with money. They never really budgeted for things like takeout and restaurant dining. You were in the mood? You got it. And I hardly (if at all) heard them talk about how much stuff cost. Like, ever. Obvs, my fam and theirs are world’s apart.

Money comes 1st in my family’s dictionary. And we don’t care talking about it. But they hardly did. Till now. I was curious what they would do over the summer (since they started taking cool vacays about 4yrs ago) but they didn’t really answer my Q.

The couple need a break from work but they knows they can’t stop working because they’ve got bills to pay (now, even bigger ones). And bills don’t pay for themselves on their own! I think to myself, if only they slowed down.

Had resisted the urge to upgrade their house (and whole life with it) and had focused on being able to do the things they really want to do. 

The thing is, more money should be giving you a better life. It should allow you to slow down when you want to and retire when you want to.

But she’s nearing 50yo and retirement is not on her radar. She can’t afford for it to be. She’s got like 3 cars to pay for, a bigger house and kids who now need fancier stuff. 

The more visible your wealth, the quicker your expectations grow

When they lived in a smaller place, their wealth was not visible. They could have had a £5m net worth or a £500k net worth and no one would be the wiser. They could have set aside a fund for their early retirement since their biz was growing so much.

They could have used all that money to slowly but surely carve out a plan for the future. A future where they can afford to take their foot off the accelerator. One where they’re present. With their family & friends. Not forever running off to take calls at stupid-o’cklock. 

But now that they’re living in a certain area they’ve slowly but surely begun to upgrade their social circles (whether that was intentional or not). They hang out with people earning a lot more than they do and whose net worth far exceeds theirs.

Once you’ve made that move – you now start to have your wealth in display. Everyone sees you in a big fancy house (with cool cars packed in the driveway) and you have no choice but to keep going. You’re still a hamster on a wheel. Only the wheel’s grown and you’ve stayed the same size. 

I look at them and see a family who could have literally had it all. And by all I mean time. More time together, as a couple, and more time to spend with their amazing kids. Not jetting off to meetings across the globe.

Because they have to. Or else they’ll fall behind. They’ve now got so many fixed expenses it’s forcing working them to work more to simply maintain what they’ve got. 

They can’t live the poor life now since they’ve signalled to virtually everyone “hey, look we’re rich”. It’ll be hard for them to cut back on stuff (but something’s telling me they already are) that everyone in their circles considers normal. They’ve subscribed to that new social code. One they really don’t wanna break. 

Lower expectations = infinitely better life 

The key to a funner, richer and better quality life is to keep your expectations firmly rooted to the ground even (and especially when) you’re salary starts creeping up. The problem is we start expecting more. And we spend more.

We think spending more means we’re in for something way better in store. But if anything, the more we spend the more we’ll need to spend just to give us that same level of happiness that that once-small thing brought us. 

The less you have, the less you need to spend to make you happy. To a kid, give them a small toy (or even a wooden spoon and some colouring pens!) and they’ll be so happy. They haven’t been exposed to the many ways in which they can spend their money. They’ve no clue the different between economy and first-class travel.

They’re so ignorant of what’s out there. They’re just happy with what they have and it doesn’t (and shouldn’t!) take much to get a big grin from them. It’s beautiful to see.  

So you aren’t really better off by spending more. Your expectations have just grown a lot quicker than your income and you end up having to splurge tons of $$$ to fill your desires and give you that thrill spending can bring. And what’s the point of being rich only for it to feed for like a day and then you’re needing more. 

I guess the trick is to grow your wealth in private and don’t put it all on display. Don’t get your validation + self-worth from a bunch of dollars in an account and you should never let others make you feel that your worth is tied to your net worth.

And if you’re feeling like, maybe you’ve outgrown your friends. Looking at my friend circle, no one is what I’d call “loud rich”. They’re all quiet with their money. They’re not flashy and they could care less whether I earn $10k a year or $100k a year (if only ha!). 

And not having your wealth on display means you know your friends are with you for You. Isn’t that a good feeling? My mum grew up without much money. But she knew her friends chose her for who she is, not for how big her account was. 

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.