Beware of the Golden Handcuffs of Lifestyle Inflation
Spend less than you earn is the most basic rule of wealth accumulation. But many of us spend more than we should on certain luxuries and amenities. Once you get used to this lifestyle, it’s easy to get attached to it.
There are many people living from hand to mouth, barely able to afford housing. But many of us feel broke when we actually spend a lot on our needs. These small luxuries add up and close the gap between our spending and our income, making it difficult to accumulate money.
But besides saving money, there is another disadvantage of living beyond our means: lack of flexibility. You become attached to a particular lifestyle, even if it is holding you back in many ways. Trent Hamm of The Simple Dollar calls this the “golden handcuffs” phenomenon:
When people have high-paying jobs, they often believe that they can “afford” a big house and a nice car, and buy them with a loan that gives them big mortgage payments and cars. This makes it very difficult to choose a career change, and it makes the prospect of losing your job incredibly daunting. My advice to anyone trying to build a flexible financial future for themselves is to maximize their cash flow – the difference between their income and the required expenses.
This does not mean that you should never spend your hard earned money. This is just another reason why living beyond our means is important – the freedom to not be “handcuffed” to an expensive lifestyle and the options that come with that kind of flexibility.
To find out more, go to Hamm’s post at the link below.
Money and Time Are the Same … and Seven Other Unusual Personal Finance Ideas I Use in My Life | Simple dollar