Treat Daily Expenses As Annual to Avoid Lifestyle Inflation
Lifestyle inflation is insidious. You don’t think you are spending that much on lunch every day, but add up your expenses and you might be surprised. Likewise, to deal with lifestyle inflation , the Distilled Dollar recommends treating these small daily expenses as an annual cost and then comparing them to your salary.
It boils down to getting a better understanding of your financial habits, but this is really vague advice. The Distilled Dollar offers a special approach for more informed spending:
… treating daily expenses as if they were annual expenses … An easy and great way to see a minor leak sink a large ship … An example is my long-standing habit of ordering a $ 20 dinner every night. I average the daily value of $ 25 to account for a few drinks occasionally. On 365 days, the total cost of dining out was $ 9,125.
I still remember the first time I realized HOW MUCH this amount in dollars. I couldn’t believe I was spending more than 16% of my salary on lunch.
The thought crept in: “If I cook every meal, the average cost of a dinner will drop to $ 5.” If I save $ 20 for 365 days, the total amount saved is $ 7,300. ”
Yes, money is just a tool and spending it is not a bad thing. But spending money with awareness ensures that you use the tool in a way that matters most to you. Sometimes just thinking about math in a different way can be eye-opening. For more details, navigate to their full publication at the link below.
Understanding and Ultimately Curbing Lifestyle Inflation | Distilled Dollar Through Rockstar Finance