When I graduated from grad school and got my first job, I was super excited to finally make money after spending 7 years in school (4 years in college, 3 in grad school). On top of that, my starting salary was three times my grad student stipend! As you can imagine, I was pretty ecstatic to be making that kind of money.
So, what do you think a 24-year-old would do with that kind of money?
I spent it, of course! Before I even started my job, I treated myself to online shopping at Zara, where I “splurged” on a work purse and a few work clothes. After a friend told me she was going to the Treasure Island Music Festival, I bought a 3-day pass for $160. And after passing by a mall kiosk, I got tricked into buying some fancy skin care products for $150.
However, apart from my short-lived shopping spree, my life and my spending remained relatively unchanged.
Lifestyle inflation happens and personally, I think it’s actually a good thing. It means we’re progressing, moving up in life, and to be blunt, making more money. I mean, why should you still live like a broke college student when you don’t have to? Of course, the problems with lifestyle inflation arise when you’re spending beyond your means or your savings rate is abysmal even though you’re making bank. However, lifestyle inflation doesn’t have to be a bad thing because there are ways to minimize its effects on your finances (sounds contradictory, I know). Here’s how I have done it.
I haven’t raised my living standards
My standards for housing have always been pretty low. While I was in college, I spent 3 years living in a shared room in the dorms. After graduating, all I really wanted was my own room and a kitchen. I didn’t care that much about living by myself or in a new apartment or even near my grad school campus. So, when I was looking for a place to live during my first year of grad school, I moved into the first place that offered those two things. Turns out it was an older house, 1.5 miles away from campus, with four roommates. Throughout grad school, I continued to live in older houses and apartments with several roommates, which helped keep my rent low. Because I was living with friends and enjoyed living in older houses, it never crossed my mind to live by myself or in a fancier place, even though I could have afforded to do so.
Post grad school
After leaving grad school, I was fortunate to get job in the Bay Area. However, my office was more than 30 miles from Berkeley, the city I had been living for the past three years. Instead of moving closer to my office, I stayed in Berkeley… in the same apartment with the same roommates. To be completely honest, I did this out of fear of losing my social circle. Nearly all of my friends and my boyfriend at the time were living in Berkeley, so I thought moving away from them would mean that my social life would go down the toilet. By not moving, I ended up saving some money because I didn’t have to relocate or buy new furniture, appliances, etc. And because I continued to live with roommates, my rent stayed pretty low.
When I got my first job in San Francisco, there was no question in my mind that I would move to the city. After all, working and living in SF had been one of my main goals. I’m not going to lie, moving to the city was a major lifestyle jump, mainly because my rent increased by 67%! 😱😱😱
But it could have been a lot worse. If I had decided to live in a fancy apartment complex with a pool, gym, and concierge or live alone in a studio or 1 bedroom, my rent would have doubled or even tripled. But because I moved into an older apartment with two roommates instead, I saved at least $500-$1000 per month. Plus, for the past year, I’ve reduced my rent even further by renting out the parking spot that came with my room in the apartment.
I haven’t changed my spending habits
Since leaving grad school, I’ve increased my income significantly. And with each job change, I have acquired more and more disposable income. Although I have used some of the money to inflate my lifestyle, I’ve been able to save at least 40% of my income ever since I started working. How? By staying frugal and not drastically changing my spending habits.
After I started working, I finally allowed myself to buy clothes from more expensive stores and even buy some items full price. But I only did this occasionally and was pretty selective about the items I bought. Because I’ve always enjoyed the thrill of getting a good deal, I still bought most of my clothes when they were on sale or heavily discounted. I also kept shopping and selling my clothes at second-hand stores and on Poshmark.
After moving to San Francisco, I decided to finally live the city life I had fantasized about. So, I went out to eat at nicer restaurants and drank fancy cocktails at trendy bars. However, because I stayed frugal and only did this occasionally, I was able to enjoy city life without breaking the bank.
Even though San Francisco has many amazing restaurants with Michelin stars, I usually went to the 2 dollar sign ($$) restaurants on Yelp. If it was a special occasion, like my birthday, I’d splurge and go to a 3 dollar sign ($$$) restaurant. A typical “nice” dinner for me would consist of an entrée and maybe an appetizer or a dessert. And because my Asian genes have blessed me with a low alcohol tolerance and the (in)famous Asian glow, I would only drink one or two fancy cocktails. As a result, a night out for dinner and drinks would never cost me more than $100.
After moving to San Francisco, I wanted to take advantage of the cultural events in the city, such as concerts, ballets, etc. I actually didn’t break the bank by doing this because I mostly went to events that were free or $25 or less. Fortunately, in SF, there are many free or cheap events going on every weekend. (I frequently used the website, sffuncheap.com, to find them!) Even though I could afford to go to more expensive events, like a big New Year’s Eve party or a charity gala, I always preferred finding cheaper alternatives and saving the money.
For example, instead of buying tickets to see The Marriage of Figaro at the SF Opera House, my friends and I watched it for free at the annual Opera in the Ballpark. Instead of buying day passes for Outside Lands (a music festival in SF), I went to Hardly Strictly, a free bluegrass festival, two months later.
I probably sound like a hipster saying this, but I actually prefer going to see lesser-known artists in smaller venues. In addition to their music, I enjoy discovering up-and-coming artists/bands before they become mainstream popular and watching their journey into stardom. Ok, I must sound like a hipster now. And because those artists weren’t in high demand yet, I usually only paid $20-30 for a concert ticket. Additionally, as I’ve gotten older, my tolerance for large crowds and rambunctious young people (wow, do I sound like a cranky old woman or what?) has significantly decreased. So, I avoid going to music festivals, like Coachella and Bottlerock (aka the new country clubs), which saves me money on festival passes, travel expenses, pricey festival food, etc…
And although I enjoy watching musicals and ballets, I only go when I can get free or discounted tickets. That means that I didn’t see Book of Mormon until five years after it premiered, I still haven’t seen Hamilton yet, and I wait for ballet tickets to go on sale. The fact that I haven’t seen the hottest musical or current ballet doesn’t bother me. I’d much rather wait until I can get a price that I feel comfortable with than overpay and possibly feel disappointed.
I haven’t upgraded my friends
Jim Rohn has said “You are the average of the five people you spend the most time with.” I believe this quote can be applied to your finances too. Friends can significantly influence how and what you spend your money on. For example, if your friends are all going to Coachella or are taking a vacation at an all-inclusive resort in Mexico, you might feel like you’re missing out if you don’t buy tickets and go with them. So, you spend a bunch of money just to be included.
As I mentioned earlier, nearly all of my friends in the Bay Area were PhD students that I met while I was in grad school. And as Ms. Frugal Asian Finance has said, PhD students don’t have that much money. (For reference, I was living off $32k per year in the Bay Area during grad school. My stipend was probably more than most students’ because I won a National Science Fellowship.) Since I left halfway through my PhD program, my friends were still grad students when I started working. But just because I was making more money than them didn’t mean that I would stop hanging out with them. Actually, by continuing to hang out with them, I was saving money.
Since my friends didn’t have that much disposable income, we mostly did free or cheap activities. I’d often go with them on hikes and camping trips over the weekends. When we went out, we would take advantage of happy hour deals or go to clubs early to get in for free. Most of the time, we would just hang out at our apartment, cooking together and enjoying each other’s company. Because I stayed friends with frugal and resourceful people, I minimized the increases in my spending and basically lived like a grad student during my first job.
Have you experienced lifestyle inflation? If so, how has your lifestyle improved? How have you minimized the effects of lifestyle inflation?