Did you beautify your Chanukah party this year with a garland of homemade paper dreidels and menorahs, or did you use an elaborate themed décor you saw described in one of the weekly magazines? Did you fry your own potato latkes served with a side of applesauce and splurge on the 79-cent jelly donuts from the local store? Or did you create a themed Chanukah dinner replete with Asian marinated fried chicken, maple bourbon chicken poppers, Yapchik latkes, and expensive Chanukah donuts that set you back about $10 per decadent treat?
These are just two examples
of lifestyle inflation, also known as lifestyle creep, a
relatively new term that has been in the headlines lately. Although not part of
our everyday lexicon, lifestyle inflation is part and parcel of our growing
community. It borrows the term from inflation, deflation, and shrinkflation,
buzz words that are all over the news.
Inflation is the rise in prices
coupled with the decline of purchasing power for consumers over time.
Essentially you can buy less goods or services tomorrow with the same amount of
money that you have today.
Deflation is when prices decrease over
time and purchasing power increases over time. This means that you can buy more
goods or services tomorrow with the same amount of money that you have
today.
Shrinkflation is when companies reduce, or
shrink, the size of a product but keep the prices the same. For example,
Gatorade’s 32-ounce bottle has shrunk to 28 ounces, a 14% drop in product size,
although the bottle size is the same height, giving the consumer the impression
that the product has not changed. And Walmart’s Great Value Paper Towels have
dropped from 168 sheets per roll to only 120, even though the price has stayed
the same.
Pizza Nights and
Theme Parks
Lifestyle
inflation often happens when an individual’s income increases and spending is
increased to keep pace with the rising income. But lifestyle inflation does not
always have to be tied to an increase in salary. A more common scenario is when
an individual or family simply desires a more upscale lifestyle and decides to
increase their living standards whether or not they can actually afford it.
How might
lifestyle inflation affect you, your family, or our community? Lifestyle
inflation is sneaky. It can be something as simple as a Thursday-night pizza
treat that turns into a weekly pizza dinner outing complete with plain and
spicy fries along with individual bottled drinks for everyone in the family.
It goes without
saying that flying a kite and kicking a ball in a beautiful public park is
outdated and, as the kids usually say, “pretty nebby.” It’s challenging to
convince them otherwise when there are so many activities that vie for our
attention, including concerts, theme parks, and vacations to exotic places,
especially on Chol Hamoed or mid-winter break. And lifestyle inflation does not
just affect our community over the holidays. It can be a purchase of a car that
is out of our price range or a splurge of a very expensive meal at a restaurant
“just because.”
Avoiding the Pit
Lifestyle inflation can quickly
spiral out of control and lead into an expensive lifestyle that we can barely
afford – or can’t afford at all. Lifestyle inflation can curtail our savings,
blow our budgets, and squash our financial goals because we have spent money on
things that we don’t necessarily need. Lifestyle inflation happens when we
don’t use careful decision-making surrounding our spending.
How do we avoid
lifestyle inflation? There are several ways:
1) Be
aware of your personal and family spending choices. Lifestyle
inflation usually starts with small choices: a new dress for your toddler for
Yom Tov in your price range. Understood. Then there is the splurge: the
matching headband, socks, and bracelet. That, in a nutshell, is lifestyle
inflation.
Multiply the
accessories by your four daughters, and all of a sudden, the small spending
choices add up to a very expensive lifestyle. When you are thinking about
adding a new expense to your life, think of the reasons why you are doing it. Is
it to please your toddler? To please your spouse? To impress your friends or
the mispallelim in your shul? Are the
accessories an essential item, or will they contribute to lifestyle inflation
without adding a significant amount of simcha in your life?
2) When
receiving a raise, do the math. This may seem obvious but is often
not done. Your raise may not give you the boost to the cash or lifestyle that
you think you have. A salary of $50,000 with a raise of $5,000 per year translates
into an increased monthly gross income of about $415. After subtracting taxes
from the increase of salary, an individual is left with only slightly under
$400 extra per month. This is definitely not enough money to purchase a Range
Rover or take the family to Eretz Yisrael for Sukkos.
3) Treat
yourself and your family within reason: Getting a treat is a great
way to have a fun time and reward yourself. Taking the family to the pizza shop
for a treat instead of buying a frozen pie at the store? Make sure that it is a
treat as opposed to a regular event, which could cut into your earnings and
derail your long-term goals.
4) Set
aside a percentage of your income for splurging: Received a $400
raise per month? How much of this will you set aside for splurging? Be
reasonable. You’ll want to use this new money to reach your long-term financial
goals but without choking on feeling that you don’t have any money for fun.
5) Add
big changes to your budget gradually: It’s really tempting, after
getting a raise, to all of a sudden upgrade several areas of your life at the
same time. Always stayed at home on Chol Hamoed and made your own fun, invited
cousins over, and just sat in the Sukkah and shmoozed the afternoon away? Perhaps
this year, you want to test the waters and go to an amusement park for the day.
It’s okay. If it truly improves your family’s happiness, then do it. Once the
trip is over, evaluate it. Were the kids kvetchy? Did you spend much more than
the amusement park tickets because you had to pay for parking, tzchotkes at the
gift store, and food at the kosher kiosk? If the expense didn’t elevate your
family’s happiness, then you may want to reconsider this trip for Chol Hamoed
Pesach.
6) Find
friends with the same goals: If you have friends who are making
grand plans for their Chanukah tablescapes and serving tongue, veal, a charcuterie
board, and other delicacies on the first night of Chanukah, know that keeping
up with the “Cohens” is a real, very human, phenomenon. An individual can
really be temped to spend more money just to keep up with what they see in
glossy magazines and with those they are trying to emulate in the sphere of gashmiyus (materialism). Again, find
friends with same financial, religious, and family goals. If you really want to
have a beautifully set table for Chanukah similar to the magazines, go with a
friend to a thrift store and see if you can repurpose anything there. A can of
spray paint, fake flowers, and glass candlesticks can do wonders to making your
Chanukah theme unique and eye catching.
7) Set
up automatic savings: Make the decision to save part of your salary,
and the power of automation will take care of the rest. Once you know that your
savings are being automatically put into a separate account specifically to meet
your financial goals regarding Yom Tov and everyday expenses, you will be able
to enjoy your reasonable splurges without worry.
8) Do not take on any debt for
any lifestyle inflation purchases. Period. If you are relying on debt to
bankroll your desired purchases, you are probably experiencing lifestyle
inflation.
9) And finally, set up a budget. A realistic budget can help you with
your spending and savings goals, and it will help you avoid lifestyle
inflation.
There is nothing
wrong with spending your money on things that you, your spouse, and family
enjoy. Think about what makes you happy, but be careful when you measure your
happiness through consumerism. Appreciate what you have instead of desiring
more and more. Beware of lifestyle inflation, which can easily delay your plans
to get out of debt, save for a home or vacation, and plan and fund your
retirement.
Rivka Resnik has developed the
Living Smarter Personal Finance Curriculum used in high schools across the
country. If you would like a specific topic addressed or for more information
on Living Smarter Jewish Coaching or the Kosher Money Podcast, please
contact info@livingsmarterjewish.org.
