Pay The Piper: Key Strategies for Avoiding Lifestyle Inflation
We live in a world hyper-aware of the present. Phrases like carpe diem, c’est la vie, it’s now or never, you only live once, and many others like these have ingrained in us a mindset and lifestyle around instant gratification.
It is not necessarily bad to live life to the fullest (depending on how you define that), but it is important to be aware of the limitations and dangers such a mindset can get us into. In the NFL, these phrases are more normalized as many professional players fall prey to the ‘bigger is better’ mindset. But it doesn’t have to be that way.
I have outlined practical strategies for you to live comfortably within your means and not succumb to lifestyle inflation.
What is Lifestyle Inflation?
I’d like to tell you a story to best illustrate lifestyle inflation. A freshly groomed athlete got his big break-- he was drafted to his dream team in the NFL. Having just come off his college turf, the world of professional sports was entirely new to him. The way he had to train, the team (and societal) expectations and pressures to win, the money he was making, all of these things were foreign.
Knowing he had large paychecks coming, he made some extravagant purchases. Unfortunately, he got injured early on in the season and those paychecks were no longer secure, and his bills still had to be paid. The stark reality of this situation happens more often than we imagine, and this player suffered from lifestyle inflation - spending more than he made.
For athletes this can happen more easily because of the ‘anticipated’ money that will be garnered. Sometimes they spend this ‘anticipated’ money so often that they fall into the debt-trap without realizing it until it is too late.
How To Avoid Lifestyle Inflation
As professional athletes, we all know some teammates who have suffered from lifestyle inflation. We may have even done this ourselves. It is important to recognize the behaviors that contribute to lifestyle inflation and the methods that can be taken to avoid it. Below, I have outlined some steps for you to take to keep your finances in check.
The Line of Scrimmage
Start at the beginning. The line of scrimmage is the place where every play begins, think about this as your starting point for your financial planning. In this stage you evaluate your guaranteed income. It is important to know exactly what you will make in a given year to allow you to plan and budget accordingly.
In this conservative offensive strategy you minimize potential turnovers. Following this same strategy with money means controlling your spending. It is a crucial step to avoiding living beyond your means. You can exercise this control through not only creating, but also adhering to a budget.
This strategy pairs a defensive player with a specific eligible receiver. This one-on-one strategy can work well on the field, but not so well with your financial strategy. It is important that you not compare your spending with another person. Just because your teammates may be purchasing more rapidly than you does not mean they will be happier than you. Nor does it mean that you have to match what they are spending.. No two games are exactly alike, and no two financial situations are exactly alike. The big spender may be in a different completely different situation or may be ignoring the principle of prudence - always think about all the possible consequences before you act. Avoid extraneous spending simply because ‘everyone else is.’
Move the Chains
We always want to think about our finances as moving forward and advancing, and the best way to do that is through thoughtful spending habits. You can help move your finances forward by developing spending habits that align with your values.
Financial decisions are customizable and it is important to know that one person’s budgets, spending habits, and values will not be the same as someone else's. When creating your own spending strategy be sure you run your own race, and establish healthy spending practices with your unique needs in mind.
Ask for Help
Lifestyle inflation can be such an easy choice to make. Learning how to discipline your budget and spending habits is not. The solution? Ask for help.
A financial planner can act as a sounding board, a guide to keep you on track. As a former NFL player who has been in your shoes, I have insider knowledge that I would love to share with you. Let’s tackle your financial strategy together, and devise a winning play to help you and your financial vision win the game of life for your family and yourself.