Trying to make a u-turn on the road of Lifestyle Inflation.

My favorite blogger, Debt Ninja from Punch Debt in the Face, has just said he was going to stop hoarding cash. I got excited for him to start enjoying his money that he saved up so diligently until I read further where he says he’s going to increase his contributions to his 401(k) and invest in taxable investments with a SLIGHT mention of lifestyle inflation. So in essence he is still hoarding cash, just in different vehicles. Once a PF person always a PF person. Except for me. I used to hoard cash like it was the end of the world. It started from my horrible experience of buying mutual funds from a scumbag life insurance salesman. After that I attempted to invest in the dot-com bubble making about 50k but losing that plus my initial investment of another 50k. Then 9/11/2001 hit right before I got married, my income dropped in half and my wife had a horrendous time finding a decent job. One of those interim jobs was at H&R Block where she did the taxes of senior citizens who lost everything from the dot-com bubble. When she saw them come in with tears in their eyes she told me she did not want to be in the stock market which I had no problem agreeing with. Ah the joys of being born in 1972 and dealing with these recessionary events. Now you know why I am a bitter Gen Xer. I swore off all investments and put our money into a high yield savings account. We saved up quite a bit considering our “low-income” by living frugally and saving as much as possible to build up an emergency fund large enough to weather another recessionary event. When the housing bubble burst we were paying off our house in 2008 and saving even more money because instead of paying $1200/month we now pay $200/month. That is when I learned how nice it was not to be in the stock market and getting a guaranteed return by paying off our mortgage. Even though we do not make a whole lot of money, having a paid off house makes a huge difference. Hence the road to life style inflation.

Being fascinated with personal finance and searching for some balance in my life, I came across a blog called All You Need Is Enough. It struck a chord in me. I wanted to be happier with what I already have instead of being so envious of others. I wanted to know what is really enough. How long do we have to travel on this road until we are satisfied. I think we’ve been on this road of lifestyle inflation a tad too long and should try to make a U-turn or at the very least slow down. Because of our low-cost of living, we should really be saving more to achieve financial freedom. In that respect, being envious of those who have large retirement accounts help motivate me to save more instead of spend more. Funny how that works.

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3 thoughts on “Trying to make a u-turn on the road of Lifestyle Inflation.

  1. The stock market has done very well by us. But you have to be in it for the long-haul. As you’ve noticed, you lose money when you take it out during a downturn. We’ve weathered at least two busts, but more than made up for it with the bubbles and recoveries. And we’re the same generation as you, just started investing earlier even though we’re younger.

    An important thing to do is to only invest in low-cost (low-fee) broad based indexes rather than trying to beat the market.

  2. Hi StackingCash – I can’t believe this is the first time I’ve read your blog. It certainly does help to understand where you’re coming from, and I’ve seen my own family go through the downturns that you experienced so I know how painful that can be. I know I don’t always spend the way you want me to, but I’m glad you’ve stuck around.

    Phoebe

    • It has been so long that I have even read my own blog, LOL! This particular post does resonate quite a bit for me. I really need to get back to blogging, it is quite therapeutic.

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