Lifestyle Inflation and the FI-o-Meter

Read TEA’s post on achieving Fi and just had to re-post – Love his blog !!  The problem of lifestyle inflation is just so apparent in society. I was amused by the interview where the interviewers who were obviously on wonderfully high salaries couldnt retire.

It is surprising what an impact lifestyle inflation has. People do not realise it creeps up on them. They circulate with friends and family that expect status indicators that they have stepped up the ladder. The trappings of success – bigger house, expensive objects and holidays, etc…

I was once in that mode. I was living with an ex-partner and we had good jobs, bought a large house in a ‘well-to-do’ area and seemed to ‘have it all’. Our families were proud of us, my ex-partner’s family more hung up on ‘keeping up with the Jones’ that mine was.

His family didnt like me to start as my family lived in a small, humble home and that rubbed right from the start. But with my good job and status, my family history was wiped out and I was accepted even put on a pedestal and ‘shown off’ to the rest of the family. I had a good job, company car, etc..etc…travelling abroad for work… ticking all the boxes. (Their relatives were accountants and company owners and his family were desperate to show that their children were doing just as well)
My expenses increased, my partner started working as a contractor (although not really earning his keep – had more time not working than working!) – anyhow.

I did try to kerb my spending and did save a bit more than 10% and we snowballed our mortgage down to near nothing. We split after some good years together and he went on to buy a big house and continue the status trip with a new partner.

I downsized to a smaller house, cut expenses and started to increase my saving – I didnt realise how much I was spending on lifestyle inflation aspects until I honestly looked at my life. I started filling my NISAs and savings. Before I knew it I had snowballed my little mortgage away – wow – I could now direct that mortgage payment to savings & investments.
I have learnt that money does not buy you happiness. I am more content now that I was when I was with my ex. I have money in the bank and my FI honey pot is growing nicely.

According to the FI-o-meter I am either 2 years away  (using very low growth figures) – or THERE! If I am conservative with my spending an expense needs – I could escape. Hurray!!!!!!!!

The Escape Artist

99_booth_of_truth Step into The Booth of Truth

The conventional wisdom is often wrong.  Sometimes the problem is not the stuff we don’t know. Its that the stuff we think we know is often wrong.

I recently learnt something about financial independence that I want to share with you as an example of this.  I had always assumed that earning a higher salary must be a good thing in terms of time taken to achieve FI.   Surely the faster your salary goes up, the quicker you must get to Financial Independence, right?

This seemed intuitively obvious…even though it was contradicted by what I’ve seen working in the City. There I noticed that Lifestyle Inflation seems to thwart the plans of even the highest earners to escape the Prison Camp (that is if they have even heard of FI).  Actually, Lifestyle Inflation is a slightly misleading term. Spending Inflation would be more accurate, given that the more…

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