Imagine transitioning from making $8.50 per hour and sharing a crammed apartment with 5 people, to being a six-figure business owner doing what you love.
That’s the journey that Julia Kelly, caricature artist and founder of JK Expressions, took.
Sounds great, right?
Well, as they say, more money = more problems.
When Julia earned $25,000 – $30,000 per year, she had fantastic money management skills. She had no debt and plenty of savings.
But when her business started making six figures, she began ignoring her finances, stopped saving money …. and racked up thousands in personal credit card debt.
Why?
Some of us write this off as life getting more expensive as we get older, but it’s actually a classic case of lifestyle inflation — when you make more, you spend more.
Why is it a problem? Because when you spend more and neglect savings, your net worth doesn’t increase, even though you’re earning more.
After Julia began earning six figures, she decided she was no longer happy with $12 haircuts from Supercuts. She happily splurged for $75 salon style cuts instead.
She started paying for convenience. One-click Amazon order? Check. Ordering an Uber or Lyft so she didn’t have to deal with parking at the airport? Check. Eating out? Check.
She became lazy about saving money, assuming that she could always earn more. Money was coming into her bank accounts at an unprecedented pace – so her finances would take care of themselves, right?
Wrong.
As Julia discovered, when you “upgrade” certain aspects of your life, you may find it difficult to downgrade. You keep spending more and more, trapped on a consumer treadmill. You’re forced to work to fuel your spending addiction.
Left unchecked, this saps every ounce of freedom from your life.
Ouch.
In this episode, you’ll learn:
- Why you shouldn’t take lifestyle inflation lightly
- How to stop lifestyle inflation before it happens
- What Julia regrets buying … and what she doesn’t
- The easiest, most effective antidote to lifestyle inflation
- How Julia differentiates between saving time vs. wasteful convenience spending
- What Julia’s advice is to those who are working on increasing their income, but don’t want to succumb to lifestyle inflation
— Paula
Resources Mentioned:
- Gretchen Rubin’s episode, The Power of Habit Formation
- Julia’s story on the Afford Anything blog
- Cal Newport’s episode, The Incredible Value of Deep Work, Instead of Distraction
- Julia’s site, JKExpressions.com
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I also want to take a moment to thank the sponsor for this episode.
If you’ve been listening for a while, you’ve heard me interview many best-selling authors. Before I interview these guests, I need to read or refresh my memory of their books.
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Breanne
Hi Paula. Is Episode #52 working? I can’t seem to get it to play and when I download it the file is very small. Sounds like a good one and I’m excited to hear it.
Thanks!
Erin
Breanne – thank you so much for bringing that to our attention! It should be fixed now. =) The only place we’re still waiting on a fix is the Podcasts app on iOS, but it’s working on the site in case you can listen from here.
Breanne
Yep works now! Thanks 🙂
Mark
Last year I moved from a 1/2 time position to a full-time one. I was super paranoid about not losing the salary increase to consumption. As soon as my first full-time check came in, I more than doubled my retirement contributions and we started paying extra on our mortgage.
It’s not often that one’s income doubles so quickly and I didn’t want to blow it. So far, it seems to be working. As your guest mentioned, capturing the savings through automation is essential. Getting that “extra” money away from my greedy little hands as soon as possible was important.
Julie
I really enjoyed this talk, as I share Julia’s history as someone who saved tonnes when earning less, and realized how it gets harder as time goes by and you earn more. Could totally relate to thinking eating out even at Tomy Roma’s as a big deal!
I also just found it interesting that she mentions buying drinks as a big part of her expenses now. It made me think of this verse: “Whoever loves pleasure will become poor; whoever loves wine and olive oil will never be rich.” (Proverbs 21:17) Proverbs is full of financial advice that still holds true!
Thanks for your great podcast, I really enjoy it!
Laura
This was a nice episode, but what if you WANT some lifestyle inflation? My husband and I have been living off of my doc student stipend and his own business earnings for five years and we’re looking forward to being able increase our spending in some areas (vacation!), have some areas that will automatically increase (student loans out of deferment, new baby costs), and have some deferred back logged costs (home improvements, a wardrobe appropriate for a professor position). Advice on keeping those in check while still making necessary expenses (underbuyer in the house [Gretchen Rubin]).