Hello everyone! If you haven’t heard, the New York Federal Reserve concluded that American consumers and businesses will pay 90% of Trump’s 2025 tariffs. Thanks to Trump, everything is more expensive. Fortunately, relief may be on the way. Supreme Court strikes down Trump's “emergency” tariffs. Or maybe not… Trump fought back with global tariffs of 10% instead of 15%. Who knows what will happen when you read this article? One thing we know for sure is that American consumers will pay more and more to make billionaires rich.
We can’t control trade policy, but we can control lifestyle inflation. Expansive lifestyle is a key factor in triggering fires. The majority of American workers (64%) live paycheck to paycheck. The more they earn, the more they spend. If you can control lifestyle inflation, you'll be able to save more and achieve financial independence faster. This doesn't mean freezing your lifestyle forever. Some upgrades are natural and even healthy. The key is conscious spending rather than blindly upgrading to “keep up.”
I took early retirement in 2012. I can’t believe it’s been 14 years! Let's see how RB40 households have responded to lifestyle inflation since then.
lifestyle inflation
Housing: A+
In 2012, we lived in a two-bedroom apartment with a beautiful view. It's great, but our apartment outgrows it. We wanted a yard and a better neighborhood for the RB40Jr. In 2019, we moved into a duplex. (We live in one unit and rent out the other.) This is a huge win.
- The RB40Jr can walk to school and hang out with friends in the neighborhood.
- We share some costs with our tenants.
- The rental income is enough to pay the mortgage.
Our monthly housing costs are actually lower now than they were in 2012. We're doing really well here and keeping our housing expenses under control. Most of my friends have nicer houses and they spend more on housing.
That said, change is coming. RB40Jr is a teenager and we need more room. Next year I will ask the tenants to move out which will double our housing costs. After high school we may sell again and downsize. Currently: A+.
Transportation: A+
Before our son was born, we bought a new Mazda5. Fifteen years later, we're still pushing it. It has almost 100,000 miles on the odometer and is still going strong. Since we parked on a busy public street, the minivan has dings and dings all over it. But I don't really care about cosmetics as long as it works reliably. I want a better car, but I'm in no hurry. Why buy a nicer car because it's going to get wrecked on the street? We did very well in this category: A+.
Groceries: B
In 2012, I went to WinCo to buy groceries regularly. They are cheaper than Safeway and other local grocery stores, but take 20 minutes to get there. These days, I'm lazy and shop at the nearby Trader Joe's and Safeway. It's easier and it gives us a reason to go for a walk. I still try to buy groceries on sale, but if I need something specific, price is not a big consideration. Let’s take it easy here: B.
Eating out: C
Today, we eat out or order delivery about once a week. This happens much more frequently than it did 14 years ago. At that time, we rarely ate out because our son was still a baby. Now that our son is a teenager, we go out more often.
I also relaxed about my restaurant choices. We still support small mom-and-pop businesses, but we occasionally splurge on fancy restaurants. Portland has an incredible food scene and we want to enjoy it here.
Yes, we spend more. But we are also creating memories.
Grade: C (I agree with this).
Clothes: A
Personally, I do a great job of keeping my wardrobe frugal. In 2012 I wore T-shirts and jeans. I still wear the same clothes but with more holes. Now, most of my clothes are “clay clothes.” I can wear them to ceramics classes without worrying about getting clay on them. Moreover, Ms. RB40 is now retired and she does not need to buy work clothes. That's great. I think we do well in this category: A.
Hobbies: D
I spend more money on my hobbies. In 2012, I was busy taking care of my children. My only hobby is blogging – it brings in income. Today, I spend about $150 a month on ceramics, and the blog is trending toward negative cash flow. Recently, I bought a beautiful ukulele for $1,000. Lifestyle inflation is high in my hobby category, but in the long run, it's really not too bad. I bet most 52 year old men would spend more money on their hobbies. How much do you spend on your hobby? What do you do for fun? Please tell me in the comments. Technically it's D here, but I'm okay with that.
Subscriptions and Services: B
Our only subscription is RB40Jr's Spotify. I made a deal with him. He can subscribe for 1 copy. If he wanted something else, he'd have to give up Spotify. Personally, I avoid subscriptions because I don't like recurring charges.
Service is where I soften up
- Take an Uber to the airport instead of public transportation.
- It was the first time I paid a plumber to unclog the sink in my rental house.
- Kitchen remodeling and flooring contractors.
- Pay for a haircut instead of getting one yourself.
I still do DIY yard work and minor repairs, but now I'm more willing to pay for convenience. Grade: B.
Itinerary: B
Not much has changed in the way we travel. These days, I try to book mid-range hotels instead of cheaper places. That's the only change we made. We are still traveling on our own and won’t buy a lot of things to take home. I haven’t upgraded to flying business class yet. That's a lot of money for sitting in a larger chair for a few hours. I'd rather spend my money on better restaurants and activities.
Travel spending rose slightly, but not significantly. B feels fair.
Lifestyle Inflation GPA: Pure B
Well, my lifestyle inflation GPA is a solid B. That's pretty good, right? More importantly, we retain Big Three (Housing, transportation, food) are largely controlled. This is the most important thing for FIRE.
Our lifestyle is pretty much the same as it was in 2012, just a little more relaxed. However, everything will accelerate in the coming years. We need more space in our home and at some point we will need a new car. I'm glad we held it in for so long.
And you? Are you keeping lifestyle inflation under control? Or have you relaxed a bit in the past few years?
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