My Three Lifestyle Inflation Mistakes

The other day I was looking back on my budget from when I was studying only a few years ago.

I used to get by for around 10,000 DKK (1,538 USD) per month – everything included.

Revisiting our budget, my wife and I now have expenses for about 40,000 DKK (6,154 USD) per month – everything included, which makes my share of it 20,000 DKK (3,077 USD).

Even though you would expect some scale advantages of having a combined budget, my monthly expenses have increased with 100% in just a few years!


I was really surprised when we added up the numbers. I mean, I have never pretended that I live a leanFIRE lifestyle, but I was still quite surprised to see the increase.

I realized that I have made the mistake I always warn everyone else against; lifestyle inflation.

Lifestyle inflation means that you increase your consumption when you income goes up. Obviously, there’s no reason to do this. You were perfectly capable of getting by before your income increased, so why shouldn’t you be able to get by after your income increases?

Looking at the numbers, it became clear I had made three big lifestyle inflation mistakes.

Everyday consumption

I have simply started spending more money on groceries, take-away and restaurants.

When I was a student I would be super frugal about every single purchase, but now I simply don’t really think that much about it anymore.

My everyday consumption used to be around 3,000 DKK (462 USD) per month, but now it has increased at least 50% if not more. Honestly, there’s no reason

I would wish that I still had my student frugal mindset, but it is not only negative that my spending has increased. I live nearly purely organic, I choose the “good”, “healthy” and “free from” alternatives rather than discount products. I believe that my body benefits from this, but my wallet certainly doesn’t.


My wife and I have gotten into a really

We used to backpack around the world living in cheap hostels with bed bugs, but now our travels have been replaced by 5-star hotels with amazing service, luxurious rooms, nice pools, excellent food etc. – although we still shop around for the good deals πŸ™‚

We used to be very happy with the budget options, but now we could never imagine going back to traveling like that – and that is the very danger of lifestyle inflation! You become so used to a new standard that it is extremely hard to go back.

Lifestyle inflation is so much easier to do than lifestyle deflation, and that is why you should always think twice before going up the lifestyle inflation ladder.

Buying an apartment

Our biggest lifestyle inflation “mistake” was buying an expensive apartment. Period.

A few years ago we bought a very centrally located, nice and future proof apartment, which we enjoy immensely every day. But from a financial point of view, it might have been a lifestyle inflation mistake.

As you will see in our budget, our apartment makes up more than 50% of our monthly expenses. When you look closer at the numbers, the amount of money we pay down on the loan is a substantial amount of that, so it is not all out-of-pocket expenses, as some of it will be included in our net worth calculations.

Still, our apartment is definitely in the expensive end and we could have easily bought a cheaper apartment or rented one in the suburbs for a much lower amount.

When we bought the apartment, we probably made the mistake of choosing an apartment that we really wanted and the most expensive one we could afford instead of choosing the most affordable that was still satisfactory. That is lifestyle inflation in action right there.

However, on the positive side, we will be able to live in the apartment for many years to come and will not have to pay moving costs again in the near future. Also, the apartment is what has currently added the most to our net worth by far because of the gains in the market (check our latest monthly report to see what I’m talking about). It might end up bringing us closer to financial independence much faster, but it might also do the opposite if the real estate market crashes.

Finally, we really enjoy living in the area and the apartment is perfect for us – and it is of course also important to take the more intangible things into account when talking about lifestyle inflation.

So what can I do to reverse lifestyle inflation?

This is the million dollar question. It is entirely possible to reverse lifestyle inflation, but the only question is whether you want to do it. Technically, I could lower my everyday consumption, traveling and apartment expenses in a matter of days and weeks.

In general, the good thing is we are quite good at prioritizing our money and looking for deals – and not spend our money on stupid things, so I’m not afraid our consumption will spiral out of control.

I know after discovering my increased everyday consumption, I will definitely be more aware of it in the future.

I know our traveling expenses will most likely not decline as we simply like the new way of traveling too much – the only exception could be if we start traveling less after we get kids.

I know our apartment expenses will not change in the short term, but we do expect to downsize slightly in the future, which will lower our monthly apartment expenses and hopefully enable us to realize some of the gains.

The most important thing we can do now is just to make sure we do not inflate other areas of our life (except if we want to, of course!) πŸ™‚

Your turn: Have you ever inflated your lifestyle? Did you deflate it again?



Jaroslav December 2, 2018 - 16:54

Hej Carl, I don’t really get the idea of including all property related outflow as expenses. In my mind, only interest, taxes and utilities should be included. Principal you pay on your mortgage is basically savings/investment as you will be able to get it back once you will sell the apartment. If real estate market crashes and you are not getting your investment back, its loss of investment, but not expenses.

Carl December 3, 2018 - 05:27

Hi Jaroslav,
You are right! In my monthly updates, I also count the principal payments as part of my net worth (and savings rate). However, it is illiquid money that I cannot use when I achieve financial independence (unless, as you say, I sell my house and move to something cheaper by renting or owning something smaller outside of the city), and I still have to pay for the apartment each month. That is why when we only look at expenses, I have definitely inflated my lifestyle (also more than necessary) and will need to sustain those expenses in the next 30 years (regardless of the fact that it adds to my net worth).

Nick @ November 24, 2018 - 09:11

HA! Ask any university-educated graduate with a decent job in Denmark, and your 3 mistakes will be exactly the same for them πŸ˜› – Just this morning, we were talking about our food budget. 10 years ago I was living with a room-mate, and we spend a combined 3000 DKK (like yourself) on groceries per month. Now we spend 7000 DKK, and are also purely (well almost) organic. Sometimes it doesn’t cost THAT much more to buy organic groceries – but I’ve noticed for the more expensive stuff (like vanilla – for the ris’a’la’mande) is twice the price as non-organic!
You don’t have to worry about your travel costs when you have kids though – they automatically goes down, as you don’t really want to bring your kid to a luxury resort in the maldives (it’s simply too expensive and too boring for kids!) πŸ˜› Going to Bornholm is almost the same price, as going 1 week to mallorca though! Vacationing in Denmark is NOT cheap πŸ˜›
Well, now that you’re aware of your lifestyle inflation, I’m sure you’ll think carefully about your choices in the future. – And maybe even, you’ll want to scale down on the 5-star luxury hotels in the future. Don’t get me wrong, I love to travel in luxury, but when I look back, some of the vacations that we had before we started making good money, is somehow also the most memorable ones πŸ™‚

Carl November 25, 2018 - 08:50

Glad to hear I’m not the only one – and even more happy to hear that travel costs with kids will go down πŸ˜‰

I also believe that 5-star luxury is not necessarily equal to the best vacations I have had, but I feel like it would be too much of a trade-down now that I know how it feels like in the future – even though I know I would do just fine without it would still be on my mind and I would compare it.

Rasmus December 3, 2018 - 20:02

Sorry, i didn’t see the travel expenses going down, after getting a kid. πŸ™‚
In fact the exact opposite. Now it’s to much of a hassel to take the cheap flight with long layovers. Public transport are too difficult, and it’s easier with a rental car. And it has to be big to contain all the baby stuff.

But hey, good post!
Could easily relate to it πŸ™‚

Carl December 4, 2018 - 03:46

Good points! I guess there’s two sides of the story then – some things go up, some things go down. I guess I’ll have to see what happens when I get a kid myself depending on which type of vacations we will go for in the future πŸ™‚

Lasse December 10, 2018 - 21:02

I also didn’t see travel expenses going going down after having kids. Neither did almost any other expense. Actually it was quite the opposite. In Denmark you pay 170.000 DKK (at least where I live) for a daycare seat in the first 6 years of the kids life. And when they get old enough to start in school, you are left with taking the summer vacation together with everybody else for a price that’s 2-3 times higher than off season (which you can easily do without the kids).
In fact the normal saying is that every kid you get will cost you about 1.000.000 DKK in their first 18 years. And that 1 million comes out of your (potential) savings. So if you are really into FIRE, don’t get kids πŸ™‚
Having said that I don’t regret having kids – I might get financial freedom a few years later but they are the source of some of the best memories I have.

– 5 years down my FIRE journey, but no blog πŸ™‚

Carl December 11, 2018 - 09:49

Fair. It seems like I shouldn’t get my hopes up too high for lowering my traveling expenses with kids πŸ™‚

I agree kids work against FIRE in a economic sense, but as you also say, I believe you should not only look at FIRE (or life) from a economic side. If getting kids brings you much more joy in early retirement, you should of course postpone it a few years to make your post-FI years even better.

… and cool to hear from FIRE people who don’t have a blog – it sometimes seems like you are the minority πŸ˜‰

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