One of the the most useful concepts on our way to financial independence (FI) was to prevent lifestyle inflation. One way we did this was by NOT spending any pay increases, bonuses and unexpected income. By limiting an increase in lifestyle all pay increases can go into savings. This became a somewhat painless way to save. When we hit our 50s we hit our peak earning years, and the urge to by a vacation home, fancy new car, remodel the house, and take nice vacations was overwhelming. However, we knew the FI lifestyle did not lie with a vacation home. We made it our goal to stay the course, and the raises went into 401k, IRA, etc.
The stress free lifestyle of being financially independent is worth it to us to not live a fancy lifestyle. We have no interest in keeping up with the neighbors, and we don’t mind living in a modest house, driving older cars and having an old camper. We have no debt. Just because we’re frugal doesn’t mean we don’t do anything fun. We take a nice vacation every year, and we like to camp in the woods locally with our 1998 camper trailer. This seems like a good alternative to a vacation home, with the flexibility to go anywhere.
The RE (Retire Early) in FIRE is rather perplexing. I don’t envision retirement as me sitting in a chair reading most of the day and chewing the fat with the neighbor. I will probably work on this blog and work on other ways of promoting financial literacy. Substitute teaching also sounds fun and I like the idea of investing in the next generation. When you really don’t have to worry about the bills, life and work can be really fun.
So as you increase your frugality, beware of lifestyle inflation. Your first consideration with a raise should be your future. Use that extra or unexpected income wisely. It’s worth it.
