Levels of Lifestyle Inflation

Most of my friends work in my industry. By most, I mean, um, all of them. This means that all of my friends make a similar income to me. Everyone spends their money differently, which I find fascinating.

I have one friend who lives with four roommates and one bathroom. I think he makes a bit less than me, but probably still six figures. He has a plain model of an older car. He drives to work every day, though he might carpool.

I have one friend who pays $2,500/month for a one bedroom apartment by himself. He has an older sportscar. He’s older (in his thirties) though (i.e. has been working for awhile now in our highly paid field) and is mostly working for the social aspect. I wonder sometimes if he’ll stop working when he has kids.

One particular friend triggered me to write this post. I think that she makes a bit more than I do, but I honestly doubt it is all that much more.

1. Her rent is comparable to what mine was when I was renting for a similar place.

2. I bought my car brand-new, but it is a subcompact that gets excellent gas mileage and cost me about $20,000, which I paid in cash. She drives a brand-new (as of when she bought it) BMW sedan with leather seats, a sunroof, and many other excellent controls. I have no idea how much it cost her, but I’m going to guess at least $40,000.

3. This is what really gets me. In one sentence, she will say that she wants to have kids in the next few years and then in another, she says that she wants to buy a condo. Her baseline is a place with an amazing view and she doesn’t see herself spending any less than $600,000. From my research on the internet, condos costing above $400,000 tended to have pretty high HOA dues and property taxes are a function of the assessed value. So even without the mortgage, the carrying costs would probably be well over $1,000/month. And at the amount she would be mortgaging, the tax deduction probably would actually mean something, whereas at the level of my mortgage, it doesn’t really. Honestly, if I wanted to live in a place like that (which I don’t), I would prefer to rent even if it cost $3,000/month because of how much risk a $600,000 condo represents – at least while renting, you could keep your savings and maybe keep building them up a bit.

Basically, we look for opposite things in both cars and real estate to buy. I’ve been falling out of touch with her over the last few years – I just don’t have any interest in spending money the way that she does. I’m not at the extreme of the friend who lives with four roommates either though. I’m somewhere in between them.

Readers, where do you fit on the lifestyle inflation spectrum of your friends?


29 thoughts on “Levels of Lifestyle Inflation

  1. It is a little hard to say as our friends have a wide range of incomes. We live well within our means so I try not to worry too much. I definitely spend a lot less on clothes than many of my girlfriends but I am lucky to have a job and live in a city that does not place a high value on expensive clothes.

    • Agreed on living in a city that doesn’t place a high value on expensive clothes! My favorite cardigans were only $10 apiece!

  2. I would say with my friends, we are all a wide range. We all have very different jobs: I’m the only in finance, they’re in engineering, teaching, police force, PR, etc. So we all spend our money differently.

  3. I have no idea. One thing out here is that most professors start with a “starter house” which is generally in the mid-100s to low 200s, and then when they get tenure they move into a “tenure house” which is generally in the mid 300s (often they will build this). We started out with a permanent house at 265K. Though I think if we’d started with a starter house we still wouldn’t be moving.

    • I’ve never really understood the whole “starter house” idea if you’re already with the person who you know you’re going to have kids with, living in the city where you plan on settling. Good on you guys for buying a permanent house to begin with!

  4. If I just look at my local grad student friends, we make pretty much the same amount of money. I would say we’re on the lower end of cars for people who bought their own, but many are still driving the college cars inherited from their parents and I know a few whose parents bought them new cars. We definitely don’t spend the minimum possible on housing, though we’ve always had roommates and not all of our friends do. We probably go out a lot less than our peers but spend more traveling. Many of our friends have pets (and a couple have babies), which I hear are expensive, while we don’t.

    The thing about grad school stipends is that you can try to inflate your lifestyle with debt right when you start – and I know some who did – but our raises year-to-year are only intended to keep up with inflation so once you get in your program and realize how difficult this is the name of the game is cutting back.

    • In considering my non-grad student local friends who are around the same age, they all seemingly spend about as much money as the grad students, but earn a lot more. I’m not sure if they’re investing their excess money or saving up for a down payment or what, but their lifestyles definitely don’t seem inflated in comparison with ours.

      • I think that them having you and your other grad student friends as friends probably really helps your non-grad student friends. My friends who are grad students or one of the couples is definitely help to keep me somewhat grounded.

        Sounds like there is quite a variety in spending levels in your circle as well! I hear babies are expensive…but then other people say that they’re only as expensive as you make them. And I hear it’s better to have kids in grad school sometimes since it doesn’t affect your tenure package?

  5. My friends & I are all over the place. Some of them are already into their 30’s and established consultants that make decent money, others are still in school doing after degrees or PhD/Law/Medicine. Likewise our lives are all very different. Some own homes outright and live by themselves, others are renting with roommates. I fit in the middle both income and lifestyle-wise. I have a good salary, but not incredible and I rent a humble one-bedroom apartment by myself.

    I think we have similar habits for the most part though, and we’re all young professionals so really the only things separating are lifestyles are our ages. I’m sure when I’m 30 I’ll be at six-figures and own a condo and a car like my friends that are already there.

    • I had this theory that we’re all somewhere in the middle of our friends. Sounds like your data set goes along with that hypothesis too.

  6. A lot of my friends make less than me and we are all at different points in our lives – living at home, grad school, law school, etc. We all graduated around 2009 so I feel like we are all on the same page. No one makes a crapload of money because we all struggled to find jobs. I sometimes feel bad for spending money actually..but at the same time I respect their decisions. I think noticing the differences in spending styles is advantageous to us though. We can all learn from it and analyze it for what it is. I like comparing myself to others in that aspect because it helps me figure out what NOT to do haha. I have a friend who makes way less than me though and acts like she deserves everything expensive. She has no idea how much things cost and the idea that you must pay your debt back. It is very frustrating!

  7. We work with somebody who is deeply in debt and makes a similar income to what we do. He drives a Hummer. We drive a Prius. He has a sprawling house with land and lots of animals. We have a modest house with a nice yard. He is deeply in debt and sometimes is totally broke until payday. It’s really weird how someone’s choices can put them in a totally different place than someone else who makes better decisions. My mom always said, “it doesnt matter how much money you make…if you spend it all, you’re still broke~!”

    • Exactly! I’m always excited for pay day, but that’s because it’s the day I get to move money to savings and then almost time to do my net worth update ;)

  8. I dunno. I think it can be dangerous to make assumptions on someone else’s spending or saving without knowing more details. We don’t know how much she makes or how much in assets she has. And we don’t know if she really is planning on buying a $600k condo or just daydreaming. Same with the kids — who knows? And if kids, maybe she will have a husband who is highly paid. Or maybe she received a huge inheritance. There’s too many unknowns.

    • I know… I think she’s really planning on buying a $600k condo – she’s been touring around with a real estate agent. I know she makes at least as much as me for a start, but that’s about it.

  9. Most people that I know, regardless of income, just seem like way more of a consumer..spending on alcohol and what not. I don’t know what people make, but I see what people spend and know what I make..and I feel like I’m above the average, so it kind of confuses me to see how much people spend…..

    • Yeah… Walking around a bar district earlier this month, seeing everyone dressed to the nines and dropping money on the non-happy hour prices, I wonder where that money comes from. (We were there for happy hour and only ordered food during happy hour.)

  10. Your friend sounds like she is on a recipe for disaster! Its fine to want to nice things. But too much too fast is bad all around for your lifestyle-creep. You’ve got the right idea staying in the middle of the road.

  11. Your reference group can really impact your views on spending and, most importantly, your choices.

    I tend to socialize with poor students, so they pretty much all live like poor students. I have basically no really good true friends from work (I have good ‘work friends’ but that’s a bit different because the only socializing outside work is the occasional bar night). They’re all super cool people, but we’re at such different stages in our lives. There was one guy and one girl, in a workplace of nearly two hundred, who was within 5 years of my age. I don’t go to jazz events or garden parties. I play Halo and write my blog.

    • Definitely. Some of my coworkers eat out for dinner far more than I really want to and I do sometimes go out with them. I see my coworkers on weekends sometimes and we’ve gone furniture shopping together and various other random things. I would call them friends. Plus, I went to college with one of them. College friends are a type of friend you will never have again, unfortunately.

      Ugh, you play Halo? I don’t think we can be friends :P

  12. Most of my friends are either in school or make around the same amount of money as I do. They are pretty frugal since most of them come from frugal families. On the other hand, my husband’s dental school classmates/friends definitely succumbed to lifestyle inflation…and none of them have an income yet. They are all taking out the maximum loans available ($50K in-state, $80K out of state) and living the dentist lifestyle when they are still in school. I know that they are all expecting high incomes and I’m sure that they can pay them off, but I still think in the long run it’s unwise to take out so many loans

    • I definitely get along better with the friends who came from somewhat frugal families over the friends who came from wealthier families because I find that our money mindsets are more similar.

      I agree with you on the lifestyle inflation of your husband’s classmates… It’s possible that some of them will figure it out in after their first year, but somehow I doubt it.

  13. I think it’s ok to splurge in certain areas but it seems like some of my co-workers want to have it all. I know that if I want to take epic vacations, I probably can’t go out and buy a new car. I’m ok with that. Some of my friends at work with comparable salaries are always complaining how little money they have. Well, duh, because they’re going out to dinner and drinks, buying nice things and living it up!

    • It’s hard when I feel like I could really have it all, considering that my mortgage pay-off plan includes ~$50k of extra payments per year. That could pay for quite a few really expensive trips or a new car every year! I definitely go out for dinner more than I care to admit, but I’m still saving $3-4k per month, so I try to not ride myself for it too much.

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