A few years ago I grew tired of my smallish one-bedroom apartment in West L.A. and was itching for a change of scenery. After a few rounds of apartment-hunting, I landed on a great find: a unit in a charming, Spanish-style fourplex nestled in a quiet neighborhood. It even came with a garage, a rarity in the Los Angeles rental market. I envisioned hosting dinner parties more than four people could comfortably attend and carving out a writer’s nook in the garage.
The rent was $1,300 a month for a far more spacious unit than my current place, which cost close to $1,000 a month. Besides the $300 monthly increase, I also had to foot the first and last month’s rent, plus moving costs.
I did the math and if I shifted a few things around in my budget, I could afford the rent. But, after getting approved, I just couldn’t bring myself to sign the lease and fork over the extra cash each month.
When can I have nice things?
Call this a champagne problem if you will, but I have a hard time spending money I’ve saved. I mean, this isn’t such an issue with one-time purchases like as nice vacation or sleek bike I’ve had my eye on, but rather on those lifestyle upgrades that permanently bump up my bills.
You may be thinking, "Quit your whining! Spend that money already!" — but I’m scared to. My fears of being a broke, old woman compounded with the fluctuating income that comes with being a freelancer makes me think twice whenever it comes time to ask that old question: "Can I have nice things yet?"
While my frugal nature has helped me save, I often need a gentle prod — or forceful shove — to spend some of the beans I’ve so prudently stowed away.
So when is it OK to to undergo lifestyle inflation? Well, here are some questions I use to figure it out.
Can you afford the upgrade?
This seems like an obvious question, but there are plenty of people out there who live above their means, albeit sometimes unintentionally. In other words, don’t figure out whether you can afford upscaling based on a promotion or robust bonus you’re banking on. Take a good, hard look at your current budget and see if you can make it work. Can you cover all of the expenses associated with the upgrade? For instance, if you’re moving to a bigger place, can you afford a higher utility bill? Will the area raise your renters insurance? If you need to rake in extra cash, perhaps, by way of a side hustle, is it worth it?
You’ll also want to look at the trade-offs. When I moved from a studio to a one-bedroom, my rent increased about $125 a month or $1,500 a year. I had to temporarily scale back my monthly contributions to my Roth IRA. It was a trade-off I was happy to make, as I had long outgrown my closet of a studio apartment. Plus, it was a $900 rent-controlled one-bedroom apartment in West Los Angeles which was practically unheard of at the time. If the deal hadn’t been so sweet, though, I might have passed.
Will you still be able to save?
Consider whether your lifestyle upgrade means you can’t save for your other goals, whether this is raising a family, getting a new set of wheels, taking a vacation to Cabo, or more.
Maybe you can save a little less, but the overarching question is can make any headway on your long-term and short-term savings goals? If you’re worried, sit down and see if there are trade-offs you can make here as well. Maybe giving up a morning latte or weekly visits to that fancy restaurant will let you save while making a lifestyle upgrade.
Do you have enough socked away in a rainy day fund?
In case stuff hits the fan, you’ll want to have enough squirreled away to make those car payments or pay your rent. Besides a rainy day fund, do you have a backup plan? For instance, in a pinch, could you move back to a smaller apartment? If you got laid off, could you cover your mortgage until you found a new job?
While it’s a bit of a "gloom and "doom" mentality, drumming up different hypotheticals and how you could manage financially in these situations, it’ll help you gauge whether you’re ready to make whatever financial leap you’re considering. Bonus: It’ll help you figure out how much you would need to get by for six months or even a year.
Is it more of a pain not to upgrade?
Figuring out whether it’s time to undergo lifestyle inflation is a matter of simple math. Maybe your 20-year-old junk car is starting to break down so frequently it’s more costly to repair than buy a new one. Or, if you and your significant other work from home, and your tiny apartment is getting so cramped that your productivity — and therefore your income — will improve by moving into larger digs or investing in a coworking membership, well, then, that’s a proper upgrade.
It admittedly gets tricky when you can’t assign a monetary value to a purported upgrade. For instance, moving to nicer digs may not necessarily save you money, but perhaps living in a more vibrant, walkable neighborhood will improve your quality of living.
Going back to my opening conundrum, I realized there’s nothing necessarily wrong with the apartment I’ve lived in for seven years, except that it sits on a busy street. Hence, my ultimate decision to forego signing the lease.
Of course, at the end of the day, it’s a personal call.
For scaredy cat spenders such as myself, lifestyle inflation can invoke catastrophic thoughts. However, asking yourself these questions will help you figure out if it’s OK to take the plunge and undergo a lifestyle upgrade.
You can have nice things … so long as you (or your budget) won’t suffer for them.