View Daily Costs As Annual Costs To Avoid Lifestyle Inflation

Lifestyle inflation is sneaky. You don't think you're spending that much on lunch every day, but add up your costs and you might be surprised. Similarly, to get a handle on lifestyle inflation, Distilled Dollar recommends looking at these small daily costs as annual costs, then comparing them to your paycheck.

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This comes down to being more aware of your financial habits, but that's really vague advice. Distilled Dollar suggest a specific approach for more conscious spending:

...view the daily cost as if it were an annual cost ... Simple and a great way to see how an insignificant leak will sink a large ship ... An example is my old habit of ordering a $US20 dinner every night. I'll average out the daily cost at $US25 to account for the occasional drink or two. At 365 days, the total cost of dining out each night was $US9125.

I still remember the first time I realised HOW HIGH that $ amount was. I couldn't believe I was spending over 16 per cent of my salary on dinner.

The thought crept in, "If I cook every meal, then the average dinner cost will be reduced to as low as $US5. If I bank $US20 in savings over 365 days, the total amount saved would be $US7300."

Yes, money is just a tool and spending it is not inherently a bad thing. But mindful spending ensures you're using that tool in a way that supports what matters to you most. Sometimes just thinking about the maths differently can be pretty eye opening. For more detail, head to their full post at the link below.

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Understanding and Ultimately Curbing Lifestyle Inflation [Distilled Dollar via Rockstar Finance]


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