Avoiding Lifestyle Inflation

Late last year my wife graduated from nursing school, and soon after we became a dual income family. This was certainly a blessing because it meant we could start repaying some of our student loans. But one of our biggest challenges lately has been avoiding the temptation to spend the extra paycheck.

This is something I considered even before my wife started working. We were accustomed to living off my income, so I wondered what it would feel like to have an extra paycheck every two weeks. I’ve always been pretty disciplined with money, but I wasn’t confident we would be able to avoid unnecessary spending.

When a family goes from earning one paycheck to two, one or both partners are often tempted to spend all the extra money. They might rationalize their behavior by saying that they deserve more after scrimping and saving for so long. This is known as lifestyle inflation, and is extremely hazardous to your financial health.

This past weekend I went to Costco for few things. I was strolling through the store as I often do, checking out the offerings, when I walked past some pillows. They looked really soft, so I walked up to touch them. “Yep, these would look great on our bed,” I said to myself. They might even help me sleep better. I did everything to convince myself that I needed these pillows, including telling myself that we could afford them now that we have extra money coming in.

In the end though, I walked away. Sure, I could have easily afforded them. The price was right too – $16 for two king size pillows. I thought about the pillows we currently have. Although they’re a year or two old, they work just fine. At this point they’re a want, not a need.

Recognizing the difference between wants and needs is a big step in avoiding lifestyle inflation. Just because you have extra income now doesn’t mean your list of needs has to expand.

What are some better things we could be doing with the extra income? Here’s where our focus is:

1. Paying off student loans. This is where the majority of my wife’s paycheck goes. Watching the balance fall month by month is very satisfying.

2. Increase our giving. We feel that it’s important to give to those who are less fortunate than we are. Even though we aren’t bringing in tons of money, the extra paycheck allows us to be more generous.

I heard a quote once that’s always stuck with me: God increases our means not that we may increase our standard of living, but that we may increase our standard of giving.

3. Start saving for retirement. Before my wife started working she had zero retirement savings. We’ve since opened up a Roth IRA for her and contribute a little from each paycheck. When she becomes eligible to contribute to her 401(k) at work we’ll start contributing to that as well.

Extra money might come into your life from ways other than an additional paycheck – it might come through an inheritance, a raise, or from reducing expenses. Whatever the source, don’t squander it by buying things you don’t need. Instead, consider your goals and the needs of your family, and ask yourself how you might use it to better your life and the lives of those around you.

What are your tips for avoiding lifestyle inflation?

Photos by capetownstore.com and fastcompany.com

Finding Legitimate Work-At-Home Opportunities

Work-at-home opportunities have grown substantially since the Great Recession began as people are looking to get back on their feet financially. These side gigs offer the flexibility of choosing your own hours and can be a great way to earn a little extra cash in your free time. What they will not do, however, is make you rich quickly.

Scamsters have also taken advantage of the increased popularity of work-at-home offers. So you have to be careful to avoid people trying to take your money. Among the most common scams:

  • People asking for sensitive personal information such as your Social Security number, date of birth or checking account number
  • Instructions to deposit a check then wire a portion of it back to someone
  • Claims that someone has access to hidden jobs or government grants that nobody else knows about
  • Anyone requiring large amounts of money up front
  • Promises of earning hundreds or thousands of dollars a month in your spare time

Never, ever give out personal information or bank account numbers to anybody without a good reason.  Because most work-at-home offers are scams, you have to be vigilant in weeding out the bad ones.

So what should you do if you’re searching for legitimate opportunities to earn some extra dough? That depends on your interests and abilities. There are several types of work-at-home outfits on the internet, but I’ll talk about three of the most common ones.

Virtual call centers and help desks

Companies often outsource their customer support, so you might be able to find an opportunity helping customers solve issues on the phone or over the internet. Arise.com and LiveOps.com are two of the bigger sites for these types of opportunities.

Legal assistance to attorneys

Attorneys sometimes need help preparing for a trial. For example, you could be part of a mock jury or focus group helping to determine case value, find which facts to emphasize, and analyze public opinion of a particular topic. If you’re interested in providing this type of service, check out OnlineVerdict.com or eJury.com.

Freelancing

Do you know a foreign language? Are you a math whiz? There are people willing to pay for private tutors for all sorts of subjects. Take a look at what skills you can offer the world, and visit Fiverr.com or Elance.com to find people looking for your expertise. Even if you don’t think you have any skills, you’d be surprised what people are willing to do for a few bucks.

On Fiverr.com, people post what they are willing to do for five dollars. One entry I just saw is from a guy who is willing to put on a hot dog costume and dance for two minutes to a song of your choice!

Work-at-home opportunities won’t make you rich, but they can be a good way to earn a few bucks in your spare time. A good way to get a feel for the reputation of a company is to search online for what other people say about it. If you see a lot of negative comments, you know to steer clear.

A final word of caution: Be skeptical if something seems too good to be true. You don’t want to get taken by the scamsters!

Photo by classifiedwars.com