How to Combat Lifestyle Inflation, with Julia Kelly

Afford Anything | Make Smart Money Choices

Paula Pant | Cumulus Podcast Network

Entrepreneurship, Investing, Business

4.7 • 3.6K Ratings

🗓️ 21 November 2016

⏱️ 36 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

#52: Imagine transitioning from making $8.50 per hour and sharing a crammed apartment with 5 people, to becoming a six-figure business owner doing what you love. That's the journey that Julia Kelly, caricature artist and founder of JK Expressions, took. Sounds great, right? Well, as they say, more money = more problems. When Julia earned $25,000 - $30,000 per year, she had fantastic money management skills. She had no debt and plenty of savings. But when her business started making six figures, she began ignoring her finances, stopped saving money .... and racked up thousands in personal credit card debt. Why? Some of us write this off as life getting more expensive as we get older, but it's actually a classic case of lifestyle inflation -- when you make more, you spend more. After Julia began earning six figures, she decided she was no longer happy with $12 haircuts from Supercuts. She happily splurged for $75 salon style cuts instead. She started paying for convenience. One-click Amazon order? Check. Ordering an Uber or Lyft so she didn't have to deal with parking at the airport? Check. Eating out? Check. She became lazy about saving money, assuming that she could always earn more. Money was coming into her bank accounts at an unprecedented pace – so her finances would take care of themselves, right? Wrong. As Julia discovered, when you "upgrade" certain aspects of your life, you may find it difficult to downgrade. You keep spending more and more, trapped on a consumer treadmill. You’re forced to work to fuel your spending addiction. Left unchecked, this saps every ounce of freedom from your life. Ouch. In this episode, you'll learn: · Why you shouldn't take lifestyle inflation lightly · How to stop lifestyle inflation before it happens · What Julia regrets buying … and what she doesn’t · The easiest, most effective antidote to lifestyle inflation · How Julia differentiates between saving time vs. wasteful convenience spending · What Julia's advice is to those who are increasing their income, but don't want to succumb to lifestyle inflation -- Paula Resources Mentioned: • Gretchen Rubin's episode, The Power of Habit Formation • Julia's story on the Afford Anything blog  • Cal Newport's episode, The Incredible Value of Deep Work, Instead of Distraction • Julia's site, JKExpressions.com __________________________ I also want to take a moment to thank the sponsors for this episode. First, huge thanks to Nerdwallet. Their new app lets you have one-on-one conversations with financial advisors. You can chat about anything related to money, such as retirement, investing, insurance, or paying off debt. You'll get personalized, one-on-one advice -- available at no cost to you. Check it out at no cost to you by visiting nerd.me/paula. _________________________ If you've been listening for a while, you've heard me interview many best-selling authors. Before I interview these guests, I need to read or refresh my memory of their books. Sitting down to physically read the books can take a long time. That's why I listen to their audiobooks, thanks to my subscription to an audiobook service called Audible. If you want to give them a try for free, head to audible.com/trynow for a free 30-day trial. _________________________ For a full list of show notes, visit http://podcast.affordanything.com/52-how-to-combat-lifestyle-inflation-with-julia-kelly Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

Click on a timestamp to play from that location

0:00.0	You can afford anything but not everything. How you spend your most limited assets, money,
0:14.8	time, focus, energy, attention, the decisions you make about those will impact the course
0:20.0	of your life. So how do you make better decisions in order to create a better life?
0:24.9	I'm Paula Pant, host of the Afford Anything Podcast, where we tackle these issues. And on
0:29.6	today's show, I invited Julia Kelly to discuss a problem that a lot of entrepreneurs and
0:36.0	hustlers face, lifestyle inflation. For those of you who aren't familiar with the concept,
0:42.8	lifestyle inflation is the notion that as you make more, you spend more. And this is a
0:48.0	problem because sometimes it means that even though you're making more, your net worth
0:52.5	isn't going up. You're not investing more. You're not saving more. You're no closer to
0:56.2	financial independence despite the fact that you're making more now than you were five or six years
1:01.2	ago. Today's guest, Julia Kelly, unfortunately can tell that story firsthand. About five or six years
1:08.7	ago, Julia used to earn a total of around $25,000 to $30,000 a year. And at that time, she was a
1:17.3	diligent saver. She was careful with her money. She always had savings. She had zero debt.
1:22.4	She was contributing to retirement accounts. She was living a well-managed life on between
1:29.2	$25,000 to $30,000 per year. Today, Julia runs a six-figure business. And as she is about to tell us,
1:38.4	when that happened, she became so lax about her money. And she allowed lifestyle inflation to
1:43.9	creep in so much that she ended up in credit card debt. So think about that for a second.
1:50.4	$25,000 a year, and you're saving money versus more than $100,000 a year, and you're in credit card
1:59.1	debt. This is the same person, same lifestyle, same family circumstances, nothing external about
2:05.5	her life changed. Other than the amount of money that she was making and subsequently,
2:11.0	the mentality around money that followed. So in today's episode, Julia shares her story of how
2:18.1	she succumbed to lifestyle inflation and how she was able to pull herself back out of it.
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from Paula Pant | Cumulus Podcast Network, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of Paula Pant | Cumulus Podcast Network and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.