Episode 130: Lifestyle deflation is the process of making small changes to remove low-value expenses. Learn how to use lifestyle deflation for a better frugal living with Dr. Bill Yountof Pivot Points MD.
What is Lifestyle Deflation?
Lifestyle deflation is identifying and correcting the excess spending and waste in your life to live a little leaner. The three main expenses in life include food, transportation, and housing. By unwinding these three expenses, you can live more efficiently through a smaller, wealthier life.
For example, deflating your food costs would include evaluating how often you eat out and getting better at meal planning and smart shopping.
Transportation deflation could include cutting back to one family vehicle or scaling back on new vehicle expenses and buying well under budget.
Housing tends to be more challenging for people interested in lifestyle deflation. Looking at smaller, more affordable options and building as much equity as possible is the goal. Houses are often a luxury expense, where people think they need more than they do based on pre-conceived notions and tradition.
Saving Money with Lifestyle Deflation
When you deflate your lifestyle, you have more money to put into savings for retirement and high-value experiences (such as travel). This creates space for paying off debt and saving before spending to build a comfortable buffer.
Another aspect of lifestyle deflation is making your assets more liquid. For example, the equity you put into your house is locked up and not easy to access. Being able to build an emergency fund is more important.
Repurposing Money with Lifestyle Deflation
The liquid assets generated through lifestyle deflation can be re-routed into creating and developing new income paths. For example, directing your money toward starting a new income-generating business. Alternatively, you can invest in property for house hacking.