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Lifestyle inflation in a nutshell

One of my major goals this year has been paying down the principal balance on my home loan and building up my long-term savings. Along the way, I’ve discovered the personal finance blogosphere and I’ve been reading great blogs like Get Rich Slowly, Early Retirement Extreme, and I Will Teach You to Be Rich for tips and encouragement as I dig my way out of debt.

One of the concepts often discussed on PF blogs is that of “lifestyle inflation,” which is really just another example of how nature abhors a vacuum. In a nutshell, the concept of lifestyle inflation states that expenses will increase proportional to increases in income. It’s the reason you might feel like you still can’t make ends meet even though you might be earning $10,000 or $20,000 dollars a year more than you made five years ago. Sure, currency inflation plays a part too, but if you examine your expenses, most people will find themselves paying much more for things now than they did just five years ago as a result of upgrading. Don’t believe me? Quick, how much were you paying for rent 10 years ago?

If you’re in your early thirties like me, chances are that you were sharing a house or apartment with one or more roommates and paying $300 or $400 a month or less for rent. Fast forward to the present day, and as a typical thirty something, I bet you have a nice fat mortgage payment of at least $1200 per month. And I think that we all can agree that this $800 or so a month difference is primarily due to lifestyle inflation, and not currency inflation. (In other words, yes your rent payment would have increased somewhat if you were still renting with roommates, but it sure wouldn’t be anywhere close to an $800 per month increase).

And this is just one example. The way that lifestyle inflation really gets you is that it sneaks up on you as you gradually make upgrades in lots of different areas. Think cell phones, cable TV package upgrades, bigger car payments, etc. etc.

“Model inflation” or a tale of two vacuums

Just as lifestyle inflation can eat away at your hard-earned financial gains if not kept in check, I’ve discovered another insidious concept I am going to call “model inflation.”

I’ve been working on some projects in my garage and my old shop vac died an untimely death Sunday afternoon. I determined that the cause of death was the infiltration of the motor by massive amounts of sawdust allowed in by the absolutely silly “paper and band” style filter in the vacuum. (I guess I should have realized something was amiss when it started spewing wood chips out the exhaust).

So, I went off to “The Borg” (*) in search of a new vacuum. I had determined that my budget for a new vacuum would be about $70 or $80. I wanted one that took a cartridge-type filter and that could also be fitted with a paper bag inside, which I thought would serve the dual purpose of prolonging the filter life and making cleanup a little neater.

(*) Big Orange Retail Giant

When I got there, I found a model that looked like it would work – the Ridgid WD1250. It had a 12 gallon capacity, 5 horsepower, and cost $79, right around what I was looking to spend. I looked around to see if there were bags for it. I found some bags that said they would fit the next few models up – the WD1450, WD1650 and WD1850, but nothing for the WD1250. After enough running around and frustration with the utterly incompetent staff at “The Borg” to fill an entire additional post, it was determined that no, there were no bags for the WD1250. It had a different intake nozzle assembly than the others and no one made bags to fit it.

To make a long story short, I wound up getting the next model up, the WD1450, in order to get a shop vac that could take a bag. I spent more than I had wanted to - $115 - and part of me wonders if the sneaky SOBs didn’t plan the product line with just that sort of thing in mind. It’s a concept that I am dubbing “model inflation,” the deliberate planning of product lines to influence consumers to buy the next model or two up the line from where their starting price range was, and the more I think about it, the more I see examples of it in a lot of consumer product lines (TVs come to mind - “well the 42 is only a little more than the 36 inch and it has extra features X and Y”).

What do you think? Have I been reading too much of a conspiracy theory into this or do agree with me? Join the manversation and post a comment about your shopping experiences below.