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If you are itching to get a lifestyle upgrade right after you get some extra money - you are just like 28% of Americans. In an article published in CNBC.com, it is revealed that 28% of Americans will buy a new home if they chance upon millions. Some will buy their loved ones some fun things (17%) while others will buy a new car (8%). It is comforting to know that 86% of the respondents said they will invest or save the money. But at least 3 out of 10 respondents of the TD Ameritrade survey revealed that they would fund a lifestyle upgrade. Don’t get us wrong - a lifestyle inflationis not so bad. Most of the time, we need to reward ourselves for all the hard work that we have accomplished. But then again, that does not give us the excuse to splurge. We have to find a balance so that we will not feel too deprived and yet we can make a practical decision about how we will spend the unexpected extra money that we have.
Smart reasons to upgrade your living conditionsSometimes, people react to windfall money in extreme ways. On one side, they feel guilty if they do not save or invest it. On the other, they are quick to give themselves a lifestyle upgrade so they can show the world that they are financially successful. You have to be careful about where you want to go when you receive some extra cash. As we said, a lifestyle inflation is not so bad - as long as you do it for the right reasons. Here are the smart reasons that can justify a lifestyle upgrade. Because there are more people in the family. It costs a lot of money to raise a child in the US. According to the data published on WSJ.com, it will cost you $245,340 to raise a child from birth until they reach the age of 18. Take note that the calculations used were based on the living costs in 2013. We all know how quickly the price index rises over the years. If you and your spouse are contemplating on adding more children or you already have them, a lifestyle improvement is in order. However, you need to choose where you will implement these upgrades. For instance, if you can concentrate your resources on buying a bigger house to accommodate the new members of your family. Because it addresses a need. Another reason that will make a lifestyle upgrade okay is when there is a need for it. For instance, buying a new car may seem like an unnecessary upgrade. But if your old car is not fuel-efficient or it costs you a lot of money when it comes to repairs and maintenance, then buying a new vehicle makes sense. It is not a waste of your resources. Because it can help increase your income. If the lifestyle upgrade can help you increase your income, then go ahead with it. Sometimes, a new wardrobe for a new job will help you feel more confident and will give off a respectful vibe in you. When you are starting your own business, you may need to invest in a new gadget or laptop to make you look more professional. Not only that, these additions can help you be more productive. Do not feel guilty about buying new devices - if they can help you with your work, then it is not a luxurious expense. Because it enriches the quality of your life. Finally, if the lifestyle upgrade will help boost the standard of living of your family, then go ahead. As long as it will not put you in debt or make you struggle to make ends meet, then do the upgrade. Renovate your house to add a new wing that will serve as your home office. Or if you need a second car to help the wife go around with the kids while the husband brings the other vehicle to work, then make the purchase. The only time that a lifestyle upgrade is not okay is when you are merely doing it for appearance's sake. If it is meant to keep up with your colleagues or neighbors, then it is not worth the expense. Sometimes, we have this mindset that wherein we look at what is outside before we decide on what we want to change inside. That is not the right way to do it. In a video from TIME, author Carl Richards explain how we should go about making financial decisions. According to the video, what most people do is to read about financial advice and then decide what they want to do. If that is what you do, then you have it all wrong. What you have to do is to understand what you want out of life - what you want to achieve through your finances. Once that is clear, you can now go through all the advice you read. You can choose one that you can follow because it fits your financial plans. Before you take that first step towards a lifestyle upgrade, you have to know your financial goals first. Do not compare it with others. Do not think about what others will say about it. Be concerned only with what you want and need in your life. Only then will you know if a lifestyle upgrade is really needed at this point in your life.
Signs that you can upgrade your lifestyleIn case you want further confirmation that an upgrade is the right thing to do, here are signs that you can give your standard of living a boost.
- If you have enough emergency funds. According to the survey done by Bankrate, almost half of Americans cannot cover 3 months worth of expenses. In fact, 28% of their respondents admitted that they do not have any emergency savings. Unless you have this money, you do not have the right to get an upgrade on anything. Fund your emergency savings first so you can secure your financial future.
- If you are on track with your saving goals. Another sign that you can proceed with the lifestyle upgrade is when you are on track with your saving goals. You can splurge as long as your retirement savings and investments are intact.
- If you got an increase in your income. If you have more money coming in and it is quite stable and secure, then you can afford to rent a bigger house or pay for a bigger mortgage. Just make sure that you have built your savings first and your emergency fund before you spend on other things.
- If you just paid off your debts. Finally, if you just paid off your debts, then it is a great time to splurge on yourself as a reward. Buy some nice things for yourself - but do not overdo it! Some Americans feel like debt elimination is impossibleso if you managed to achieve this feat, then you deserve a reward.