The iPad2 Effect – Lifestyle Inflation In Action

Hooray, I won an iPad2 the other weekend!  Alright!  Three things resulted from this:

  1. Celebration:  Yay!  I am so happy!
  2. Gloating:  Neener, neener, you didn’t win an iPad2.
  3. Lifestyle Inflation:  I could now spend buckets of money if I’m not careful.

It’s really number three that I’m worried about, and that has a point of this blog.  Here’s what’s going down:  I now have a new toy.  Of course, the toy doesn’t do much unless I start putting music, books and apps on it.  And it doesn’t do much if I don’t have a home internet connection (and I don’t.)  And I don’t want it to get all scuffed up, so I’m going to have to get some protective covering for it.  That means, I could end up spending this:

  • High speed internet connection and WiFi on a year-long contract: $50 per month
  • Protective covers: $70
  • Twenty handy apps at $4.99 each: $99.80
  • Fifty music downloads at $0.99 each: $49.50
  • Ten books at 12.99 each: $120.99

What’s the grand total?  $340.29 and $50 per month.  For a free iPad2.  How does this happen?  Lifestyle inflation.

It happens all the time.  Envision a person who upgrades to a larger house in a more expensive neighborhood.  Well, if they’re moving up from a neighborhood that matches their current lifestyle to a neighborhood that exceeds their current lifestyle.  So, to fit in, they’ll have to make some changes.  First they move up to a bigger, more expensive house, so then they’ll have to:

  1. Decorate that house.  It looks a little weird to friends and neighbors to have a big, empty house, so we have to furnish that puppy.  This is not cheap.  But that’s not all, when you buy a bigger, more expensive house, you also have to…
  2. Insure that house.  That means that your homeowners insurance premiums will go up.  Additionally, your…
  3. Property taxes increase.  Hope you planned for a property tax hike, since your property tax is figured from the assessed value of your house.  Of course, now that you are in a bigger house, you’ll probably want to…
  4. Get cars that match your peers.  You don’t want to look poor do you?  Never mind the cars you have were satisfactory in your old neighborhood.  Now you need up-to-date luxury vehicles.  And if you want to make it in the social scene, you’ll have to…
  5. Join the Country Club and take the kids to all the “right” lessons.  Hey, you have to fit in, and everyone goes to the country club/takes riding lessons/scuba dives/whatever.
  6. And so on.

In the end, it pays to be mindful of lifestyle inflation and cut it off at the pass.

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