Earning money and spending money go hand in hand. Money comes in, money goes out. For some people, spending money becomes such a huge part of their lives that they become trapped on the Hedonic Treadmill.
But what is the Hedonic Treadmill, or “lifestyle inflation”, and why is knowing about it such a big deal?
Because acknowledging it and understanding how it affects your spending can put you on the right track to save money, invest wisely, and choose work you love.
This article is part of my Saving Series – my thoughts on why reducing spending and consuming less leaves us happier and better off.
The Hedonic Treadmill is an obstacle that must be overcome on our way to a healthier relationship with money.
What is the Hedonic Treadmill?
The Hedonic Treadmill, also known as hedonic adaptation, is a process by which our happiness and mental stability return to a baseline level following major positive and negative events.
Put simply, the hedonic treadmill is a defence mechanism our bodies use to attempt to maintain stability no matter what happens to us.
It’s referred to as a treadmill as our bodies will adjust to the speed of the treadmill to keep moving forward. Or worse, it can cause devastating damage if we’re unable to keep up with its pace.
The hedonic treadmill is often referred to from the perspective of making and spending money. You may have heard this also described as lifestyle inflation. As a person’s income rises, so too do their desires to spend that income.
The hedonic treadmill is dangerous as your baseline happiness often stays the same even as your spending increases. As one ramps up their spending in an attempt to find happiness, one may find spending increasing to a level that becomes unsustainable to maintain.
Keeping Up With the Joneses
Have you ever bought something just because somebody close to you also bought it? Maybe it was a friend, a school or work colleague, or a neighbour. Someone who bought the newest phone or a new car, or did something you wanted to do.
Chances are you didn’t really want to buy that thing. You were just motivated to also purchase something new and shiny because the people around you did. As you get exposed to newer and shinier things, it’s normal for our minds to naturally believe that we are being deprived by not having that new thing.
For some, having the newest and best things is a point of pride. They cannot be seen without these things out of a fear of what people would think . For others, it may simply be the way how they operate. If they have the means to purchase a new phone each year, then they will do so.
Overconsumption
This line of thinking becomes a problem as the solution to problems simply becomes “buy”. Whenever feelings of jealousy, anxiety, or boredom hit, the solution often becomes buying something to scratch that itch.
Thoughts of using up the things you have and replacing them only when necessary go out the window when a cool, new, shiny thing comes along. Purchasing things that you want without considering other factors has its own series of problems.
Rising Income, Rising Costs
As you progress through your career, build skills, and take on greater responsibilities, your income will usually rise. When this happens, your spending usually rises to match. Perhaps you find yourself in a new circle of people: a new job or a new friend group. In some of these environments, there can be an expectation of spending money to “do things”, especially as your income rises. Unfortunately, maintaining a frugal appearance in these circles can be frowned upon. Some relationships even require a baseline level of spending to maintain them.
I’ve worked in corporate roles for most of my career. In my experience, you don’t need to spend excessively to “fit in”. And there are ways to show that you want to spend time with your work team, even if it doesn’t mean going out for lunch every day. There have even been times when I have declined activities due to their cost.
However you approach your spending as income rises, you have to set an upper limit. If you don’t, it will very easily spiral out of control.
Why the Hedonic Treadmill is Dangerous
The biggest threat to your financial future is the belief that you have to spend money to be happy.
Falling into the spiral of spending money to make yourself happy only serves to relieve you of your money. In addition, it trains your mind to believe that you must spend a specific amount of money to be happy. This mindset is very convenient for corporations but very inconvenient for all of us.
The hedonic treadmill tells us that our happiness levels will adjust to the stimulus we receive. If we continuously spend money on new things because it makes us happy, we are conditioning our brains to be unhappy unless we spend this much money.
We then begin to chase the next level of happiness – one that can only be achieved by spending more, earning more, running faster and faster on a treadmill of our own creation.
How Did We Get Here?
It makes sense why we think this way. We live in the most prosperous time in human history, with access to the greatest technologies the world has ever seen. We have access to everything we could ever want via a supercomputer we keep in our pockets.
It’s only natural for a society that can have anything it wants to find itself in a situation where no amount of consumption is enough.
Social media makes us compare our lives with others more easily than ever. All this does is lead us to want to spend more to live the lives of the people we see online. And the only way to do that is to have “more.”
More More More
Unfortunately, our society has increasingly come to see money as the ultimate goal. Money is central to everything we do in society, making it the primary motivation for many people’s actions. If there’s an opportunity to make more money elsewhere, people often abandon their current pursuits to chase that financial gain.
This mentality promotes the idea that living a simpler life with fewer possessions and lower expenses is undesirable. As a result, the common approach is to earn as much as possible to fulfil every want and need.
The Trap
The problem is that by the time people realize they’ve been hoodwinked, it’s too late. They’ve conditioned themselves into spending too much money to support a lifestyle that they don’t really want to impress people they don’t even like.
At this point, they may be able to afford the luxuries they want. But it comes at the cost of requiring an ever-increasing amount of money, things, and experiences to maintain that happiness. They are forced to continue earning more and more, working harder because there is no way out if they maintain their spending. And reducing their spending robs them of the joys of life – the things they’ve been working so hard for all this time.
They have willingly become a slave to a system that wants to free them of the burden of their money. All to satisfy a desire which can never be truly sated.
How to Escape the Hedonic Treadmill
Hope Is Not Lost
Thankfully, you aren’t stuck slaving away forever if you find yourself spending too much.
There are ways to get off the hedonic treadmill and free yourself from the desire of always wanting more.
It’s not easy to undo this conditioning. But if you are in this situation, your options are to continue living a life of overconsumption, or wake up and find a way to get off the treadmill.
Discover What Matters
You can buy almost anything you want, but you can’t buy everything you want.
You need to be sure that what you’re spending your money on is what truly matters to you. Make sure you know exactly what you want so that you don’t waste your money.
Avoid cutting things you truly enjoy out of your life. The best approach is find things you love, and mercilessly cut the rest. Most of us don’t have enough for everything, so choose what you spend your money on wisely to make it count.
Be Content With Less
We all own so many things, and we really don’t need to own many to get by. Whether it’s food, holidays, experiences, or possessions, being content with a smaller amount of those things is essential to slowing the pace of your hedonic treadmill.
Build an expectation of less, and contentment with less will follow. Realign your hedonic treadmill to be at a lower percentage of your income.
This is especially important if you’re at a breaking point with your finances. There are only two levers to pull: earn more, or spend less. And in some cases, you simply have to find a way to spend less.
Wind Back Expenses
There isn’t much else to say here except that you have to be aware of what you’re spending.
If you find that you’re spinning your wheels and can’t get ahead, then it’s very likely that you’re spending more than you can afford to. In the short term, reducing your expenses is often easier than finding ways to make extra money..
Track your expenses via bank statements or reports. Make sure you’re covering essential expenses.
If you’re spending money without being certain that it’s what you want, you will build a habit of spending money to attempt to solve your problems. Try instead to solve problems without spending.
Don’t Get Caught Again
This part is obvious, but it’s best to avoid getting caught up on the hedonic treadmill in the first place. Avoid chasing trends and letting jealousy influence your spending habits.
The best way to get spending under control is to never let it get out of control in the first place.
Closing
Overcoming the hedonic treadmill and building a healthier relationship with spending frees you to use your money exactly as you desire.
Acknowledging its existence allows you to avoid the pitfalls of how most in society spend their money, and allows you to focus on what matters.
With enough effort towards this goal, you’ll find ways to build wealth and save more and more towards a future of financial independence. Taken far enough, that future will arrive sooner than you think.
Thank you for reading.
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