Income

5 Ways to Control Your Lifestyle Inflation

The solution to most of our money problems is pretty simple: more money. But a larger income doesn’t guarantee a lifetime of financial solvency. For many folks who can’t break free from a paycheck-to-paycheck cycle, lifestyle inflation is to blame.

Lifestyle inflation happens when your spending increases as your income increases. You get a raise at work, so you move to a bigger apartment. You start earning extra cash on the side, and you spend it on small expenses (a new manicure habit, or a subscription to HBO) that add up over time. That’s the thing with lifestyle inflation—it often goes unnoticed.

The problem, of course, is that you gradually lose control of your finances. “Lifestyle inflation is different than a one-time splurge,” says Jackie Lam of the website Cheapsters.org. “It increases your living expenses over the long run. The problem with lifestyle inflation is that even though you have more money, you won’t be saving any more of it. Sometimes you may find yourself in even more debt.”

If your lifestyle spending has gotten out of control, here are a few ways to break the cycle.

1. TRACK YOUR SPENDING.

When you’re ready to deflate your lifestyle, the first step is to look at the numbers. Pull your monthly statements and carefully review your transactions so you can identify any spending problem areas. You might be surprised to find just how much those small lunches or Amazon purchases add up. Once you know where your weak spots are, you can prioritize and rethink how you allocate your money.

“I’m a fan of the Marie Kondo method of decluttering, and you can do the same with your expenses,” Lam says. “Is what you’re spending on bringing you joy? Do you have space for it in your budget?”

Love your daily latte but know you’re spending way too much money on coffee? Lam recommends you find a more affordable alternative. “I’m a huge fan of the ‘swap it, don’t stop it’ method,” she says. “Figure out what the value of something is and see if you can find alternatives. For instance, if you go to CrossFit class partly for the camaraderie, are there other ways you can get fit and hang out with people and spend less?”

2. THINK OF BUDGETING AS A HABIT, NOT A TASK.

Most people have the wrong idea about budgeting. We think of it as a one-time task: crunch the numbers, come up with a spending plan and boom, we’re done budgeting.

But budgeting is more of a habit: It’s most effective…

What the “Alternative Minimum Tax” Is and Why It Matters for the Rest of Us

One standout item from Trump’s 2005 tax return, revealed last night, was something called the “Alternative Minimum Tax” (AMT). If you’re not terribly familiar with it, here’s what the AMT is all about and why it matters.

David Cay Johnston is the Daily Beast Reporter, tax analyst, and author who found Trump’s 2005 IRS 1040 in his mailbox and shared it online (and on Rachel Maddow). The Daily Beast reported:

The documents show Trump and his wife Melania paying $5.3 million in regular federal income tax—a rate of less than 4% However, the Trumps paid an additional $31 million in the “alternative minimum tax,” or AMT. Trump has previously called for the elimination of this tax.

It’s obviously not the only thing worth noting in this whole fiasco, but it brings to light the significance of the Alternative Minimum Tax, an important part of the IRS tax code.

The Alternative Minimum Tax was basically designed to keep wealthy people from taking advantage of so many loopholes that they don’t pay their fair share in taxes. As the Tax Policy Center explains, in 1968, Treasury Secretary Joseph W. Barr informed Congress that 155 taxpayers with incomes over $200,000 (which was an even more significant amount at the time)…