Money & Power

How to Cost Out Your Lifestyle

Gain control over your financial obligations.

As in all things dealing with economics, lifestyle can be defined in terms of supply and demand. After all, a certain way of living (and spending) ends up as a monetary number. So, on one side (demand) you can ask, what lifestyle can I afford with my present income? Taking the supply side of this equation is different—how much do I need to make to attain the lifestyle I want?

The usual approach to adjusting your lifestyle in the face of declining financial prospects is expressed routinely as “tightening your belt." This metaphor of moving one hole or two inward an accessory that holds up your pants gives an inaccurate imagery. Presumably, this move is due to some weight loss associated with, in this case, having nothing to eat rather than following a particular diet, and is clearly a demand-side approach. The logic presumes that with the reduction in the level of income, the lifestyle one can afford to buy needs to be notched down as well.

The financial advice columns after the 2008 financial crisis which now seems to be receding somewhat into the area of bad memories all dealt with such demand-side suggestions as going back to basics even for tycoons. (You don’t need a helicopter to go to the office, just use your Benz.) Advice covers attire, like making do with old clothes, or wearing those still in their plastic cases bought from two trips back.


Lifestyle costs fall in the realm of what economists call discretionary spending.This is different from cost-of-living items like rent, food, tuition for kids, electric and telecoms utilities, and transport to go to work.

Strangely, these trite appeals to old-fashioned values of a less flashy time (before glossy magazines defined status) are always attributed to characters that never had cell phones, withdrew money from ATM machines, or associated notebook with stationeries and supplies. Thus, the homey appeals to a thrifty life are expressed as lessons learned from dead people like grandmothers and company founders who squeezed the calamansi until the skin was yellow. Their words were never heeded before as they were just exasperating admonitions on how to keep one’s fists closed when passing a shopping lane.

The supply side of the lifestyle issue is not about affordability at all but desires. Rags-to-riches stories abound with this supply-side dynamic as a goad to success. The poor waif, in a case of unmitigated envy, looks at the lifestyle of the truly rich and then works hard to get this through boxing or hard work. In this fairy tale, the disadvantaged child dreams (biographers never use the word envy) of a life with a car, a mansion. If the dreamer is aggressive or corrupt enough, he throws in a helicopter or yacht just to differentiate his lifestyle from others who are merely well-off.

Lifestyle costs fall in the realm of what economists call discretionary spending. This is different from cost-of-living items like rent, food, tuition for kids, electric and telecoms utilities, and transport to go to work. For readers of this website, this includes amortization for the house and even cable TV and Internet connections. It also covers contingency costs like health care, but not necessarily cosmetic enhancements.

Discretionary spending has more to do with status issues than bare necessities. These involve unnecessary or avoidable expenses which can be postponed until the market recovers sufficiently to exceed your average buying cost.


Which approach to determining lifestyle is best? In both cases, there is a need to put price tags on the lifestyle set, much like the consumer who wants to put together a home entertainment system. As in the latter, the components (fifty-two-inch flat screen) and brand of speakers affect the costing. It is not just the items in the list but the quality these imply.

Costing out your lifestyle gives you control over your financial obligations. It allows you to avoid surprises. (Is that how much the business-class fare to Paris costs now?) Not putting down the numbers for each of the items in the lifestyle plan before such costs are incurred can mean swiping your card and adding up the bills after you have already incurred the cost.

Here’s an example of a lifestyle approach for one year:

First, add up the monthly basic costs like groceries, utilities and other necessary and recurring items. This is matched to your revenue which should then yield a positive balance for discretionary expenses. If there is no balance left after the necessities, then you can forget the extra amenities of life until the next planning period. A deficit in this department means going back to tightening of the belt and skipping meals (see above).

On the demand side of this approach, the disposable income after the necessities translates into availability for discretionary spending. The balance after deducting obligatory costs from revenue determines the cash for the year’s lifestyle expenses like travel, spa treatments and throwing a silver anniversary party.


When only savings serve as a source of funding, costing out a lifestyle is even more critical. It is even possible to compute how long the money will last without the need for the kindness of relatives and strangers.

The more aggressive supply-side approach starts with the wish list (one Caribbean cruise plus a trip to Canada, a new car, a patio for the house) and then works backward to the revenue needed to achieve material Nirvana. It is then a matter of applying the reality check to the probability of a dying aunt finally kicking the bucket and leaving an uncontested will or a rise in the stock market index.

What do you include in the costing of lifestyle? How detailed should it be?

Let’s take the item on travel as an example. Say you are planning a two-week stay in New York. You include the plane fare for two (economy or business). Then the hotel cost for the two weeks, unless you have a flat in Manhattan or plan to stay for free with someone who has a flat in Manhattan. The daily expenses on  meals, taxis and gifts (for those staying with relatives) are factored in. Maybe, a number of plays to see and out-of-town trips and some allocation for fine dining (keeping in mind the 15-20 percent tip)—note that eating is different from dining, as hot dogs from the sidewalk are poles apart from a three-course dinner with wine in a dark place. Do not forget the allocation for shopping.

Costing out a lifestyle gives an idea of where your money and credit card charges are going.


Sometimes you are not even aware of how much things cost until you jot them down. This computation will also show you how much debt you have been using to keep up with your colleagues. It is a way of putting a number on the costs of social climbing, which may or may not be successful. Like a true tenor, hitting the high notes should be performed with seeming lack of effort. To show too much strain in shelling out money for a cruise with your friends gives the game away.

When only savings serve as a source of funding, costing out a lifestyle is even more critical. It is even possible to compute how long the money will last without the need for the kindness of relatives and strangers. Thus, a retiree, which is now defined not by age and ownership of a senior citizen’s card but by a financial state where no revenues come in periodically, needs to make a simple calculation. How much do you spend in one month and this number serves as denominator to determine how many months the savings and their pathetically small interest will last. This is not counting contracting a dreaded disease.

Filipinos like to walk their financial tightropes without a safety net. The assumption is that children who are now making big bucks but have expenses to match these will take fiscal responsibility for their parents in need. This is no different from the federal government’s penchant to bail out ailing industries and stick the cost to the taxpayer, in this case a loving son or daughter, but not necessarily an equally ardent in-law.

It is best to think of children’s role in the lifestyle issue as limited to occasional treats like a dinner or even a free trip.


To depend on others, no matter how close a relative, is a recipe for disappointment.

Cultural obligations of children may enhance the purchasing power beyond your own revenue. But this dependence entails costs in terms of the right to give an opinion that is given a decent hearing. Even in our old-fashioned Asian society where children are supposed to take care of their aging (and no longer productive) parents, the continued support from this sector is doubtful. The supposed benefactors have their own lifestyle to compute and consider. It’s very unlikely that supporting dependents is in this wish list.

Computing the cost of things we need to pay for to enjoy life removes uncertainty, but not always the stress. Still, it is good to see how much we need to live it up…or simply to live.

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A.R. Samson
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