Has ‘Skimpflation’ Come For Your Spending Habits?

Our spending habits closely tie to how we view ourselves.

How we dress, where we travel, what we eat. They all shape and reflect, at least in part, our identity. And they all drain money from our bank accounts.

These costs aren’t inherently a problem, even in large or frequent amounts. In fact, they’re quite pleasant when they align with what we value most.

But the value to us is not constant, even if we spend with care. The value can change due to external factors. And a problem does arise when we don’t realize it.

Entrepreneur Pieter Levels recently argued that the value we get from certain purchases has declined. He wrote:

[Inflation can be] “hidden from prices and instead shows up in the extreme decrease in quality of almost every product and service.

We’re in an asset boom where stock prices look like they’re growing but they just show the underlying value… is rapidly dropping.

That’s why the same product or service you bought two years ago is now twice the price, but more than half the quality, so essentially became 4x more expensive.”

Analysts have labeled this phenomenon “skimpflation.”

Author Nick Maggiulli adds:

“Technically, the [Bureau of Labor Statistics] does adjust for shrinkflation, or when the size of a product decreases even as the price stays the same. You may have noticed this with shrinking candy bars and paper products over the last few years.

But the BLS doesn’t adjust for what’s being called skimpflation, or when a business skimps on the quality of their product or service while keeping the price the same. If you’re a big consumer of chocolate bars, you’ve probably noticed a difference in taste recently as manufacturers swapped out cocoa for cheaper alternatives.”

From salad dressing quality to restaurant service quality, you may no longer be getting what you’re paying for.

It’s easy to eliminate those expenses when you never really valued the purchase in the first place. But change becomes much tougher when the value decline hits something you truly enjoy.

But you’re not what you buy. And that’s critical to remember when you realize that skimpflation may force you to rethink how you spend your money.

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About the author: Kevin Mahoney, CFP®

Hi, I’m Kevin. I’m the founder of Illumint and a financial advisor in Washington, DC. I specialize in financial planning for Millennials like you. As a Millennial father and Certified Financial Planner™, I empower our peers to invest with confidence and flexibility. If you’re new to Illumint, I’m glad you’re here – you now have access to free personal finance tips written specifically for Millennials. I encourage you to read, watch, or listen to the ideas I share about exchanging your money for memories with your friends and family. And then when you’re ready, please send me your thoughts & questions!