You’re probably aware that we’re going through inflation right now in today’s economy, but there’s another inflation that you’ve probably been living with all this while but never noticed - it’s known as lifestyle inflation. Get to know what is lifestyle inflation and why it could make you poor!
Lifestyle inflation is when an individual’s spending increases as their income increases. It's also known as "lifestyle creep" because these lifestyle changes can sneak up on us!
IT HAPPENED TO ME.
Have you ever realized that the more you earn, the more money you spend too? YEAH. There's a thought in us, where we think, “Oh yeah, now I’m earning more, I can finally save up that additional increment!”
Yeah, hold it - that’s what I thought too. But then recently I noticed something peculiar, my demand for “wants” has now changed to “needs”.
I’ll give you an example, just months ago, I was okay with using drugstore skincare brands. But now that I know I’m earning a little better than before, my skincare needs have unconsciously changed to buying bougie skincare products!
That’s when I realized, I was falling trap into lifestyle inflation. Things that were once luxuries in life have now become necessities. It happens when your lifestyle or standard of living improves as you make more money.
WORK. SPEND. REPEAT.
It’s natural to spend more as you have more money to buy the things that you want. After all, we work hard to buy and do the thing we love!
But here’s the problem, you can get stuck in a cycle of living paycheck to paycheck or worst, fall into debt.
SIGNS OF LIFESTYLE INFLATION.
- Buying or renting a larger home than what you need.
- Your amount of monthly savings isn’t increasing.
- You're no longer on a budget.
- Indulging in way too many expensive habits.
AVOID FALLING TRAP INTO LIFESTYLE INFLATION.
1. Be aware of emotional spending.
Emotional spending happens when someone goes out on a shopping spree to make themselves feel good. You might end up buying something that you don’t need or want all because you were feeling angry, sad or stressed.
2. Spend your raise intentionally and strategically.
One way for you to spend your raise wisely is by creating financial goals so you don’t lose track of your finance. Set your financial goals and align your spending against your goals. For example, you should only upgrade your car to fit your family's needs.
3. Don’t try to keep up with your social circle or family.
Peer pressure is real. But this isn’t a “Keeping Up With The Kardashian” show! Seeing your family and friends with the latest Apple iPhone or driving a brand new car may make you want to own one too, but remember, spend according to your means. At the end of the day, we don’t know their financial commitments and background. For all you know, they may also be in debt for living that luxury lifestyle!
Now that you know about lifestyle inflation, try to be more conscious of your future lifestyle changes and shake off that lifestyle creep!