You might not have noticed it, but lifestyle inflation is eating your finances. What is “lifestyle inflation”? When a person’s income goes up, their standard of living also rises. Their wants turn into needs slowly. Things that used to be luxuries gradually become necessities. Yet people hardly ever notice the extra that they shell out for this improvement in lifestyle. Instead, these expensive styles become the norm.
Clothes get older more quickly.
Phones get changed in 6-8 months now
People prefer to eat out at fancy diners and upmarket cafes over the weekends.
Lifestyle inflation affects mostly young adults and encourages lavish expenditure with a rise of about 25-30% in their finances annually.
How to tackle lifestyle inflation
- Reprioritize and revisit goals. Splurging is not bad as long as you find a balance between enjoying the present and saving for the future.
- Link investments to goals. Have a clear link between your investments and goals as it can prevent wasteful expenses.
- Stick to a budget. Make a personal budget and stick to it diligently.
- Save first. Automate savings by giving a standing instruction to your bank for SIPs or towards a recurring deposit.
- Find areas to cut spend. If your lifestyle related expenses are somehow unavoidable, then find means to cut cost elsewhere.