What is Lifestyle Inflation And How Can it Affect Your Money?

Lifestyle inflation is the tendency for individuals to increase their spending in response to an increase in income, which can hinder their ability to save and achieve financial goals.

Lifestyle inflation, also known as lifestyle creep, has hindered people from saving for the future or retirement, which is why some remain dependent on relatives.

Of course, some people spend on luxury as their income increases. They tend to buy new homes, expensive clothes, eat out in five star restaurants at all times.

Common triggers for lifestyle inflation include sudden increase in disposable income, consumerism and marketing influence, social pressure and peer influence, emotional spending, lack of financial planning, and easy access to credit.

While it is natural to want to improve one’s quality of life with additional income, unchecked lifestyle inflation can lead to living paycheck to paycheck despite earning more, as the growing expenses offset the income gains.

To counter it, individuals are advised to prioritize saving and investing a portion of their increased income rather than spending it all on lifestyle upgrades.

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