- Date : 28/05/2022
- Read: 3 mins
With an increase in income, it's easy to slip into lifestyle inflation. Understand the concept of lifestyle inflation and how to avoid it.
An increase in income is always a happy occasion, but it also brings the desire to buy or have more in life. When your spending rises with your income, mainly to meet certain lifestyle choices, it is termed "lifestyle inflation". However, you need to be careful of this as it can impact your future financial plans and your ability to live comfortably.
Below are some tips that can help you avoid falling prey to lifestyle inflation.
1. Make a budget:
Even if you are not currently experiencing lifestyle inflation, it is important to create budgets so that you can fulfil specific financial objectives. In addition, budgets are essential in helping you track expenses and track your wants and needs. This can help you look over your daily or monthly expenses, where the money is being spent, and ultimately ascertain if you are wasting money or not. Along with creating budgets to understand how much you are spending, you can ensure money is being saved by budgeting for your savings or investments.
2. Set clear, measurable financial goals:
An increased income may lead you to believe you can take your eye off your savings account and emergency fund. But this may not necessarily be the case. However, it is necessary to continue tracking your savings and adding to your emergency fund so that you will always be prepared in the event of an unprecedented event, such as income loss, should it occur. To ensure this is possible, it is best to clearly state reasonable and achievable numbers that you can accomplish monthly or yearly. Doing this makes it easy to track your progress.
3. Live below your means:
It is important to learn how to live below your means to prevent lifestyle inflation. While it is likely that some expenses may rise as your income increases, try to keep an eye on it how much you are spending. Stick to your budget as much as possible. This doesn't mean you have to adopt a minimalist lifestyle. You can enjoy the occasional splurge on travel, shopping, etc., but don't let this become frequent. Remember, you also need to account for future inflation.
4. Surround yourself with like-minded people:
If you surround yourself with people who have the same style of living and same financial goals as you, you are more likely to be mindful of your financial habits, which could result in reaching your goals efficiently and effectively. This could be a significant factor in helping you avoid lifestyle inflation.
It doesn't matter how much money you make. If you don't know how to manage it, you will fall victim to lifestyle inflation. It can often be a toxic cycle, and getting out of such situations can be tricky. Society constantly tells us that more is always better. But, With a mindset adjustment and disciplined financial habits, your finances can turn around for the better quickly. Smarter purchasing habits can also lead to your home becoming clutter-free and less stressful to live in. By focusing on current and future needs and devising smart ways to achieve specific goals, you will not have to worry about lifestyle inflation impacting your life.