“It’s not your salary that makes you rich, it’s your spending habits” - Charles A. Jaffe
Ever wondered why even though you’ve had multiple pay raises and received even more bonuses over the years, your lifestyle doesn’t reflect it and instead, you’re in more debt?
When you get a raise or promotion at work, do you upgrade your car or buy that big-ticket item you’ve been eyeing? Then you might be experiencing lifestyle inflation. Don’t panic! The truth is you are not alone. Lifestyle inflation is something most people have been guilty of at some point in their lives.
What is lifestyle inflation?
Lifestyle inflation is an increase in your spending when your income increases. Lifestyle inflation is also called Lifestyle Creep and if you’re not careful it can creep up on you. It tends to continue each time you get a salary increase or a bonus because you want more and more of the good life. Sadly, this is the reason why most people with good incomes wind up living paycheck to paycheck. Some people call it the silent killer of wealth.
How to manage lifestyle inflation?
Here are 5 quick tips to help you avoid the traps of lifestyle inflation:
- Create a goal-based budget: It’s easier to go down the tunnel of lifestyle inflation when you don’t have established goals. You need to actively make out time to create your short-term and long-term goals so you can be more mindful of your spending.
- Don’t spend to impress others: Stop keeping up with the Joneses, it’s the only way you won’t end up broke on a higher level.
- Take away the visual temptation: If you can’t restrain yourself, it might be wise to stop following social media accounts or visiting places that make you want to splurge on luxury items or experiences.
- Don’t get caught up in the “always treat yourself” mindset: Certainly, you should treat yourself, but make it strategic. If it didn’t feature in your budget, stay away from it.
- Surround yourself with like-minded people: get yourself an accountability partner or join a community of financially disciplined individuals.
The right mindset for financial independence
The next time you get a raise or a windfall, don’t suddenly realise you can now afford a luxury item, more holidays, or a fancier car, SAVE and INVEST! Look out for lifestyle inflation, don’t let it rob you of your financial stability and freedom.
Key Takeaway
Learn to upgrade slowly, rather than splurging.
Lifestyle inflation is inevitable; it is part of life. People get caught in the vicious cycle of lifestyle inflation all the time, the trick is to be a little more mindful of your money and reconcile your income and expenses regularly.
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