Lifestyle inflation can easily creep up

It is sometimes a bit more difficult to realize if and when lifestyle inflation has occurred in your own life. This effect occurs gradually at times that we do not even realise that lifestyle inflation has occured until sometimes something major happens that jolts us to our reality. The reality may be that the expenses increases to the point where they are more than our income – such that our overall quality of life may then start to decline.

As this type of change happens over time, it is for some persons practically impossible to evade it. Remember – staying within a budget takes discipline, and that at times is easier said than done. Sometimes, expenses increase to the point that they can’t match up with an individual’s saving rates or even the rate at which we make money as income.

In such a scenario, an individual may be in a worse situation than he/she was before when his/her income was low.

What is lifestyle inflation?

Lifestyle inflation refers to that phenomenon where personal expenses increase as his/her income increase. As we continue getting an income raise or increasing amount of money coming in, and we now start making more than we were before, the lifestyle inflation becomes more significant to the point that can lead an individual into a financial crisis. We may start to shop a little more, impulse purchases may increase or we may now use the credit card a bit more frequently than before to splurge.

Things such as our debt, and the little bit of savings for retirement – and meeting financial goals and objectives start to change and spiral out of control. In this regard, individuals may remain in the same economic status quo, where the money that you earn is now barely just enough to pay off the bills.

For example – we may be able to afford a regular pair of socks, and therefore purchase that pair of socks which would then last us of a few months. Long enough that we don’t have to purchase another pair say until 3 months for the day. However with lifestyle inflation – we now choose to purchase socks weekly or every two weeks just because we can, and for the time being this practise becomes a habit. Maybe the pair of socks purchased now are rather than $1.99 may now be $5.99 per pair that we now choose.

This example is only on a pair of socks, but then consider the same thing for other products and services, which we may have been using before. Now all of these things add up where we are now spending increasingly more and more.

How does lifestyle inflation happen?

Most of the times, as an individual income raises, desire to live a luxurious raise. As a result, an individual gradually begins to give room for more spending with time. In this regard, a person spending increases with time for him/her to be at par with income raise, and when this happens, an individual income grows substantially, but the savings remains intact. In such a case, lifestyle inflation is said to have occurred.

What are ways to avoid lifestyle inflation?


Sometimes lifestyle inflation can be creepy. For this reason, it’s suitable for an individual to understand his/her needs to make the right decisions based on the budget. Before introducing a new expense as part of our lifestyle, it is important to rationally consider the following;

  • Is the expense/product or service (shining new thing) that essential? Maybe wait another – 48 – 72 Hours – and see how we feel about it.  
  • Can it add lifestyle inflation without a substantial impact/contribution to your life?

Before thinking to advance in your lifestyle, it is good to do some math’s on the income raise because sometimes the expense may not correlate with it.


It is good to treat yourself because you deserve it after earning, but it shouldn’t be done overboard. Short term treats can be fun, but they can hinder an individual from achieving long term goals because they cut the budget in a more significant portion.


As much as an individual spend some income on splurging, it is suitable for him/her to take a look at his/her budget. Most importantly, as income raise pop in, it is suitable for an individual to decide the amount he/she is a willingness to splurge for fun to avoid overspending.


An individual may be waiting eagerly for the raise to upgrade his/her lifestyle. However, it is suitable for him/her to avoid going for the expenses at once and take one at a time.


Being around friends with the same goals may assist you as an individual to improve your personality and make the right decision when it comes to spending.

Wrapping It Up

It’s good to be very vigilant in your expenses, to avoid being trapped in lifestyle inflation. Yes, it is good to crave for a good life, but you should allow it at the expense of your long-term financial goal. True there is nothing wrong with trying to improve your living circumstances…but, be mindful of being able to sustain it.