Lifestyle Inflation and How to Manage It?

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Life is packed with experiences and changes and with every progress you make, you might find yourself wanting more. You may upgrade your phone, order gourmet food items or even choose to dine at fancier places. This gradual increase in expenditure with the rise in income is called lifestyle inflation. While it is natural for you to relish the fruits of your hard-earned money, substantial lifestyle inflation can hinder your future goals and financial stability. Discussed here are the causes that result in lifestyle inflation and prudent stepwise measures you can take to protect your financial well-being.
Causes of lifestyle inflation –
Also addressed as “lifestyle creep”, lifestyle inflation happens when you begin spending more money with the rise in your income.
There are many causes of lifestyle inflation, including:
Smart stepwise measures to avoid lifestyle inflation –
Evaluate your crucial financial goals
Begin by setting financial goals for the short, mid, and long term. Doing so will endow you with a roadmap and purpose for money management. When you know what you're saving for, it's easier to resist the temptation to spend money on unnecessary things. Note that it is crucial to strike a balance between enjoying today and financially securing your tomorrow.
Prepare a budget
Creating a budget is essential to track your expenditures and figure out areas where you often overspend. Ensure to allocate a reasonable part of your income towards discretionary expenses but stay mindful not to surpass it. It can help you stay on track and avoid overspending.
Avoid debt:
Debt can quickly spiral out of control and make it difficult to save money. If you can, avoid using credit cards and other forms of debt.
Avoid lifestyle comparisons
Everyone is unique and so are you and your financial preferences and needs. Comparing yourself with others can result in unfulfilling and unnecessary expenses. Concentrate on what adds value to your life and line up your spendings accordingly.
Save and invest diligently
Open a new bank account solely for your saving purpose and to earn bank interest on saving account while maintaining high liquidity. You may even look for online saving account opening deals offering high saving account interest rates and better benefits and features than their regular counterpart. By doing this, you will preserve your buying power and ensure steady growth of your parked funds over time owing to the power of compounding.
Closing note
Lifestyle inflation or creep is a common pitfall, however, with prudent financial decisions, you can avoid falling prey to it. Always ensure to spend on necessary items and prioritise on saving for your financial life goals. Remember, occasionally you may treat yourself, but never lose sight of your future goals and make conspicuous consumption a frequent affair. Opening a savings account for meeting your life goals is a significant step towards your financial well-being and security. So, plan diligently and save patiently for a fulfilling today and a brighter tomorrow.
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