Besides economic inflation, lifestyle inflation is a personal finance issue that often troubles many individuals.
1. Definition
What is Lifestyle Inflation? This Blog is for you!!
Lifestyle Inflation, or Lifestyle Creep, is simply when INCOME INCREASES, and so does EXPENDITURE.
Lifestyle Inflation is something that cannot be avoided, and it’s also a sign that the economy is developing in a positive direction. As a result, individuals tend to want to improve their standard of living. This often happens when you start earning more money and also start spending more, typically on luxury and non-essential items.
“More income means a higher standard of living!”
Why does this Lifestyle Inflation happen? Increasing income comes with a sense of confidence and financial security. You start thinking that you can enjoy life better and differently!
The desire to reward oneself after efforts through travel, shopping, and dining out is not wrong. In itself, lifestyle inflation is not a problem; it only becomes an issue when you spend too much compared to your income.
- The Advantages of Lifestyle Inflation: Enhances life experiences and overall improved quality of life, self-rewarding after hard days of work.
- The Disadvantage of Lifestyle Inflation: Easy fall into debt, difficulty in saving, or achieving major financial goals like retirement, buying a house, or a car.
Examples of Lifestyle Inflation: Frequent dining out, buying designer items, and upgrading to the latest smartphone trends even when it’s not necessary.
2. Consequences of Lifestyle Inflation
- Increased debt burden
- Financial stress
- Difficulty in achieving financial goals
- Reduced savings and investment capacity
- Retirement planning challenges
- Discontentment and stress
3. How to deal with Lifestyle Inflation
While lifestyle inflation to some extent is difficult to avoid, remember that every spending decision made today impacts your financial situation in the future. Consider the following measures to address this situation:
- Distinguish between needs and wants: Start by learning to differentiate between things you truly need and those you merely want or desire at the moment, often influenced by FOMO (Fear of Missing Out). This will help you prioritize long-term goals more effectively.
- Create a spending budget: Establish a spending budget for every month, week, and year. Allocate funds for essentials like groceries, housing, and clothing, followed by savings. Finally, determine the amount available for discretionary spending. By following this order, you enjoy life with financial control and savings in place.
- Cultivate disciplined saving habits: To combat lifestyle inflation, you need the discipline to save. Consider setting up automatic transfers of a portion of your income into a savings account. This way, you save regularly without much thought.
- Invest now: Lastly, don’t let your money sit idle. Invest in it to make it grow over time. Seize investment opportunities today to secure your financial future.
Overcoming lifestyle inflation can be challenging, but with patience and determination, you can ensure your life progresses without unnecessary financial stress. Begin smart financial management today to build a more secure financial future.
How have Vietnamese people in the United States been struggling in recent years:
Suppose you want to learn more about the current insurance programs to deal with inflation. In that case, you can watch additional videos posted on the Thinksmart Insurance YouTube channel or call 678-722-3447 for detailed and completely free consultations.
