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Lifestyle inflation happens when higher income leads to more spending. Prevent it by budgeting, automating savings, and prioritizing happiness over luxury.
News18
‘Lifestyle’, the desire to keep up with the current trend and match up with societal expectations. When a person starts earning more, they tend to spend more to make their lives comfortable and cozy. Buying a bigger apartment, eating out in 5-star restaurants, and purchasing expensive clothes and gadgets are some of the examples of a lifestyle upgrade.
It leads to creating a phenomenon known as ‘lifestyle inflation’. While these changes can make life more comfortable, lifestyle inflation can make it hard to save money in the long run.
It’s psychological to upgrade your lifestyle once you start earning higher, but the thrift spending may disturb your finances. Despite earning a high income, you will still feel like living paycheck to paycheck.
Why Should We Avoid Lifestyle Inflation?
There’s no doubt savings and investment are very essential to have a buffer against untoward events. If you constantly upgrade your lifestyle at every high pay, you would end up with less in the end without any substantial savings.
Moreover, without savings, you won’t be able to invest in high-return assets like equities and real estate. Thus, having enough money to invest requires dedication and willpower to nibble out some portion from your salary every month.
How To Avoid Lifestyle Inflation?
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Comparison Kills Joy: Lifestyle upgrades usually happen when we try to match up with the expectations of our peers and neighbors. When one buys a four-wheeler, we are usually craved to have one for ourselves despite not having any need. Thus, don’t compare yourself with others and follow the trend to spend money thriftly.
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Stick to a budget: It’s very important to have a budget and, more importantly, to stick with that budget each month. The budget must segregate needs, wants, and savings/investments. And these separations should be followed sacrosanct.
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Automate savings or investments: The best way to save or invest a particular amount each month is to make it default or reduce friction. Once you automate it, your brain won’t trouble you to think very much about it, giving you space to invest/save the money.
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Increase happiness, not luxury: Spend on experiences or hobbies that make you genuinely happy, not just to “look successful.”
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Look for discounts/offers: In some cases, if you have to do something or buy something, you can do so as cost-effectively as possible. Discounts/offers allow you to purchase products while not lighting your pockets. That’s the best way to upgrade your lifestyle while keeping up with the budget.
In the end, a balanced approach should be followed. There’s no hard and fast rule, and we earn to spend on our needs and desires. But having a plan and budget will not only help realize your needs and wants but also help you save and invest money for the future.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
October 27, 2025, 14:32 IST
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