At the moment, we are all well aware of the effects of inflation. A trip to the gas station or grocery store provides a good picture of how we reduce our purchasing power. However, many people also experience the effects of lifestyle hypertrophy along with. If you aren’t aware of your spending habits or high inflation in your lifestyle, you may find yourself out of your financial depth.
Inflation Definitions vs. Lifestyle inflation
Unfortunately, most people do not understand the difference between inflation versus lifestyle inflation. Therefore, it is easy to confuse the two terms.
inflation Indicates the low purchasing power of a currency. For example, the increasing cost of food, gas, and other living expenses are good indicators of this. Although your income has not changed, the goods and services you buy are usually more expensive. This means that you can incur lower costs, which indicates a decrease in your purchasing power.
on the other side, lifestyle hypertrophy It indicates higher spending when your income increases. This usually happens during transitional periods in your life such as graduating from college, getting a raise, or getting a promotion with a bigger salary. When you earn more money, it makes sense that you spend more. However, spending tends to grow with each additional increase or source of income.
High inflation in lifestyle
Lifestyle hypertrophy, or lifestyle creep, can creep up on you if you don’t keep an eye on your spending habits. It can become a major problem if it hinders your ability to save and build wealth. However, you may not even realize that you are dealing with a lifestyle hypertrophy until it is too late.
Although it is difficult to define, there are many factors that lead to this. It usually starts when you receive a significant increase in income and decide to reward yourself for your efforts. While there is nothing wrong with treating yourself or enjoying some of your hard-earned money, it can become a problem if you are overindulging.
If that makes you happy…
With so much negativity in the world, many may use windfall financial gains to compensate by spending money on things that make them happy. If you work hard to achieve the reward, you deserve to enjoy the money, right? This reasoning is fine in small doses, but the need to compensate has led to lifestyle hypertrophy high.
The effects of lifestyle inflation become more complex if you use money or things to fill a deeper need. Some people begin to believe that the things and services they can afford now will make them happier or more satisfied with their lives. Then, they keep spending more on things that will never make them happy instead of rooting out the source of the problem. If you place more value on acquiring things, maintaining appearances, or equating things with their personal happiness, you will lose control of your money.
The need for acceptance
In addition, people are social creatures and tend to imitate those they spend the most time with. It is natural to want to accept or fit in with your social group. However, it can have a devastating effect on your finances if your social circles spend more on things than you can really afford. Keeping up with the neighbors is a dangerous game, especially if everything can fall apart when you can no longer stand it.
Getting stuck in the cycle
Even those who have lived successfully on a budget give in to temptation and bragging about things they didn’t need before. After that, they regularly start paying for things that were once considered luxuries but are now necessities. However, if your spending exceeds your income, you are no longer living within your means.
It’s easy to get stuck in a spending cycle, even when it becomes difficult to meet your minimum monthly payments. And if you’re fighting inflation at the same time, you’ll find yourself fighting a losing battle.
How can you avoid lifestyle inflation?
The only way to avoid lifestyle inflation is to make financial independence a top priority. This starts with finance basics like creating a budget and creating positive habits. Staying on top of lifestyle swells also requires constant attention to make sure you’re on the right track toward your financial goals. However, here are five more things you can do to avoid falling into negative spending cycles and lifestyle inflation.
1. Recognize needs versus needs.
One of the first steps toward financial independence is understanding the difference between your wants and needs. After determining the basics of life, you will clarify your priorities. Then, you can adjust your budget based on what is most important to you.
While your salary increase may seem important on paper, it doesn’t affect your finances as much as you might think. If you do the math for the actual take home total after taxes and living expenses, you might rethink some of those big purchases.
3. Create an automated savings plan.
This is good advice for any budget. If you automate your savings plan, you can be sure that building a safety net will always be a top priority.
4. Make incremental changes.
If you can stand the most beautiful things in life, there is no shame in enjoying them. However, it’s best to make incremental changes as you start raising your tax brackets. Instead of flaunting all your lifestyle upgrades at the same time, maybe you could make small changes as you adjust to your new budget.
5. Focus on experiences over things.
While having nice things can bring temporary happiness, you have to understand that it is intangible experiences that make life worth living. Instead of buying more stuff, find ways to spend money on experiences and making memories instead. In the end, the time we spend together and experience what life has to offer is more valuable than anything else.
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Jenny Smedra is a passionate world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing Life Abroad reinforced her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is devoted to either working with children, she also enjoys good friends, good food, and new adventures.