Beware of Lifestyle Creep

 

Not able to save? Blame it on lifestyle creep!

You know the importance of savings; your parents and elders have pounded it into your head.

And you think you are saving money and investing it for a better future. But not enough.

Over the years, your income has increased but your savings have not increased not that much. You have this thought arising in your mind now and then that you ought to save more but you are not able to.

There are many reasons for not saving more and each person’s circumstances, duties and responsibilities to his family is different. Each one’s needs and wants are different.

However, there is one common reason for saving less and spending more.

That reason is called “lifestyle inflation”, or as Americans say it, “lifestyle creep.”

What is “lifestyle inflation?”

We have heard about inflation that raises prices of stuff and cost of living. But this “lifestyle inflation” creeps on you slowly, gradually, often without you being aware of it.

After the last salary increase, you sold yr car and bought a new bigger model.

Or you sold your trusted Hero or Honda, or TVS and bought a Royal Enfield classic.

Or you started eating out more often. Or you moved to another house for a higher rent.

Why you do this?

 1) You have watched neighbours or relatives living an expensive lifestyle and when you can afford it, you too do the same to keep up with them.

2) You simply do not prioritize your financial matters: you have no idea of how much to save and how much to spend. Your financial life is running on automatic, without a plan.

3) You are used to immediate pleasure from lavish spending. You avoid saving and investing to achieve long-term goals as it entails the pain of sacrificing a posh lifestyle.

Take action

1) Draw up a financial plan; consult a qualified person if necessary. Spend and save according to the plan.

2) Pay yourself first before you pay others. Automatically save first and spend only what money is leftover. Make savings compulsorily the first thing you do whenever you get an income.

3) Draw up a monthly budget for expenses and monitor your spending periodically.

You want a better future

It is your life. Live your life according to your needs and wants. Create your lifestyle in accordance with your values, your budget and within your means.

Keep your long-term financial goals in mind and do not live to satisfy others’ expectations or competing with lifestyles of other people.