{"id":56756,"date":"2023-07-03T17:43:56","date_gmt":"2023-07-03T09:43:56","guid":{"rendered":"http:\/\/wordpress-my-161844363.ap-southeast-1.elb.amazonaws.com\/articles\/?p=56756"},"modified":"2024-01-31T17:39:34","modified_gmt":"2024-01-31T09:39:34","slug":"lifestyle-inflation-finances","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/lifestyle-inflation-finances","title":{"rendered":"How Lifestyle Inflation Hurts Your Finances"},"content":{"rendered":"

Have you ever spent more money than you usually do after getting a raise or a bonus? If you have, then you should already be quite familiar with the concept of lifestyle inflation.\u00a0<\/span><\/p>\n

A simple way to explain this is when your personal or household spending increases as your income level rises. While it is understandable to want to spend the money you worked so hard to earn, knowing when to pull the brakes on your spending to keep your finances healthy.<\/span><\/p>\n

<\/span>What is lifestyle inflation?<\/b><\/span><\/h2>\n

In a nutshell, when your cost of living increases along with your income. A boost to your income can come from any variety of sources. You could have gotten a raise or a promotion, a new job, or maybe some extra earnings from a side gig. In fact, one of the largest leaps in lifestyle inflation is when a student graduates from college and moves on to earning a full paycheck at their first job.<\/span><\/p>\n

This financial trap can be very easy to fall into. After all, it is not easy to keep the urge to spend in check once you get a bigger than usual payout.<\/span><\/p>\n

It is only natural to want to increase your standard of living. However, extras like a mortgage, nicer clothes, or just eating out more can quickly add up if you are not careful.<\/span><\/p>\n

<\/span>Why lifestyle inflation is a red flag<\/b><\/span><\/h2>\n

Building personal wealth is a slow and steady process. It generally involves saving and investing a substantial chunk of your earnings. This becomes harder if there is little to no gap between your earnings and spending.<\/span><\/p>\n

It is not that you can\u2019t spend on yourself to upgrade your standard of living once you get some extra cash. Sometimes, such spending is necessary to improve your quality of life and keep you motivated and happy. Big events, such as getting married, will come with major extra spending.<\/span><\/p>\n

Issues begin to arise once your lifestyle spending starts to take such a huge chunk from your income that you can’t afford to increase your savings when your earnings increase. <\/span><\/p>\n

When that happens, your spending habits might begin to impede on your ability to save sufficient funds for your retirement, keep a fully stocked emergency fund, or even pay off your debts.<\/span><\/p>\n

<\/span>Warning signs to look out for<\/b><\/span><\/h2>\n

Lifestyle inflation can creep in slowly. If you are not one to constantly look over your financial budget, it can be weeks, even months, before you start to notice that you are being affected. Here are a few signs to look out for.<\/span><\/p>\n