Unveiling a Silent Menace: Reining In Lifestyle Inflation for a Stronger Financial Future

In the busy world of modern India, where the economy is booming, and everyone wants the latest and greatest, there's a hidden problem: lifestyle inflation. It's like a quiet enemy that can mess up your finances without you even realising it. This blog dives into the heart of this issue, explaining where it comes from, how it can mess up your plans, and most importantly, how to take control of your money.

As India gets richer, people make more money. The tricky part is that as incomes go up, so does spending. The bigger house, the fancier car, the dream vacations—all these things become tempting. There's a saying, "Once you travel in Business or First class, it's very difficult to go back from it." But these upgrades often become a problem, tying people to a cycle of spending that can harm their financial well being and their future.

What causes this spending frenzy in India? A big factor is the desire for family and social status. We want to keep up with others around us, even if it's not the best idea for our wallets. Plus, everything is so accessible now. We can buy anything we want, even if we don't really need it. Credit card EMIs and Personal loans make it seem like we can afford it all, but that's not always true. This easy access to credit, combined with the temptation of instant buying and paying in instalments, can be a big problem.

Remember how our parents and grandparents used to save every penny? Things have changed, and now people want to enjoy their money instead of saving it all. While enjoying your money is great, it's crucial to find a balance between instant gratification and delayed gratification. Instant gratification shouldn't push you to live in debt.

Lifestyle inflation is like a two-edged sword. With more income, we want a better lifestyle, but each step up is more expensive than we think. And once we get used to the upgraded lifestyle, it's hard to go back. For example my parents used to travel in Sleeper coaches of Indian railways for their travel, be it 4 hours travel or 40 hours travel, then with better earning they upgraded to AC 3 tier, then to AC 2 tier and now mostly to Air travel. This has happened over the last 30 years and side by side they were always saving, making it a priority over spending, meaning they saved first and then they splurged on upgrading their lifestyle. 

So, how do you control your growing expenses? First, set clear financial goals for the short and long term. This will guide your spending and help you decide what's essential and what's not. Make a budget and stick to it. Think twice before making big purchases—give yourself time to decide if you really need something. Set up automatic savings to avoid unnecessary spending. Build an emergency fund to handle unexpected expenses.

It's okay to enjoy your money, but there's a balance between enjoying today and securing tomorrow. Create an investment plan, stick to it, and review it regularly. Having someone to hold you accountable, like a family member or advisor, can help.

Lifestyle inflation is like a sneaky ninja—it creeps up when you're not looking, sooner than later such small acts take the shape of habit and get ingrained in our lifestyle. As India's economy grows, it's crucial to be ready and resist the urge to spend more just because you can. The Indian dream isn't just about enjoying things now; it's also about building a prosperous future. You're in control of your financial story, so make it a tale of success and empowerment. Have you noticed changes in your lifestyle and expenses over the years? Share your thoughts in the comments!