High Income but Zero Savings? Decoding Lifestyle Creep

Shiksha Roy, a marketer residing in Mumbai experiences the same. She says, “As my income rises, my spending habits naturally adjust, and while this makes it difficult to save, there is also a sense of satisfaction that I can afford a better lifestyle. I find myself constantly juggling housing costs, lifestyle choices, and financial goals, especially with the rising expenses in Mumbai. On one hand, I enjoy the freedom of being able to afford more, but on the other, I’m constantly aware of how quickly spending can escalate if I’m not careful.”

Similarly Bhaavya Roy, a lawyer, admits of her increment being directly proportional to her spending. She says, “After every increment, my lifestyle changes. From a modest 2 BHK, I have shifted to a larger space. As one chooses to live a luxurious life, practicality takes a backseat. With growing purchasing power, the habit of spending results in complacency. I realise that I need to control my spending habits but it is easier said than done. Increased income blurs the line between needs and wants.”

WHAT IS LIFESTYLE CREEP

Also known as lifestyle inflation, this phenomenon refers to the gradual increase in one’s expenses as their income grows. Initially, people adjust their lifestyle as per their income, but as they progress in their careers and see substantial income growth, they often find that their increased income doesn’t translate into savings or surplus. This is because, consciously or unconsciously, they start spending more as they earn more.

WHAT CAUSES LIFESTYLE INFLATION

● Marketing and payment strategies like ‘buy now, pay later’ options, credit cards, and EMIs have made purchasing high-cost items easy, contributing to increased spending
● People today are more willing to compromise on other expenses, to allocate a significant amount of money for their luxury and well-being
● Further, Gen Z and Millennials are exposed to curated content on social media that is focused on beauty, fitness, and wellness which influences their spending decisions
● Lifestyle inflation can also occur if you are prone to comparing your lifestyle choices with others who might have a better lifestyle than yours
● Additionally, the fear of missing out on luxuries that others around you might be enjoying, can also contribute to lifestyle inflation

DON’T BECOME A LIFESTYLE CREEP

● Set a budget and prioritise essential expenses such as rent, groceries, and transportation
● Delay purchases for instant gratification, encourage financial stability and long-term satisfaction
● Set aside funds for investments or savings that aren’t easily accessible. This can help prevent overspending
● Track the outflow of money to identify unnecessary expenses