Lifestyle Inflation
As our income increases, it seems natural that our savings should be easily increasing as well.
But for me, savings seem to increase at a slower pace than expected. Worse, I’ve no idea where the extra income goes to!
I have probably fallen victim to income inflation as detailed in this article. Income inflation can be simply defined as the costs of spending increasing as our income increases.
The author then suggests 3 reasons for this phenomenon:
1. Image building
As my income increases, I have to purchase more and better things to reflect my higher income!
Thankfully, I don’t find this relevant at the moment as I have perhaps not viewed myself as an individual with higher status at this point. This is a good note for me in the future!
2. Pursuit of happiness
As my income increases, I have greater financial tools to make myself happier with experiences and things!
This is quite relevant currently, as I am constantly seeking to pursue happiness. But this seems less relevant as compared the following point.
3. I deserve this!
I worked hard for the income I earned, so naturally I deserve a break and should treat myself once in a while!
Eventually these ‘treats’ will add up and my spending increases exponentially as it becomes a part of my new ‘deserving’ lifestyle.
This is most relevant more myself and perhaps many of us.
While this might seem to be no reason for worry, there can be something wrong in always using small monetary purchases as coping mechanisms.
A little reward once in a while is good! We just need to be conscious that it doesn’t turn into a subconscious addiction that we are forced rely on.
