December 9

Monitor Lifestyle inflation at Different Lifestages

How we spend our money can help determine our lifestyle. The spending habits start building up as we move from a student life to the corporate world.  As we go through different life stages our expenses tend to increase. Our behavior during these moments can define our financial future.  If we are habitual of making expenses only after analyzing our requirement things span out in our life much better. But if we are accustomed to not worrying about our finances then we tend to ignore any impact lifestyle expenses can make on us. As a result many of us go into a hand to tight situation when responsibilities and liabilities rise to their peak. This forces us to borrow more and more to meet our requirement and financial crisis evolves. It’s essential than that we have a  basic understanding of what constitute lifestyle expenses and how it impact our financial future, whatever lifetsage we are in.

lifestyle inflation

What is life style inflation?

We are very well aware of general inflation and how it impacts our finances. It will mostly comprise of  food inflation and education cost  which are clearly visible  to us. But one aspect of our living we generally miss out is our lifestyle. What we spend above our basic needs caters mainly to maintain our lifestyle. So dining out with family and friends and watching movies pertains to expense which we do for entertainment. All these cost adds to your expenses. The more you have leisure activities the more it attributes to your lifestyle expense.  When prices of such lifestyle expenses gets increased periodically it termed as lifestyle inflation.   But all lifestyle expenses are not bad and some of them you may not be able to avoid.

So let’s understand what life events bring change in your lifestyle and where you should be monitoring to avoid any crisis.

Life Stages Where You Change Your Lifestyle

  1. Your First Job:

You are moving out from college life to the corporate world.  Feeling of self-dependent and a disposable income in your hand brings lot of aspirations in your life. The excitement of your own earnings is converted into monetary spending at this stage. However, the lifestyle in metros and your peers may lure you to over spend at this stage. In today’s scenario you get access to many credit benefits such as credit cards, personal loan etc. and living look very easy when you extrapolate your future earnings. But the root cause of most financial crisis is heavy debts and worldwide students or young earners are more prone to it. So you need to understand the difference between a need and a want early at this stage.

  1. Your Income Increases

Any rise in your income will be accompanied by rise in spending if you are accustomed to lifestyle inflation. You might look at upgrading your house or your car with more disposable income in your hand assuming you can pay more EMIs. You may look at upgrading to a home theatre system or heavy luxuries because now you feel that you can afford all such lifestyle expenses. The higher the raise the higher you wish to go for your living standards. But life takes a u-turn when you fall into a situation where you cannot afford these luxuries. For e.g. from a two income family you have to live on one income for various reasons. The EMIs just become unaffordable and  you find it difficult to meet your both ends.

  1. Marriage

Till you are single you manage your expenses as per your need. But as you get married your expenses start increasing. Some of these will surely pertain to your lifestyle and may not be avoidable. But there will be many expenses which you may do to enjoy your new beginning. If you are not in control then frequent traveling, outings and entertainment can take the major chunk of your family expenses hurting your future well-being.

  1. Birth of a child

Becoming a parent is joyous moment for all of us. The birth of a new member in your family brings many cherishable moments which is hard to describe. But your expenses also increase with the upbringing of a child. Many of your child expenses may be related to lifestyle such as heavy gadgets, toys, clothes, etc.. Your child will demand items seeing others in his/her vicinity and if you fulfill most of them then you are welcoming a trouble in the future. The small demands can rise to fancy gadgets, bikes, cars or any other thing as the child grows. At teenage frequent parties, dining with friends will add to your lifestyle inflation. So as the child is growing with such habits your lifestyle inflation is making a dent on your cash flows and any adverse scenario in life can bring financial crisis at your door.

What Should You Do?

Life style inflation can be very devastating in your financial life if not addressed properly. As you go through life stages certain measures taken by you can help in nagging the rise in your expenses and ensure you live a life well within your means. Here are few steps you should take when dealing with your lifestyle expenses:

  • Curtail your expectations and analyze clearly whenever you wish to spend your money
  • Build a habit of saving first and spending whatever is left. This will ensure you spend within your means without hurting savings for your goals.
  • If both members are earnings, try to build your cash flows on one’s income so that you can give importance to other things which matters most in your life
  • Put borrowing the last option in your life for meeting any requirement.
  • Buy what is affordable within your savings and not within your borrowing. Upgrading cars, house or purchasing luxury items should curtailed when you cannot afford it.
  • Spend looking at future and not at present. This will ensure you have  limit on your spending habits since you need money for the future
  • Make yourself aware of the vulnerability of increase in spending
  •  Avoid wanting everything you desire
  •  Build a habit of saying no to your children demands where you feel it is incorrect.
  • Find happiness in life and not in spending money.


Expense management, Inflation, Lifestyle, lifestyle expenses, Spending habits

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  1. Hi Jitu
    One of the best articles in recent time. Congrats.
    This morning only I was speaking to a small group of entrepreneurs that one starts stabilizing in business and /or job at age 30 and when retires at 60/65 calculation shows that if your above mentioned advice is not followed doesn’t have enough money at retirement.

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