Lifestyle inflation is the potential for people to spend more as they earn more. Parkinson’s law states that expenses would always rise to meet income. Sometimes getting a pay raise or landing a better paying job comes with a tricky side to it. On one hand, you have more money to spend and on the other hand, your expenses seem to have doubled overnight.
You would most likely find yourself asking “where did all the extra money go?”. If you aren’t so financially aware, you might never get to retrace your steps to find out what exactly is “chopping” your money.
The truth you might be shying away from is that you decided to take an uber every day to your place of work instead of the regular “Danfo”( a danfo is a term used to refer to commercial buses in Lagos, Nigeria). Or you raised your meal budget to meet your current class.
These seemingly little changes you make all at once to befit your new social status can send you straight into lifestyle inflation faster than it takes to get to bikini bottom.
You can avoid this unpleasant fall by choosing to be more deliberate in your spending and saving culture with these four easy steps:
1. Save first:
As soon as you get that paycheck, resist the temptation of spending first. Take out your savings to a separate account you can’t touch. Employ the 50 20 30 rule with your income. This means, spend 50% of your Income on recurrent expenditure like taxes, feeding, transport e.t.c, 20% on savings and 30% on every other thing you might want. All of these can be easily done by employing autosave functions.
2. Stick to a Budget:
If you are going to make progress in being financially free, you undoubtedly have to discipline yourself to make a budget and stick with it. Remember expenses will always rise to meet income so you have to be deliberate enough to know where your money is going.
3. Invest your savings:
It’s good to save some cash for the rainy day. It would be better if you can identify credible investment opportunities to grow your savings instead of stacking them up in the bank.
4. Make upgrades gradually:
If you so desire to upgrade your lifestyle, learn to do so gradually. Decide to activate one upgrade at a time. This saves you from being swamped with lots of expenses and helps you better prioritize your expenses.