Easy ways to beat Lifestyle Inflation

Inflation is one of the biggest financial obstacles we constantly face. The bad news is that inflation will continue to rise. But the good news is that we can beat inflation by investing wisely.

What is inflation?

Inflation is a constant rise in the rates of goods and services in a particular economy over a span of time. In other words, inflation is the rate at which the prevailing level of rates for goods and services increases, consequently reducing the purchasing power of currency.

What is Lifestyle inflation?

Lifestyle inflation means rising your lifestyle habits along with the rise of your income. For example, going to Starbucks for coffee now that you have money to afford coffee there.

Why does this happen?

When you start getting surplus money, you tend to feel like purchasing more, showing off, etc. Keeping up with the Joneses or trying to impress society is one major reason for this.

What are the consequences of this?

There are negative consequences of doing this such as getting into more debt or staying in debt and forgetting to save for emergency, retirement and other goals.

How to avoid Lifestyle Inflation?

Here are some tips to avoid Lifestyle Inflation

1. No need to keep up with the Joneses

Quit trying to impress other people or copy others lifestyles. See if you really want something rather than wanting it because society thinks it is status to possess it. Be satisfied with what you have rather than competing to buy the latest and newest things all the time.

2. Understand that material goods bring happiness only to a certain extent

Material items bring happiness as long as you don’t go overboard, compare what you have with others, and desire what others have. If the limit is crossed, it becomes greed.

3. Know the difference between “need” and “want”

A need is a basic necessity like food, shelter, clothing, medicine, etc. A want is a desire for more (greed). Mahatma Gandhiji once said “The Earth has sufficient resources to fulfill every mans need but not every mans greed”.

4. Maintain a budget

A budget contains your monthly income, expenses, savings, investments, insurance products, financial goals and time frame to achieve them. Having a budget will show you how much you spend versus how much you save out of how much you earn.

5. Delay gratification

When you think you want something, wait for some time and ask yourself if you still want it really. This will help you figure out what you really want and what you don’t. Don’t go for impulse purchases.

6. Do it the old fashioned way

Keep your cards and online shopping at home. Walk around the corner, go to shops with a list of what you “need” and carry relevant cash. Since you are paying by cash, you will spend up to the limit. Since you aren’t shopping online, you will only buy what you need. Since you actually go out and make purchases, you will be less lazy.

For further information, like, share and follow me.