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Lifestyle Inflation

17 October 2022

Everyone is talking about inflation. From the petrol pumps to our grocery bills, we’re feeling the pinch of the increased cost of living. But there’s another inflation that we don’t often like to talk about too much: lifestyle inflation.

Also known as lifestyle creep, it’s something that happens when we start to spend more because we’re earning more. Most of us have experienced this; many might be stuck in a constant lifestyle creep. The challenge is that with lifestyle creep, luxury goods and discretionary spending become perceived as a right to have and not a choice – as a necessity versus a want.

This means that when our budgets are strained, it’s difficult to discern where we can make changes to keep ourselves earning more than we’re spending.

There are many signs of lifestyle creep, and some may include:

  • Not thinking twice before spending money
  • You eat out more than before
  • Regularly upgrading your car, phone and wardrobe
  • You buy more things online (lockdown has made this a slippery slope!)

Possibly, the most significant impact of lifestyle creep on your financial plan is that the increased spending today reduces the amount that you’re investing for tomorrow. The stagnation of saving has a considerable impact (especially in the face of financial inflation) on how hard or how easy it will be to maintain your lifestyle should you lose the income you currently enjoy.

If your lifestyle and savings increase together, it’s a good sign, and it means that you’ve got a balanced growth strategy, and you’re sticking to it. But if your spending increases and your savings stagnate, then it might be helpful to make some changes to restore the balance to your budget.

If you’re eating out almost every night of the week, look to reduce it to two or three nights. If your gadgets, gizmos and outfits are being upgraded once or twice a year, perhaps consider lengthening the time between upgrading and decide if it’s really important to have the latest, greatest thingamabobs.

Slow down before you put any more cash down. When we are more mindful of what we’re doing with our money, we can become more intentional with our money.

It’s a wonderful feeling to just buy things because we have the money, but if it’s not inside of a financial plan – we will eventually run out of money. If you’re feeling stuck in a lifestyle creep, it might be a good time to check in with us – at SFP, our goal is to help you take control of your financial journey.

Sanlam Life Insurance is a licensed financial service provider.
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