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How to Avoid Lifestyle Inflation

Nov 9, 2022 | Uncategorized

Lifestyle inflation refers to an increase in spending as an individual’s income grows. This can make it quite difficult to keep your finances on track, as you desire a more luxurious lifestyle as you generate more income. It can lead to an increased debt-to-income ratio to the point that you may end up owing more than you can pay back. 

There are ways to avoid lifestyle inflation, which includes setting a budget, contributing to savings and retirement accounts, and more. Below are ways you can avoid lifestyle inflation and take control of your finances.

Set a Budget

When you don’t follow a budget, you aren’t aware of your spendings. You end up spending more than you think.

Having a budget is crucial if you’re looking to avoid lifestyle inflation. Once you know exactly how much you’re making each week/month, update your current budget. Figuring out the money ratios can be a challenge at first. As you follow your new plan, make adjustments as necessary to find your spending-to-savings mix. 

Contribute To Your Savings

You should always contribute a certain amount (that works for your individual financial situation) to your savings. If you don’t intentionally save money now, you may never achieve some of your financial goals. 

Saving small amounts each month can quickly turn into a large sum. Consider setting up automatic payments to your savings each month. This way, you don’t have to worry about manually transferring money, and you’re less likely to skip a transfer.

By contributing to your savings, you’re contributing to your long-term money goals.  

Don’t Take On Any New Debt

If you find yourself taking on new debt in order to afford a new luxury, then you’re probably spending more than you should and lifestyle inflation is taking over. Even if you can afford the monthly payments, it doesn’t necessarily mean that you can truly afford the debt. Try not to take out any new debt so that you can save money and avoid lifestyle inflation. The last thing you want to do is end up living paycheque to paycheque just because you aren’t able to prioritize your money efficiently. 

Don’t Always Follow the Latest Trends or Fads

Many of us feel like we need to “Keep Up With The Joneses.” If you’re unfamiliar with this term, it simply means comparing yourself to your neighbour (or anyone in your life), as a benchmark for social class or the accumulation of material goods. Essentially, you’re trying to follow the status quo with your peers.

Do you feel like you need to have the latest technology, or the newest car in order to fit in? Constantly trying to keep up with others can lead to an unsustainable lifestyle, and is not the way to go if you want to avoid lifestyle inflation.

Consider adjusting your money habits. Get clear on your own values; it’s important that your money habits align with your personal values. Embrace your individualism and don’t conform to how others live their lives. Change your mindset and practice gratitude. 

Prioritize your Important Spendings

Just because you want to avoid lifestyle inflation doesn’t mean you should avoid spending money on things for personal use. When you make more money, you’re rewarded with more to spend for personal use (after you pay your bills, of course). However, it’s important to consider how much money you want to allocate to which expense. Here are some categories you may want to prioritize disposable spending:






Debt Repayment


Once you figure out which expense category is most important to you, calculate your maximum spending amounts. Always look for non-essential areas where you can reduce spendings. For example, going to an all-inclusive resort once a year. In order to afford this, you could consider reducing the amount you spend dining out.