Don't fall victim to lifestyle inflation

I am not a financial advisor, so any investments you take come at your own risk.

What is lifestyle inflation?

Imagine you get a promotion or a new job that pays better than your old one. As a result, you begin to treat yourself to some nicer things, maybe you end up driving a nice car instead of the old banger you bought 10 years ago.

This is what lifestyle inflation is - you earn more, so you spend more.

Lifestyle Inflation occurs naturally

While we may think of lifestyle inflation in its most extreme forms such as people buying luxury goods when they have student debt to pay off or flying business class instead of economy. The truth is lifestyle inflation happens at the small scale too.

If you earn a low income, you might have a very strict budget for grocery shopping. If you earn a little bit more, you might treat yourself to some treats, you might buy branded items in place of store brand items, and you might even go out to a restaurant instead of cooking.

Small habits can snowball into larger ones

It can be easy to overspend, especially if there is some value in paying more for something. If you've had a long day at work, cooking is probably the last thing you wanna do so you might order food for that one night, but it's easy to get used to the comfort, taste, and convenience. As a result, people start ordering food multiple days a week and it ends up costing them in the long run, not just financially but also in terms of their health.

Spending isn't always bad

The reason why rich people get richer is largely because of how they view the function of money. Working class and middle class people view it as a way to fund their lifestyle, whereas rich people see the purpose of money as expansion, in other words, using money to make more money. While "getting rich quick" isn't feasible for most people, it's certainly possible to build long-term wealth with the right commitment.

Maybe you spend money on gardening equipment like a strimmer, a lawnmower, and a pressure washer to start a small business. Maybe you start investing some of your money in a high interest ISA (Individual Savings Account). These are known as assets, while things that cost you money are liabilities.

Luxury is an illusion

People who actually have money generally don't spend it on designer tat unless they're selling it for a profit or they don't value money that much (I imagine this is more the case with people who inherited wealth rather than self-made rich people).

Another reason why truly rich people don't show off is because flaunting your possessions makes your property a target for theft and vandalism.