What is lifestyle inflation? According to Investopedia, lifestyle inflation refers to increasing one’s spending when income goes up.
I was chatting with my friends few weeks ago on how to achieve financial freedom, we concluded that lifestyle inflation is one of the major obstacles in accumulating wealth. With how connected we are in today’s age via internet, when we are on Instagram or Facebook, we see how happy our friends are with their latest purchases, latest travel, fancy restaurants and etc.
Some of my friends claim that what they see on Instagram or Facebook doesn’t affect them, I call bullshit. Well, maybe you won’t get affected if you only see one of your friends traveling to some exotic places like Nigeria; try imagining almost 10 to 20 of your friends showing off pictures of their trip to Nigeria. Now the herd mentality sinks in and you want to go Nigeria too, there goes your yearly bonus.
As you see more of your friends having a good life on their social media, you will start to compare your life against theirs. That new iPhone you don’t need? Just because you saw your friends on Facebook showing off with their new iPhone, now you want one too. There goes your RM5,000. This is the main trigger of lifestyle inflation, by comparing yourself to others, you will feel pathetic and tempted to “improve” your life by doing what your “friends” are doing.
To accumulate wealth, we must practice delay gratification so that we can resist lifestyle inflation. How do we practice delay gratification? Well, to make things easier, start deleting your social media accounts. And then, associate yourself with people who are also practicing delay gratification. These people are easy to spot: they work in some good jobs or own a business but they dress simply and drive normal cars.
