Is this a new term that you are hearing for the first time? If so you need to know what it is all about. Lifestyle Inflation indicates the rise in your lifestyle expenses which you need to consider. As your disposable income increases, you tend to acquire certain expensive tastes and desires. This is also a function of the growth in availability of a number of options. For example, you would have been content to watch movies in an ordinary movie hall a few years ago. However, with the hefty pay hikes you’ve received over the years, you would now have upgraded to multiplexes. In simple terms, it means your ticket cost has jumped from Rs 100 to Rs 250.
This problem is very common in the engineers working in the MNC and also to a certain extent in the ITES sector as well. In the 80s -90s time frames, the people who were employed were getting hikes in the range of 5% – 7% above the inflation and that did not give them enough spending power. Even if they did get that spending power, they just used the money to buy assets in order to strengthen their financial status. Whereas in today’s situation, the pay package of an individual is nice so that he/she has enough disposable income. So, the affordability is much higher, resulting in people giving in to aspiration and peer pressures.
This bug bites individuals in the range of 25-40 years. This is the age where individuals stretch themselves to buy the latest car or an LCD TV, even if that siphons off a considerable portion of their bank balance. Why I choose the range of 25 – 40 years is that after that age, the growth need not be as massive as in the prime age and the salary will almost become stagnant and there will not be much big spending as it was happening in the 25 – 40 range. If you want to know are you affected by this, then just check the spending that you have done in last few years and now. If there is considerable difference then you are affected by the inflation.
The question that comes to my mind is, is it a good thing or not? I am not against buying nice computer, nice apartment or a latest car or a LED television. If you are working hard and earning money, you need to spend the money. What is the fun in not spending the money and realizing your dreams? The point is the spending that you are doing should make sense to you and it should be *reasonable*. Reasonable is a subjective term and I shall explain it to you in a better way.
For a person with 1 Lakh salary per month buying a car worth 10 Lakh might be reasonable and the same need not be same with a person earning 10k per month. If a person earning 10k per month buys a 10 Lakh car then definitely he will be in trouble during the later part of his life. When you are affected by this then you will know how difficult it is to come out of it. So in order to control it, just be careful of what you spend and how much you spend on. It should be reasonable for you to buy the stuff that you need. You may not be in need of it after a while that is how the stuffs are.
Long back, having a telephone was a big thing, and then pager, mobile came into picture in a later stage. Now people want the best of the mobiles. This is how things are changing. The intention of having a mobile is to communicate, you can do that with Rs.1,000 mobile or even Rs.1 Lakh mobile also. It is upto you to decide which is reasonable for you and have one. Have you noticed any significant changes in your spending habits in the recent times, if so please share it with me. Thank you.