In simplest terms the concept of lifestyle inflation refers to a person’s spending going up as their income goes up.
Some lifestyle inflation may be unavoidable but it’s a good thing to keep it in check as much as possible. Otherwise you end up living paycheck to paycheck and having little or no money let over to pay down debt, save for retirement and use for other investments.
When a person is at that point, with no money left to create a cushion, life gets really stressful.
Moments of Lifestyle Inflation
We can be drawn to increase our lifestyle at any point in life. As I see it though, there are five instances when we are most susceptible to increasing our spending. Here’s how it often works.
1. After college graduation at the first real job