Everything You Need to Know About Lifestyle Inflation
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Last week, I gave a talk on Impostor Syndrome to PhD students at Weill Cornell Medical College, The Rockefeller University, and the Memorial Sloan Kettering Cancer Center. After the talk, a PhD candidate asked me what other pitfalls he should look out for in his young adult career. This post is for him, and anyone else who is thirsty to be better.
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Lifestyle inflation is a reality that most people today face. It occurs when a person’s income increases, and they match that increase with more expenses. It’s a natural reaction to want to spend the extra money you worked so hard to make. The result, however, is lifestyle inflation.
You may be wondering, “what makes lifestyle inflation so bad?” It can cause difficulties if you are in student loan or credit card debt. Or if you want to save for a house or retirement. Without the extra income to put towards paying off debt or into an investment, it will be difficult to achieve all the financial goals that you have set for yourself. This is the main reason why people tend to get stuck in the rat race of a job, even if they don’t enjoy the job, and even if the job doesn’t pay as much as they would hope. Such individuals are working purely to pay the bills.
Why does lifestyle inflation take place?
There are several factors that can lead people into lifestyle inflation. Some examples are below. If you are experiencing lifestyle inflation, some honest reflection about which of these root causes got you into your situation should also help you to get out of it.
Natural Tendency
When people get more money, they naturally tend to spend more money. This is a normal occurrence that needs to be tempered. For example, people tend to spend money on luxury items (items that are not necessities). While it’s fun to have nice, new things, there are always newer items coming out next month that will leave you forever chasing.
Trying to Imitate Others
When you see someone driving a BMW to your office, it’s hard to not feel a twinge of jealousy. When it comes time for you to buy your new car, it becomes just a little bit harder to resist getting your own BMW, even if it’s a bit outside of your price range…
