Is lifestyle inflation good or bad?

Last week, I mentioned about Lifestyle inflation and today I'll expound more about it's misconceptions. Lifestyle inflation is an easy concept to define: When a person advances into a more profitable position at work, his or her monthly expenses typically rise correspondingly. This is a phenomenon known as lifestyle inflation, and it can potentially present a problem, because even though you might still be able to pay your bills, you are somewhat limiting your ability to build wealth.

However, the financial industry seems to be demonizing this concept; that it is something to be avoided. Also, the personal finance world seems to hate on spending because it can easily screw up your finances. Some people define spending and lifestyle inflation by those problems, which may be fair, because they often go hand in hand. But they’re not necessarily the enemy when it comes to your finances.

It will still ultimately boil down to habits that have been built over time, such as when lifestyle inflation makes it hard to get out of debt, save for retirement, or break out of a living from salary-to-salary –  that’s when it becomes a problem.

There may be times when increasing your spending in certain areas makes sense. Your situation will change over time – both professionally and personally – and you will likely have to spend more money on things you previously avoided altogether (like a car, wardrobe, rent and the like). A certain amount of lifestyle inflation is to be expected as your work and family obligations evolve.Spending a little extra to improve your quality of life might also make sense – as long as you can afford it.

People get turned off of personal finance because they assume it’s about self-depravation and giving up on stuff and experiences you enjoy. Personal finance is not about living like a pauper. Yes, frugality has a place in personal finance, but it’s just one way to reach your goal. Money is a just but a tool, it needs us to give it a goal or purpose to make sense.

I live below my means, but I’m not eating pancit-canton every night either(doing that is unhealthy too). As I’ve gotten older and my finances have evolved, I too have embraced some lifestyle inflation.

Before I take on a lifestyle upgrade, I try to always ask myself, “Can I afford this?” And then, before I make a final decision, I ask myself again, “Will this affect my current spending and investing goals?” – then I make adjustments accordingly (delaying the upgrade, looking for alternatives, seeking to increase my cash-inflow and the like).

Greater income helps you achieve bigger financial goals as you advance through life. Always remember that money is just a tool for financial freedom. It’s okay to spend it and live a better life.If you’re looking to mitigate lifestyle inflation, you’ll need to focus on saving money and coming up with a plan for deflating your lifestyle.Being mindful of the differences between needs and wants can definitely help you manage lifestyle inflation – before it manages you.

Enjoying the fruits of one’s hard work isn’t bad, but the key is finding that careful balance between saving for the future, mindful spending and enjoying life.


The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit

Originally Published in Philstar - The Freeman Newspaper last May 16, 2017.
Is lifestyle inflation good or bad? Is lifestyle inflation good or bad? Reviewed by Vernon Joseph Go on Sunday, May 28, 2017 Rating: 5

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