Escape the Lifestyle Inflation Trap

Practise proper financial planning and regular investing to achieve your financial goals and live your desired lifestyle.

As a working adult, one of the best things about earning an income is that you’re able to buy the things you want to suit your lifestyle. And usually, your income will increase the longer you work, which can tempt you to spend more than you previously did. When you start spending more in tandem with the increase in your income, you are experiencing lifestyle inflation, or also known as lifestyle creep.

While lifestyle inflation can make your days feel brighter, it can also be a problem. This is especially if you started off living paycheck to paycheck and you continue to find yourself in the same situation, regardless of how much more you earn down the road. To make matters worse, you may not be any closer to reaching your personal financial goals because of this.

To avoid this situation, you need to take measures to ensure that you do not fall into the lifestyle inflation trap. You can start by creating a budget to help you prioritise your spending. A budget will help you allocate the money that you earn to pay bills, pay down debt, save for emergencies, etc. With a budget, you will also know if you have enough allocated for the things you need and that are important to you.

At the same time, make your money work for you by setting aside some of it to be invested so as to build your wealth and help achieve your personal financial goals. While you may think that you are still too young to worry about investing, you should actually start as soon as you can to benefit from the power of compounding. Investing is also important as your money will not be able to keep up with inflation if you simply save it in a regular bank account.

Taking these steps does not mean that you cannot enjoy your hard-earned money. You have worked hard and you deserve to enjoy your achievements. As such, do not forget to set aside a portion of your budget to treat yourself and your loved ones! Just make sure that it does not come at the expense of your financial future.

When you have taken the necessary measures to avoid the lifestyle inflation trap, you can focus on making your financial goals a reality and achieve the financial freedom you want.

This article is contributed by Public Mutual and is prepared solely for educational and awareness purposes and should not be construed as an offer or a solicitation of an offer to purchase or subscribe to products offered by Public Mutual. No representation or warranty is made by Public Mutual, nor is there acceptance of any responsibility or liability as to the accuracy, completeness or correctness of the information contained herein.