Statistics say that most people will spend more money if they have more money.
“We like to try out new restaurants and pubs every weekend,” says the Mumbai-based Product Manager Dinesh Ahuja. The food prices have not risen very sharply in recent years, but Ahuja’s expenditure on eating out has more than doubled in 4 years. In 2013, he used to go out twice a month with his friends and colleagues and spend roughly Rs 4,000. Now his monthly expenditure has escalated to Rs 10,000. Not only has Ahuja started going out more often but he has also started visiting costlier eateries, resulting in 25% increased expenditure every year, over the past 4 years.
Ramesh Shah, a businessman from Surat is firming up plans for an annual holiday. Ten years ago, Shah and his wife used to spend roughly Rs 50,000 on vacations. Now they splurge 10 times as much i.e. Rs.5 lacs. “We go on foreign vacations for 30 days in a year and travel within India for another 20 days,” he says. His holiday inflation: 26% per year.
Compare this to the 5-year average official inflation rate of 7.2% . Inflation rate is the percentage rate of change of consumer price index over time.
The Culprit: Lifestyle Inflation.
Lifestyle Inflation is invisible, but it is drastically affecting almost all of us. As incomes go up, the standard of living of a person also rises. Wants stealthily transform into needs, and items that once used to be luxuries morph into necessities. This mindset poses a problem, a big problem.
You might go on ‘enjoying’ your life in your own chosen fashion but you’re also limiting your ability to build wealth, concurrently. If you’re living beyond your means, you’re inviting financial trouble, my friend.
Telecommunication is a good example of how changes in the lifestyle impact our household expenses. Call and data charges have drastically fallen down in recent years. Despite that, families are spending more than they once used to. The reason is the collective dependence of the entire family on internet and smartphones.
Rising incomes also alter the attitudes. These days, a 6 month old phone is quite an old phone. Olas and Ubers of the world have taken over the humble and economical public transport. While these are only a few examples, we do know that we’re victims to Lifestyle Inflation.
That said, there is nothing really wrong in upgrading to a better lifestyle. After all, we work hard, save more and invest better only to be able to enjoy our money. So, it’s fair to try out new eating joints or upgrade your wardrobe every once in a while. But what’s not to be forgotten is the cost of the undue upgrades. The futile expenses can add up over time if you are not careful. If you have not bothered until now, it may be the time to take a closer look at where your money is going.
Most financial planners suggest that one should save at least 30% of their monthly income. Once you take care of the savings, it won’t matter much even if you stretch your budget for certain lifestyle spends. But, if you find that you are not in a position to save even 25% of your monthly income, lifestyle inflation has probably already crept in. In this scenario, consider alternate ways of how you can cut back on expenses and save more.
We often get ideas and advices on how to save money, yet most of us are unable to do it on a regular basis. Truth is, that it requires a lot of discipline and sincerity to save up money, without any external push.
However, the best savings can happen when you are doing it along with your trusted ones. The Money Club strongly believes in this practice and has stepped forth to help you save up your money along with your trusted ones.
Through the Money Club mobile app you can form a club with your friends, cousins, family, colleagues, etc. and pool up money regularly , just like women do in Kitties. This means that you are forced to SAVE because of the joint commitment made by the entire group. The microfinance industry has established for decades , how people can save in groups to transform their individual lives, collectively.
Click here to know how the Money Club can help you save more effectively.