Nothing has changed in these five months except the fact that five months ago I was a student and now I am an employee. Everything apart from this remains the same but the biggest challenge which I am facing nowadays is five months ago I could satisfactorily manage my living with a mere Rs 2000 whereas today 30000 bucks have failed to do the same for me.
If you are facing something similar to this then do panic because you are a victim of Invisible Inflation.
The food prices have not increased much but your restaurant bills show a 10k figure. A friend of mine was complaining yesterday that during college days this was never a problem, the amount we paid during those days would at max result into something around 5k.
This is lifestyle inflation, which is invisible in nature. It is not a mathematical figure which you can calculate or has no resemblance to your country’s GDP, the only thing it obeys is your salary, to be more specific the money in your pocket. Lifestyle inflation is directly proportional to the money in your pocket. The more you earn, the better you aspire to live and this continuous need to earn a better lifestyle than the previous, helps you shed your money.
The problem is, most of the lifestyle related splurge goes unnoticed. We spend our money in different things assuming it to be our needs. Actually, the things which are your need now were your luxuries yesterday. This surge of expense happens at such a slow rate, that you will remain ignorant about the transfer of your luxuries to your needs.
The chicken thali which used to be of Rs 100 five months ago may have increased to Rs 120 now which is a 20% hike, the inflation is higher because we are spending in Smoky Grills. Have you ever calculated how much you are spending on your Cab rides? When the money in your pocket increases, you tend to lose your bonding with public transports and develop a close proximity with OLA and UBER.
Lifestyle inflation is that virus which affects most of us but particularly the individuals who fall in the age bracket of 23-35. These are individuals with less immunity. By immunity I mean these people cannot resist lavish expenditure, the reason being their financial independence, least financial responsibilities and of course increasing salary.
To meet with the fashion trends and in the peer pressure of exploring new things and visiting new outlets, coping up with new technologies people like you and me are running out of savings.
According to the financial analysts, the lavish lifestyle which we are trying to maintain is very much justified as at the end of the day people are earning more money, giving in their extra efforts to lead a better living but the whole idea of lavishness needs a bit of contemplation. The concept is nothing but joining the dots.
The salary which you earn will only support you till you turn 60. After the retirement, you will approximately have another 15 to 20 years to live. You need money for that, a heck lot of money because at that time your savings should be sufficient enough to beat the visible inflation, the inflation which government is fighting against.
So, calculate an amount you need to have in your bank account when you retire and start saving it from the next hour itself. Start joining the dots because the early you start saving the less you need to save every year to reach your calculated amount.
Vaccination of the virus
Stick to your budget
The solution to every financial problem. It sounds simple enough but it is quite hard to maintain. You know, the trick to sticking to your budget is self-control. In the initial days of every month make a budget plan for the month, allocate a certain percentage to every realm of your spending and stick to your budget till the end with the help of self-control tool.
Set financial goals
Splurging is good as long as it is in accordance with your financial goals. The key idea is to enjoy the present to the point where you have enough for the future. You must have a clear financial goal which must be directed properly with the milestone of ages.
In the financial goal, you set for your future, there must be enough room for any kind of emergencies, for example, any medical conditions, or break of job and stuff. When you have a clear goal to achieve lifestyle inflation will affect you less.
Find areas to cut
If you find that you are not in a position to save even 20% of your monthly income then lifestyle inflation has crept you. Think of the areas where you can cut your expenses. Invest your money somewhere to get a return which can beat your lifecycle inflation. Make your money work for you by parking it in stocks, bonds, commodities, real estate etc.