What Is Lifestyle Inflation and How It Silently Drains Your Savings
What Is Lifestyle Inflation and How It Silently Drains Your Savings
Earning a big salary doesn’t always mean you will become rich. Many people earning ₹2 lakh a month are still living paycheck to paycheck. On the other hand, someone earning ₹80,000 can build strong savings and even grow wealth, if they use their money wisely. Chartered accountant Abhishek Walia, in a Business Today article, says your earnings matter less than what you do with them.
Walia shared a real-life example of a client who earned ₹90,000 per month. She had no second income, but she managed her money with care. She had no loans, saved up an emergency fund that could last six months, and invested monthly in SIPs to pay for her MBA in the future. Every part of her income had a job. Her money was tied to her goals.
Walia compared this with another client who earned ₹2.5 lakh per month but had no savings at all. She didn’t have an emergency fund. She didn’t invest her money. Most of her income went into shopping, outings, and expensive items. She was always short of cash by the end of the month. Even though she earned more, she had less control over her finances.
Wealth Comes From Planning
Many people believe that earning more money will automatically lead to wealth. But Walia says that is a myth. Real wealth is not about how much you earn, but how much you save and grow. Without planning, even a big income can vanish quickly. He says people often have a money flow problem not because of less income, but because they lack clarity. The ₹90K earner had a plan. The ₹2.5 lakh earner did not.
The Problem of Lifestyle Inflation
One big reason many high earners don’t save is lifestyle inflation. As their salary grows, so do their expenses. They buy new gadgets, dine out often, and spend more to keep up with friends or what they see online. Social media adds pressure to spend like others. This mindset causes people to spend more just to feel equal, but it takes away their chance to save.
What Is Lifestyle Inflation?
Lifestyle inflation means your spending increases every time your income increases. Instead of saving the extra money, people often start buying more things. This makes it hard to build wealth because all the money goes into living a bigger lifestyle. The smart way is to keep your expenses stable and grow your savings as your income rises.
