Does a salary increase make you spend more? (Image: Getty)
Times are tough and money is tight.
We all know what inflation is and how drastically it affects us, but what about ‘lifestyle inflation’?
Erika Kullberg, a corporate lawyer with a huge following on social media, shared an explanation of this term.
It’s the idea that the more you earn at work, the more you could spend; having more money makes us more lavish with it.
The end result is that you still have no savings despite a high salary because you keep spending more and more.
So for example: you can get a raise, suppose that means you can afford a fancier place to rent and have more money to spend on nice clothes…but this can make the ‘extra’ money disappear to a large extent. speed, before you have a chance to save it for the future.
This is your own personal lifestyle inflation, also known as lifestyle creep.
Erika writes: ‘Lifestyle inflation can affect anyone, whether you make $50,000 a year or $150,000, the important metric is what percentage of your income you are saving and investing.
‘Someone earning $50k a year could be saving/investing more than someone earning $150k a year.’
The more someone earns, the more they could spend; this can be a slippery slope to later not being able to retire because no money was saved or invested.
Some commented on the video: ‘So true! Every time I received a raise over the past four years, I went into my 403b account and increased my Contribution % with the goal of maxing out.
More money
‘This has helped me with temptation and to reach this goal! I do this BEFORE my new paycheck hits my account, so I make sure to increase the amount I pay myself first before I fall for full-blown lifestyle inflation.
Another admitted: ‘Damn that’s happening to me, the more I earn the more I spend.’
The key to preparing for the future is to save and invest as much as you can, regardless of your salary, and try not to get swept up in big spending just because your income has increased.
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Source: metro.co.uk