Think Naira by ‘Damola
When I started working, there were expenses that were outright “No” just at the thought of it, I didn’t even dwell on the thought so much, It was just NO, I can’t afford this. A perfect example of such cost was taking an Uber to work or constantly eating out or even certain hangouts, I wanted to do these things, but my salary was saying otherwise so I didn’t consider it for long.
Fast forward to couple of weeks ago, I was out with couple of my friends and we were heading back home and it was not even up for consideration, we just ordered an Uber. Note that this is not something we would have done some 2–3 years ago. Also, these changes had been occurring overtime, but I didn’t pay too much attention to it. Now, without thinking too much I buy better quality of some products I was using before, I consider engaging in some activities I couldn’t even think of before and what is the simple cause of this? Lifestyle Inflation.
Lifestyle Inflation simply means an increase in spending as a result of increase in one’s income. Events that cause this inflation could include job promotion, salary raise, increase in customer base or even something as simple as winning a giveaway.
All of a sudden, taking Yellow bus to work or eating Iya Basira’s ₦250 rice and stew now seems unattractive, like one of my friends once said, “I cannot wear fine suit and be jumping bus in the morning, o wrong now”.
That moment when that item seemed so expensive isn’t so expensive to you anymore. The better life now appears affordable to you. The joy that comes with this is such that you are able to meet bigger financial goals such as taking exams for personal development or higher investments. However, downside is that there is a very high possibility you enter a spending dip especially if the increase was not planned or budgeted for.
Lifestyle inflation is a slippery slope that everyone needs to be really conscious of. It’s easy to say that one should maintain same level of expenses despite an increase in income. Realistically, that’s not very attainable. So, how are we able to manage lifestyle inflation to ensure you still have financial freedom and avoid living from paycheck to paycheck?
- Estimate the real percentage change in your income: It is always advisable to know the exact percentage by which your income increased. Let’s assume you were initially earning ₦120,000 while you saved ₦36,000 monthly (30% of your old income) and now your income increased by 50% to ₦180,000 monthly. It wouldn’t make much sense if you retain your savings at the same ₦36,000 monthly, it’s only reasonable to increase your savings just as your income such that it matches i.e. ₦54,000 (30% of your new income).
You can also replicate this percentage increase to your other expenses such that even as your income increases so does your savings and expenses increase at a reasonable level or better still make room for newer expenses, all this works effectively with good budgeting. I’m a preacher of automated savings and automated investment, it simply makes your life a bit easier.
- Take Baby Steps: It is not advisable to go on and make big purchases like buying a car or going on a big vacation at the first sight of a higher income. Start off small, have changes in your wardrobe, enjoy occasional fine dining, have a skincare routine therapy or remodel your apartment because truly what’s the point of earning more money if you can’t enjoy better stuff.
Before you start spending your additional income, check your lifestyle if there’s anything that needs improvement. If there’s none, transfer the excess to savings or investment so you don’t spend aimlessly.
- Avoid unnecessary debts as much as possible: Remember the popular phrase that says “with more money comes more responsibility” well, it is still pretty much applicable. With an increase in income, it’s very easy to go off your radar and increase your debt because you’re certain of a constant income. While debt isn’t necessarily bad, be cautious you’re not taking it just to maintain or increase a lifestyle.
On a lighter note, you have to “look” your money but don’t go off your radar.
Thanks as always for reading
