Many people fall into the trap of upgrading their lifestyle the moment they get a salary increase from work or more money as a business person. So most people will say, now I can afford the things I have been deprived of. My GenZs will say, “I cannot come and go and kill myself”. The interesting thing is, some researcher’s has shown that many people who get a pay rise, end up purchasing luxury things that are a liability. They just want the feel happy, they feed their ‘emotional’ self; rather than saving the extra funds they now have.
Resisting the urge to upgrade your lifestyle when your income increases can be a wise financial decision with long-term benefits. While it may be tempting to indulge in luxuries and increase your expenses as your income grows, there are several reasons why exercising restraint can lead to a more secure financial future.
In my explanation here, let us explore some key points this weekend.
Lifestyle inflation refers to the tendency to increase spending as income rises, often leading to a continuous cycle of higher expenses. This pattern can hinder your ability to build wealth, save for the future, and achieve your financial goals. By resisting the urge to upgrade your lifestyle, you can break free from this cycle and allocate more of your income towards savings and investments.
One compelling reason to resist lifestyle inflation is to build an emergency fund. Life is unpredictable, and unexpected expenses can arise at any time. A financial safety net in the form of an emergency fund can provide peace of mind and protect you from debt or financial hardship. By maintaining a modest lifestyle and directing the additional income towards savings, you can establish a solid emergency fund that can cover unforeseen circumstances.
Another advantage of avoiding lifestyle inflation is the opportunity to pay off debt faster. If you have existing loans or credit card debt, using the extra income to accelerate your debt repayment can have significant benefits. Paying off debts not only reduces the amount of interest you’ll have to pay over time but also improves your credit score and increases your financial freedom.
By prioritizing debt repayment over lifestyle upgrades, you can achieve debt-free status sooner and have more disposable income in the future.
Saving and investing the surplus income can lead to greater financial security and wealth accumulation. By resisting the urge to spend more, you can take advantage of the power of compounding interest.
This helps you to invest the additional funds in assets such as stocks, bonds, or real estate, which can generate returns and grow your wealth over time. The earlier you start investing, the longer your money has to grow, thanks to compounding interest.
By keeping your lifestyle in check and investing the extra income, you can set yourself up for a more comfortable and financially independent future.
It is essential to consider the role of long-term financial goals. Whether it’s buying a home, starting a business, funding your children’s education, or retiring comfortably, these goals require careful financial planning and discipline. By resisting lifestyle inflation, you can allocate more resources towards these objectives, ensuring a higher likelihood of achieving them.
You don’t have to buy a second car if your only car has been serving you well. You don’t have to upgrade from a salon car to an SUV If your salon car is in good condition.
In conclusion, resisting the urge to upgrade your lifestyle when your income increases can have significant advantages for your financial well-being. By avoiding lifestyle inflation, you can build an emergency fund, pay off debt faster, save and invest for the future, and work towards achieving long-term financial goals.
While it may be tempting to indulge in immediate gratification, exercising restraint can lead to greater financial security and a more prosperous future.
Remember, it’s not about depriving yourself but rather making thoughtful and deliberate choices that align with your overall financial objectives.
Have a fantastic week ahead.
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