When the income of an individual increase, the expenses also rise. It is known as lifestyle inflation. This spending increases every time you get paid. It is believed that about 5% to 6% of inflation will affect our target in the near future for our Wealth.
If we do more research about the inflation we have in our lives, we find that this inflation is the silent killer for our wealth and money.
When we plan our goal, we take the inflation rate given by the RBI, but we did not think about how the RBI increases our inflation. We all have different desires, such as new food habits and lifestyles, so it will be our biggest mistake if we make our goal according to the RBI inflation rates.
Needs vs Wants
Lifestyle inflation varies from person to person. It is because now the world is advanced in technology and most people are aware of what they need and what they want. Many people try to take things that are needed, not the things which are wanted.
For example, Alex has a monthly salary of Rs. 8 lakhs, and his spending is about Rs. 4.5 lakhs. He spent all his money on the needed products, not on the wanted products. His goal is to retire because of his spending. This example is right in the spending habits. The spending habits depend on person to person. Making goals according to the RBI inflation rate is the biggest myth.
Advancement in technology helps decrease lifestyle expenses. Many features are added to our mobile phones and TVs, and this makes our work easy.
By providing such benefits, the companies are forcing us to spend less money. It is because of the new innovative features added to the products. Here are some of the examples that tell you that nowadays what are our spending:-
- Cost of the movie: – The cost of the movie tickets in 1975 was about Rs. 3 and now it has increased by Rs. 300. And while watching the movie we used to eat the snacks and popcorn, it also needed some money to spend. So it can be counted in the list of lifestyle inflation.
- Car prices: – It is impossible to buy a brand new car under Rs. 4-5 lakhs. In 1980 the cost of the car was only Rs. 9800. When we purchase a new car there are more expenses such as petrol and maintenance expenses, and it can cost about Rs. 5000 to Rs. 10000 or depending on the car model. The price is increased due to the features and looks of the car. Now the raw material is also expensive.
- Cost of television: – The first color TV launched in India has a price of about Rs. 5000 and now starting color TV’s are about Rs. 15000. In 1982 there were few channels on TV. Some of the android TVs are about Rs. 75000 to Rs. 3 lakhs. This can also be counted on the list of lifestyle inflation.
How to beat inflation?
There are impacts of lifestyle inflation in our life, and every problem has a cure. So here are some of the factors that help you to beat lifestyle inflation.
- Invest where the probability of return is more: – The best way to beat inflation is to invest your money in the products where the likelihood of return is more than the inflation rate. The rate must be above 8% to 10%. It is a risky way, but an effective way. Many people do not adopt this factor to beat inflation.
- Invest more: – The people who are not willing to take the risk can go with this factor. In this, you have to invest more and more. It will help you to beat inflation. This process is very easy and is adopted by many people.
- Reduce your lifestyle spending: – If you are not capable of adopting the above two factors, then you can go with this. You have to make your expenses low. That means that you must not spend money on buying advanced gadgets and applications that increase your inflation. Only purchase those goods which come in your basic needs. It is also very hard for many people, but in the end, this is the only way by which we can beat lifestyle inflation.
Conclusion
We hope that the above paragraph will help you to learn about lifestyle inflation and the effects that lifestyle inflation has on our life. This inflation is a silent killer of your wealth.
To solve this problem, you should control your expenses and purchase only your basic needs products, not the products you want. Always invest money where there is more rate of return than inflation.
