Lifestyle Inflation: What It Is & How to Avoid It

More money, even just a little more, often inspires an urge to "upgrade" one's current lifestyle. It is no wonder so many young working Kenyans struggle to acquire assets. We explore how to resist the allure of "Lifestyle Inflation".

Greetings, and welcome to the fifteenth edition of Wallet Wellness in 2024 - your midweek source of practical financial tips to elevate your money management skills!

We hope you had a chance to check out the last edition where we explored the 5 Hidden Risks of Starting a Side Hustle. In today’s edition, we will explore lifestyle inflation, what it is, and how to avoid it.

As always, be sure to check out the Concept Corner below for a deep dive into the money concept of the week.

Let’s dive in!


Lifestyle Inflation: What It Is & How to Avoid It

Lifestyle inflation, also known as lifestyle creep, refers to the tendency to spend more money as you earn more. When we get a pay raise, it's natural to want to enjoy the rewards of our hard work, right?

Many of us immediately start imagining ways to splurge. That could mean moving into a bigger house or a new neighbourhood, buying a ‘better’ car, a new gadget, a wardrobe upgrade, dining at fancy restaurants, or taking luxurious vacations - are you sensing a pattern here?

It's easy to fall into the trap of upgrading our lifestyles with each increase in income. However, this habit can have serious long-term consequences, quietly eroding our financial stability and delaying our long-term goals.

By being mindful of our spending habits and making intentional choices, we can create a more secure future while still savouring the present joys.

Let’s delve into today’s discussion on ways to avoid the trap of lifestyle inflation.

Strategy 1: Maintain a Budget and Stick to It

This means creating a spending plan and sticking to it, even as your income increases. By sticking to your budget, you can avoid overspending and prioritise your financial goals such as investing, retirement planning, and saving for emergencies.

  • Why this Matters:  As your income rises, the urge to splurge leads to failure in maintaining and sticking to your budget. This can lead to living beyond your means, increasing debt, delaying your financial goals, missed opportunities and financial strain.

  • What to Do:  Anticipate and allocate additional income. If increases in your income are expected e.g. a pay rise or a big deal is about to close, budget for that money beforehand. Adjust your budget as your income rises to prioritise your goals over lifestyle upgrades. 

Strategy 2: Automate Savings and Investments

To ensure that the additional income goes towards your goals, consider automating your savings and investments. Whenever your income increases, adjust your automatic transfers to your savings or investment accounts to avoid the temptation of spending the extra money.

  • Why this Matters: Failure to automate savings and investments can lead to inconsistent saving, missed savings opportunities, increased temptation to spend impulsively, delayed financial goals, and less financial security in the long run. Read More.

  • What to Do:  Set up a system where a portion of your income is automatically transferred to your savings or investment accounts without you having to do it manually each time. Reassess the amounts as your income changes in line with your most cherished financial goals such as owning a home or saving for your children’s education.

Strategy 3: Implement Lifestyle Changes Gradually

Instead of quickly adopting a more lavish lifestyle, consider gradually adjusting your spending habits as your income grows. Making small changes over time can help you avoid the negative impacts of lifestyle inflation, like overspending and financial stress, while still enjoying an improved quality of life.

  • Why it Matters: Lifestyle inflation inevitably leads to the urge to keep up with the Joneses, a tendency to compare one's lifestyle and possessions to those of their peers and feel pressure to match or exceed them. This may lead to overspending or even getting into debt hence financial stress. Read More.

  • What to Do: Consider practising delayed gratification to distinguish between needs and wants. When managing lifestyle changes, avoid immediate upgrades and adjust your spending gradually. This approach can make new habits more manageable and help you adapt more easily while monitoring your progress. Read More.

Strategy 4:  Invest In Experiences Over Things

Investing in experiences and learning new skills offers lasting personal growth, adaptability, career development, boosts creativity, increases social connections, and improves well-being. Compared to material possessions, investing in experiences is considered to be more enriching for your life in meaningful ways for years to come. Read More. 

  • Why it Matters: Choosing material possessions over experiences can lead to a less fulfilling life, straining finances and stress. It may also result in missed opportunities for personal growth and meaningful connections, as the focus shifts towards what you have rather than the experiences you share with others.

  • What to Do: Prioritise meaningful experiences that bring lasting satisfaction and memories. Focus on budgeting and saving for these experiences, rather than succumbing to peer pressure or the constant need for possessions. This approach can lead to a more fulfilling life, stronger personal connections, and greater financial security in the long run.

Strategy 5: Set Clear Financial Boundaries

This involves establishing rules to manage the relationship between your finances, your loved ones (including friends), and yourself. By setting and adhering to these boundaries, you can avoid the trap of being unduly influenced to live up to the standards of others. They are especially important when your income increases to ensure that you are making financial decisions that align with your goals. Read More

  • Why it Matters: Not setting clear financial boundaries can lead to living beyond your means, possibly falling into a debt trap, stressing about money, and difficulty reaching your financial goals. It can also strain your relationships and leave you feeling insecure about your finances. 

  • What to Do: Define your financial goals clearly, create a budget and stick to it, set spending limits, review your finances regularly. Consider keeping a money buddy who is essentially a friend, family member, or partner with whom you discuss financial goals, challenges, and progress. This person is your financial accountability partner, and sometimes, if qualified, can provide advice regarding your finances.

While it's natural to desire the rewards of our hard work, especially with increasing income, succumbing to the temptation of constant lifestyle upgrades can lead to long-term financial instability

Through mindful spending and intentional choices, we can steer clear of the trap of lifestyle creep and pave the way for a more fulfilling and financially secure life. 


Living Paycheck to Paycheck

Living paycheck to paycheck means you are seated at the edge of your seat on the 5th day of every month and hoping the salary comes in before your landlord knocks on your door. It means all your money usually comes in and goes right back out again by the end of the month, sometimes, way before the month ends. In this article, we explore how to get out of such a cycle. Read More. 

Money Confessions

“I Took a Loan to Buy a Luxury Car”

“As I settled into my third month of employment, I had an induction session with the HR who informed me that once my probation ended, I qualified for a special employee loan facility. We did the calculations and I was informed that I could borrow up to Ksh1.2 million and repay up to 60 months. And that is where the trouble started…” Read More.


What’s the First Thing You Do After Being Paid?

Tell us, what is the very first thing you do after you receive that notification that your salary has been paid? Some say, they cover their bills first, others say they pay back loans and there are many who “spend a little” to ‘reward themselves”. What you do first with the money you are earning determines a lot where you are headed financially as this week’s #MoneyTok shows. Watch Video and read on about what paying yourself first really means.


What is the First Thing You Do After You Get Paid? #Money254 #Salary #Rent #Savings #Debt #Moneytok #Money #Fypp #Personalfinance

That's it for the fifteenth Wallet Wellness edition of 2024! We hope these financial tips have added some energy to your mid-week hustle. Stay tuned for more practical insights in our next edition of "Wallet Wellness" next week and watch out for Money Weekly on your inbox this Friday.

Also, don’t forget to download the Money254 App on the Google Play Store, and remember that we can help you compare over 300 loans, savings accounts, current accounts, and more if you’re thinking about your next product.

Cheers to your wallet's well-being!

Money254 editorial team.


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