**The paycheque may have grown, but why does the wallet feel as light as ever?** Across bustling urban India, countless salaried professionals are witnessing their earnings soar compared to five years ago. Yet, at the end of each month, anxiety looms large as they grapple with explosive EMIs, overwhelming credit card bills, and dwindling savings.
The underlying culprit is **not merely stagnant salaries or escalating costs**; it’s a phenomenon that personal finance experts have aptly termed **lifestyle inflation**—the subtle yet insidious tendency to spend extravagantly as one’s income grows.
And the evidence is beginning to emerge in alarming debt statistics.
WHAT IS LIFESTYLE INFLATION?
**Lifestyle inflation** can best be described as the habit of increasing your spending to match your income growth. A handsome salary increment often leads to a chain reaction of upgrades: a larger home, a brand-new vehicle, cutting-edge gadgets, or dining out more frequently. However, without proper oversight, these expenditures can swiftly eclipse your actual earning potential.
“**It’s a major concern**,” warns Abhishek Kumar, a SEBI-registered investment advisor and founder of SahajMoney. “**Even those with substantial salaries find themselves with limited disposable income**. As their income swells, so do their expenses—often at a rate that outpaces their earnings.”
This ongoing cycle diminishes financial flexibility. What was once a promising salary morphs into a means of financing immediate gratification and long-term liabilities.
A SALARY HIKE, FOLLOWED BY AN EMI
With each job change or annual raise, many professionals slip into heftier EMIs and pricier lifestyles. Yet when those income hikes are minimal, the math often doesn’t add up. “High earners are increasingly falling into what I refer to as the **‘new middle class.’ They earn well but still feel stretched each month**,” explains Kumar.
In our modern age, **Buy Now, Pay Later (BNPL)** schemes and tempting no-cost EMI options make overspending all too easy. “These financial products alter behavior. They create the illusion that expensive purchases are manageable by splitting them into smaller payments, but the overall burden can wreak havoc on monthly budgets,” he adds.
Debt can accumulate surreptitiously until repayments take up one-third or more of a person’s income.
THE WARNING SIGNS
**The signs of lifestyle overextension** are often masked, going unnoticed until it’s too late. “Living paycheck to paycheck despite a decent salary, relying on credit for daily essentials, dipping into savings for basic needs—these are significant warning signs,” points out Kumar.
Additional red flags can include a frequent reliance on short-term loans, missed credit card payments, and plummeting credit scores—indicators that a person may be living beyond their means.
These habits are becoming more commonplace. The uptick in personal loans among urban salaried workers has reached record heights, while delinquencies in BNPL accounts have been steadily increasing.
CHASING SOCIAL MEDIA TRENDS
The psychological triggers driving lifestyle inflation are as compelling as the financial ones. “**FOMO (Fear of Missing Out) is very real**,” explains Kumar. “**Social media cultivates the illusion that everyone else is thriving. This pressure drives people to upgrade faster than they can afford**.”
A meticulously curated lifestyle on platforms like Instagram or a viral aspirational video can dictate everything from vacation choices to dining decisions. However, these comparisons often come with a significant financial toll.
COMPROMISED SAVINGS
The most damaging consequence of lifestyle inflation is its impact on what truly matters: **long-term savings**. “When spending on lifestyle escalates, investment for the future dwindles. These foundational years are crucial for wealth accumulation,” states Kumar.
Missing out on the benefits of compounding in your 20s or early 30s can delay your financial ambitions by years. A few indulgent purchases now might mean putting off retirement or inadvertently embracing more risk down the line.
**Financial discipline doesn’t equate to living in austerity; rather, balance is essential**. “Adopt the 50-30-20 rule: dedicate 50% to needs, 30% to wants, and 20% to savings and investments. This framework helps you stay grounded,” Kumar recommends.
Additionally, he advocates for automating investments, confining EMIs to essential purchases, and imposing a 24-hour pause before making significant purchases. “**Clarity is vital**. It’s not solely about how much you earn; it’s about leveraging your income to achieve your life goals.”
Ultimately, it’s discipline—not just income—that paves the way to wealth.
(Disclaimer: The views and opinions expressed herein are those of the experts cited and do not reflect the views of the India Today Group. Always consult a qualified financial advisor before making investment decisions.)
