Is your improved lifestyle hampering your financial goals? How to keep it in check | Mint

You just got a raise. So, naturally, you reward yourself – a better phone, dining out more often, maybe you upgrade your car. After all, you’ve earned it. But this celebration of success hides a dangerous pattern.

This isn’t about spoiling yourself – it’s about gradually resetting your “normal” to a point that becomes financially unsustainable.

What you’re experiencing is lifestyle creep. And left unchecked, it’s one of the biggest reasons people feel broke, even with rising incomes.

What is lifestyle creep?

Lifestyle creep (also called lifestyle inflation) refers to the gradual increase in your spending as your income grows. It doesn’t happen overnight; it builds silently over months and years, disguised as rewards or necessities.

• You switch from a basic car to a luxury brand.
• Your grocery runs move from budget stores to gourmet markets.
• Vacations turn from weekend getaways into annual international tours.
• Casual dining becomes fine dining.
• You rent in a posh locality because “you can now afford it.”

None of these decisions feel wrong individually. But when stacked together, they create a high-cost lifestyle that’s hard to reverse—and even harder to sustain if your income ever slows down.

Why lifestyle upgrades are so sticky

There’s a psychological concept called the hedonic treadmill—you quickly adapt to pleasures and start craving more. That’s why it’s difficult to downgrade once you’ve tasted an upgrade.

• After driving a luxury car, a hatchback feels uncomfortable.
• After business-class flights, the economy seems unbearable.
• After staying in a premium locality, moving to a cheaper area feels like a failure.

This anchoring effect traps you into maintaining your new normal, even if it drains your savings or delays wealth creation.

Same income, different futures!

Take two people, A and B. Both earn ₹100,000 a month.

• Person A spends 85% of it.
• Person B spends 65% and invests the rest.

They both “live within their means.” They don’t take on debt. They don’t splurge recklessly. Yet, their financial futures will be wildly different.

Why?

Because saving rate, not just income, is the strongest predictor of wealth. The more you spend, the less you invest. And without investments, there’s no compounding.

Over 20 years, Person B will own income-generating assets, while Person A may still be working pay-check to pay-check just to support their lifestyle.

The real cost of lifestyle creep!

The worst part? Lifestyle creep makes retirement way more expensive than it needs to be.

If your current lifestyle costs ₹80,000 a month, you’re not just funding your present – you’re also raising the benchmark for your future expenses. Here’s what that means:

• At 6% inflation, your ₹80,000 lifestyle will cost you over ₹2.5 lakh/month in 25 years.
• To retire with that lifestyle, you’ll need a corpus of ₹5–6 crore, just to maintain basic comfort.

But if your lifestyle costs ₹50,000 today? You need far less—and hit financial independence faster.

Bottom line: Every upgrade today inflates the price of your future.

How to recognise the signs of lifestyle creep

It rarely feels obvious. But here are some red flags:

• You used to save 30% of your salary. Now it’s barely 10%.
• Your fixed monthly costs rise with every promotion.
• You feel financially stuck despite earning well.
• You constantly feel the need to upgrade even when things work fine.
• You measure success by what you buy – not what you build.

These are early signs that your income is no longer translating into wealth.

Strategies to keep lifestyle creep in check

Now that we know the trap, let’s explore how to outsmart it.

1. Anchor yourself to a savings rate, not a lifestyle: Instead of anchoring your lifestyle to your income, anchor your savings goal first.
For example:

• Save 30–40% of your post-tax income before deciding how much you can spend.
• Automate your investments before the money hits your spending account.

This creates a reverse pressure: your lifestyle must adjust to what’s left – not the other way around.

2. Indulge selectively, not impulsively: It’s okay to upgrade. You earned it. But do it deliberately.

• Does this expense improve my long-term quality of life?
• Am I upgrading because I value it or because others expect it?
• Will I regret this decision if my income stops tomorrow?

Upgrade only what adds genuine value. Leave the rest untouched.

3. Let your assets grow with your income: Every time your salary increases, make sure your investments grow faster. If your income grows by 10%, increase your SIPs by 20%.

• Your cost of living doesn’t eat your raise.
• Your asset base compounds faster.
• You’re buying more freedom, not just more stuff.

4. Use step-up SIPs: Let’s say you start a monthly SIP of ₹5,000 at a 12% return for 10 years.

• Without step-up: You invest ₹6 lakh → You get ~ ₹11 lakh.
• With a 20% step-up: You invest ~ ₹15 lakh → You get ~ ₹25 lakh.

The difference? You simply increased your SIP by 20% annually:

• Year 1: ₹5,000/month
• Year 2: ₹6,000/month
• Year 3: ₹7,200/month, and so on.

This automation quietly fights lifestyle inflation while building wealth in the background.

Final thought

The world wants you to upgrade your lifestyle. Ads, algorithms, peer pressure – they all push you to buy more. But very few will remind you that wealth is not about what you own—it’s about what you can afford to walk away from.

So the next time you feel the urge to splurge after a raise, pause and ask: will this expense make me richer in five years or poorer in two?

Let your income growth be felt not just in your wardrobe or vacations but in your net worth, your peace of mind, and your ability to stop working when you want to.

Chakravarthy V., Cofounder & Executive Director, Prime Wealth Finserv Pvt. Ltd.