Inflation is defined as:
A general increase in prices and fall in the purchasing value of money.
Basically, it takes more money to purchase the same item in the future than it does today. As I read, the cause of inflation can be attributed to various factors. Bunches of smart people have yet to agree fully. The term is bandied about here and there, but I rarely lose sleep over it. Lifestyle inflation is more personal. This impacts us in a very tangible way, yet can be just as gradual.
My introduction to this phrase came during an interview with Joe Mahalic, the student loan, debt dumping, wiz kid who paid off $90,000 in student loan debt in just 7 months. Listen to the entire interview here.
Lifestyle inflation is the general increase in debt and expenses and the fall in disposable income over time. Contributing factors include:
Not all factors contributing to lifestyle inflation are untoward (read: bad). Salary increases, a growing family, and even some societal norms can be very healthy. At issue, the notion that life’s expenses should increase regardless of one’s ability to afford the transition. Lifestyle inflation can be a conscious decision, i.e. new baby = bigger/more expensive house. It can also launch a surprise assault on your finances through poor money management skills or mindless spending. This phenomenon can keep you enslaved to creditors and away from enjoying the peace of mind that debt freedom offers.
What factors have contributed to lifestyle inflation in your case?