The Hidden Inflation That Is Taking Away Your Money

When I spend time with my friends on weekends; catching up for a cup of coffee or watching a movie, it made me feel relaxed, and it actually rejuvenated me to go back to routine on a manic Monday. Slowly, it became a part of my lifestyle and later I realised I have become addicted to it.

I turned to be incorrigible but I found ‘inflation but not-that-inflation’ was hitting my savings.

The amount of money that I saved at the end of six months to pay my life insurance premium was lessening. That was the first time I started questioning, “How often can I go out with my friends?” Before buying things, I started to question, “Do I really need it?” This all has had happened frequently but that didn’t reduce the worry.

The worry was where was my money going without having any idea of it?

What perturbed me was the fact that I wasn’t doing anything different every weekend, nor was I spending on things that were unaffordable to me; but suddenly my savings were hit. That is when I decided to check the loophole?

Yes, the retail price of many luxury goods and hotel bills had hiked. Also, the type of food joints we spent money on were expensive. Going to movies was an expensive affair too as we graduated to better options of theatres and choice of seats. My monthly bill on leisure activities had increased though the activities remained the same.

It is obvious that as your income increases, you look for better options; if you travelled by train or bus earlier, now you choose to take a flight. While on a vacation, you preferred staying at a 3-star hotel, now you would prefer a 5-star hotel. Priorities change in relation to the quality that we wish to attain because we think that we deserve with the rise in pay scale.

My monthly bill on leisure activities had increased though the activities remained the same.

Indian middle class is smitten with high aspirations and this isn’t a regressive sign. Our salaries aren’t adequate today not because we don’t earn adequately but, due to the fact that we have begun to acquire expensive tastes and desires to upgrade ourselves with the rise in income.

At this stage of realisation, we should get aware of the concept of ‘lifestyle inflation’ that has become a prominent sign of the ‘wave of change’, we are all going through.

For an instance, I earn a better salary today so my purchasing power is higher. Earlier, I wouldn’t mind watching a movie at a mediocre theatre with less ticket prices or dine at a modest restaurant. But, today I’m hooked on to better choices, expensive theatres with high ticket rates, hip cafes and restaurants that fit my new lifestyle.

We often don’t realise that the luxuries that once we wished for have now become necessities.

Things in the country, here in India, were so simpler earlier. The earlier generation hadn’t seen this kind of high income (and expense). The growth in income for most Indians was 5% over and above inflation. So, the earlier generation had lesser disposable income in their hands. But, at present, the economy has taken a swirling change where incomes have surpassed 10% in excess of inflation. Today, most companies in the private sector don’t deduct retirement benefits. Conclusively, the disposable income in our hands is more than before, so the possibility of succumbing to peer and aspirational pressure is high.

If you are in the age group of 25 to 40 years, you are bitten by this lifestyle inflation bug. When you reach 30 years, you are considerably settled in your career and would think of buying a car, smart TV or expensive refrigerator and furniture, even if it eats into your savings (although millennials are now changing the meaning of being rich, like you know already but still). To many or maybe a few if that’s a picture could be drawn, at this age, the car is more a status symbol than having a utility value.

While all this, even taking an Uber, is gradually creeping into your life and nibbling your income, you are totally unaware of it. We need to be aware of what exactly we need and want, and then accordingly define the investment goals. Prioritise your expenditure.

Out of all this, one thing that should not go unnoticed is our lifestyle patterns do get changed [arguably] with levelling up of standard of living, rise in income or the way we used to deal then and now. Many a time, we are having the same thing but for a little more cost and adding to it, with change in patterns while doing the same thing.

To put it across through a very clear example, earlier travelling from point A to B, one used to take a bus, but now books an Uber cab. This is where the hidden inflation hits which we don’t realise, even we are not bothered for, but it eats away our money!

This brings to the note that saving isn’t about having great saving plans, it’s about spending consciously.

Before you buy something ask yourself if you need it? Have a goal as to where you need to invest your money (marriage, house, children’s education, etc). Plan how you are going to make it possible by cutting your unnecessary expenses. Always keep a track on your expenditure by classifying it under different heads and find out what consumes most of your income. Be aware that under each head you don’t cross the limits.

Each month you need to save some amount and the best way to do it is to figure out investment opportunities like SIPs. Don’t splurge too much and buy things that are below the affordable mark.

You can have some smarter ways to enjoy, relax and holiday. The most challenging choice to make is probably be less impulsive about going on a holiday or spending on something. This is sometimes quite difficult for an impulsive buyer but, you tend to hold back your desires for better future when you stop being impulsive.

Keynes said, “In the long run we are all dead”. But, if you have goals for future, you have to forgo some present unimportant pleasures. Restrain don’t refrain, spend smart don’t splurge, and invest don’t indulge in impulsive buying.