For India’s rising center class—particularly younger professionals—a wage hike usually brings a disproportionate rise in spending. This phenomenon, referred to as life-style inflation or life-style creep, quietly erodes monetary safety by permitting bills to rise in lockstep with earnings, leaving little room for financial savings or long-term investments.
Lifestyle inflation displays the tendency to extend discretionary spending as earnings grows, the place ‘wants’ rapidly flip into ‘needs’ with each increase.
The cycle is acquainted: a wage hike creates a way of success and elevated wealth, which is instantly channelled into life-style upgrades—shifting to a bigger residence, shopping for a premium automotive or smartphone on EMI, eating out extra ceaselessly, or subscribing to a number of high-end providers.
Over time, fastened and recurring bills rise so sharply that all the earnings improve is absorbed, leaving people residing pay cheque to pay cheque regardless of incomes extra.
Wealth erosion dangers
The largest casualty of life-style inflation is long-term wealth creation. Every rupee spent at the moment is a rupee not invested—and due to this fact denied the facility of compounding. For younger professionals, these early incomes years are probably the most important, as investments made now have the longest runway to develop and help future objectives equivalent to retirement or a house buy.
Rising fastened prices—excessive EMIs, elevated rents, and lifestyle-linked obligations—additionally shrink monetary buffers. A sudden job loss, medical emergency, or financial downturn can rapidly flip a excessive earner right into a financially pressured particular person, forcing reliance on high-interest debt or the untimely liquidation of investments at unfavourable costs. Chasing an ever-higher life-style usually locks individuals into working merely to maintain their spending, pushing monetary freedom additional out of attain.
The phantasm of fast wealth
Under rising monetary stress, many formidable younger earners are more and more drawn to the promise of fast cash—significantly by means of speculative inventory market buying and selling. However, that is no substitute for disciplined saving and investing.
A report by the Securities and Exchange Board of India (Sebi) highlights the dangers: 9 out of ten particular person merchants within the fairness futures and choices (F&O) phase incur losses on common.
These devices are complicated, extremely leveraged, and demand deep market understanding and emotional self-discipline—qualities most new merchants lack. For many, such hypothesis worsens monetary vulnerability slightly than assuaging it.
Practical countermeasures
Safeguarding monetary stability—particularly early in a high-earning profession—requires aware self-discipline. The simplest first step is to ‘pay yourself first’. As quickly as earnings is credited, automate transfers into investments equivalent to SIPs in mutual funds, PPF, or different appropriate autos earlier than allocating cash for spending.
Every wage improve must be cut up intentionally: prioritize boosting financial savings and investments, and solely then permit for modest life-style upgrades. A generally used framework is the 50–30–20 rule—50% for wants (lease, EMIs, groceries), 30% for needs (leisure and discretionary spending), and a non-negotiable 20% for financial savings and investments.
Another highly effective device is life-style lagging—delaying life-style upgrades by six to 12 months after a increase. Investing the complete increment throughout this era helps construct wealth, assessments monetary consolation, and ensures new bills are genuinely sustainable.
Finally, constructing an emergency fund masking three to 6 months of important bills in a secure, liquid account is essential. True wealth is measured not by how a lot one spends, however by how a lot one saves and invests. Without aware restraint, life-style inflation isn’t just a monetary inconvenience—it turns into a severe risk to long-term safety and the pursuit of economic freedom.
Saravanan is a professor of finance and accounting at IIM Tiruchirappalli, and Williams is Head of India at Sernova Financial.