By Amos Mzenge
NAIROBI, Kenya, April 30 – The path to financial security is paved with good intentions, but there’s a sneaky villain lurking along the way, disguised as progress: lifestyle inflation. It’s the gradual, often subconscious, creep of spending as your income rises. That long-awaited promotion or a successful business venture might finally bring that dream vacation or a brand new car within reach. You might upgrade your movie streaming package, start treating yourself to more frequent dinners out, or even move to a swankier apartment. These seemingly small adjustments add up, slowly eroding the very financial security you were striving for.
Lifestyle inflation feeds on a primal human desire: social comparison. We see our friends and neighbors with their latest gadgets and enviable experiences, and a natural urge to keep up takes hold. Social media, a curated reality where everyone seems to be living their best and most expensive lives, amplifies this effect even further. In a survey carried out by Enwealth Financial Services  limited in 2023 showed that the saving and investment habits of nearly 87% of Kenyans are influenced by online peers.
The danger lies in mistaking wants for needs. A raise is a fantastic opportunity to improve your financial situation, not just your spending habits. Falling prey to lifestyle inflation can leave you feeling trapped in a high-cost lifestyle, with less disposable income for saving and investing towards the future, like that dream retirement or your child’s college education.
The negative effects of lifestyle inflation are often masked by the initial excitement of new purchases. The thrill of a brand new phone or the satisfaction of a luxurious vacation cloud our judgment. However, the long-term consequences can be significant. With every shilling spent on lifestyle upgrades, there’s a shilling less saved or invested. This reduces your ability to build a safety net for emergencies and achieve long-term financial goals.
Lifestyle inflation can also lead to a dangerous dependence on loans to maintain a higher standard of living. High-interest debt payments further strain your finances, creating a vicious cycle where you’re constantly chasing your tail. The more you spend, the longer it takes to reach that holy grail of personal finance: financial freedom.
This translates to working longer and having less control over your time, a precious commodity that only increases in value as we age. Perhaps the most insidious cost of lifestyle inflation is the toll it takes on your mental well-being. The constant pressure to maintain a certain lifestyle can lead to financial anxiety and stress. The feeling of not being “enough” compared to the carefully curated personas we see online can negatively impact your self-worth.
The good news is that lifestyle inflation is a controllable beast. The first step towards change is awareness. Start by diligently tracking your income and expenses to understand where your money goes. Many budgeting apps can automate this process, making it painless. Once you have a clear picture of your spending habits, you can start differentiating between needs and wants. Housing, food, and utilities are essential needs, while entertainment, dining out, and expensive vacations fall under the “want” category.
Prioritize allocating your income towards needs first, leaving a set amount for wants. Learn to embrace delayed gratification. Don’t fall for instant gratification purchases. Saving for bigger expenses and experiences allows you to savor them more in the long run, and avoids the burden of credit card debt. Automate your finances as much as possible. Set up automatic transfers to savings and investment accounts. This “pay yourself first” approach ensures you prioritize saving before you even see the money.
It’s also important to challenge social comparison. If need be, unfollow accounts on social media that promote unrealistic lifestyles and curate your online space to reflect your values. Focus on building financial security instead of chasing fleeting trends. Finally, redefine your definition of success. True success is not defined by material possessions or the latest trends. Focus on experiences, personal growth, and building a secure future for yourself and your family.
Living a fulfilling life doesn’t require constant upgrades. There are many ways to enjoy your life without succumbing to lifestyle inflation. Explore free cultural events, parks, and outdoor activities. Host potlucks or game nights with friends instead of expensive outings. Learn to find fun in the inexpensive – visit local museums on free admission days, cook delicious meals at home, or take up inexpensive hobbies like hiking or reading. Invest in experiences that create lasting memories, like travel or learning a new skill, rather than focusing on material possessions. Cultivate a sense of gratitude for what you already have. Appreciate your current standard of living instead of constantly chasing the next upgrade.
By consciously managing your spending and prioritizing your financial goals, you can reap significant rewards. Responsible spending habits create a safety net for emergencies and peace of mind for the future. You’ll have the time and resources to pursue your passions and live life on your own terms, not dictated by the need to keep up with the Joneses. The choice is yours: a life of fleeting pleasures fueled by lifestyle inflation, or a life of security, freedom, and fulfillment built on conscious spending.Â
Mzenge is a Manager at Enwealth CapitalÂ
