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Lifestyle Inflation – Is it Borrowed from the West?

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Here comes one more Thursday. Are you waiting for the updated Inflation figures? The inflation data that is announced on this day has more to do with the headline (WPI or Wholesale Price Index) inflation which includes basic items such as food articles, fuels and manufactured products amongst others.

However, the retail public is more closely impacted by the fluctuations in the inflation measured by the consumer price index which covers over 250 items. In fact, over and above consumer price inflation, there is one more inflationary count that can be measured in terms of lifestyle inflation.

Lifestyle inflation is nothing but consumption of premium range of products or services, triggered on the back of future growth projection of one’s own income.

lifestyle-shopping

Simply put, it is raising your standard, in terms of cost of living, a notch higher every time you get a salary increment or a bonus. According to the conventional wisdom, an extra bonus received should be perceived as savings, as that portion of the income is not needed to run the daily household expenses which are usually met from your regular salary structure.

However, as per the newly emerging lifestyle inflationary trend, any such incremental income goes into enjoying the luxuries of the life – coupled by higher purchasing power and availability of more choices to make you habituated to them.

The simplest example is branded and non-branded goods. Suppose, you are one of those who buy moderately-priced pair of shoes from the nearby shoe shop, that is good enough in quality and comfort at the given price. Now, if your salary gets raised by 10%, you would most likely be tempted to buy a pair of more expensive branded shoes. This is Lifestyle inflation.

If not for your increment in salary, you would have stuck with the pair of shoes that are moderately priced and yet comfortable to you. The thinking behind this could be: I’ve just got a salary pop, let me buy a pair of branded shoe for once – next time I shall save the incremental income. But, you never know – next time you may have some other new aspiration.

Thus, the jump in lifestyle costs is lifestyle inflation. It is akin to the philosophy used in western countries like the US, where the thinking is ‘Earn over weekdays and splurge over weekends.’ No need for savings right now – we’ll see when time will come in future.

In this dynamic and competitive world, employees with high aspiration levels give rise to lifestyle inflation based on their expectations of a raise almost every other year. Even the more recently evolved products such as credit cards is a part of lifestyle inflation involving thinking such as

Let me buy now, I have a credit of one month to pay for it.”

There is a thin line of difference which separates a need from wants. A person in mid income range can do without a car. He can travel in public vehicles or even hire cabs to reach instantly from one place to other. But, for a status symbol he buys a personal car.

What is the lifestyle cost involved in buying a car?

  1. The car will start accruing maintenance expenses after a certain number of years, say, for example, after 3 years of usage.
  2. 2) Rising crude prices will directly impact his fuel costs.
  3. 3) Regular AMC charges for maintaining the vehicle in the garage.
  4. 4) Paying money to a maid for washing car every morning.

Even If we retrospect our own lifestyle in detail, we can determine as to what lifestyle shifts have crept into our lives until now. Let’s make it an exercise and try to explore some of them! :)

  1. balaji yadhav says

    Viral
    Nice article on lifestyle inflation.But dont you think by and large Indians are better at savings than others (especially the west)but the problem is that most of us save in low return investments like Fixed deposits etc as we are scared of the finance companies and stock market.
    But we need the middle class to spend inorder to create jobs.Consumer spending can create more jobs than any govt funded employment guarantee scheme.India has 600 million people in a ever decreasing agriculture sector.How in the world are we ever going to create jobs for the soon or already unemployed youth in agricultural sector.
    Only consumer spending is the answer as we all should learn when to spend and not to cause sometimes locking up liquidity is not good for the economy.

    1. Viral says

      Hello Balaji Yadav,

      Almost fully agreed with you. I would again like to take this opportunity to point out that the message conveyed through this post is Not to restrict the people from spending.

      It is more about exploration of human spending habits in their daily lives. More related to retrospection of shifts in their lifestyle patterns which have crept in gradually and un-consciously.

      Anyways, Balaji Yadav… thanks for your valuable feedback and comment.

  2. Guha Rajan says

    Offcourse, we are following the west in the credit culture, spending future money today was unheard in Indian environment about a decade back. However, interestingly India does not offer social security during old age and hence one has to depend on his own saving.

    http://indian-amps.blogspot.com/2010/07/4-common-debt-trap-to-avoid.html

  3. Viral says

    Hello Amrish,

    By this post, I don’t mean to say that people should stop spending money. I am neither saying that they should simply accumulate wealth.

    The article is more inclined to bring awareness amongst the people about different types of spending habits and inflationary trends affecting one’s life.

    So many of us throng to multiplexes to watch movies. In fact, the price of pop-corns sold during intermissions are half the price of a movie ticket itself. But, is it affordable to everybody? espcially, the lower and middle class population?

    But, going by the latest trend, people get charged on account of the snob value that the term ‘multiplex’ offers to them, while discussing with their colleagues that I saw this specific movie in that particular multiplex.

    My article is targetted at those people whose needs are barely fulfilled yet they aspire to spend money on unscrupulous wants.

  4. amrish says

    after all what is we earn for and Spoil our nights at study and at work.It’s all about money and next process is to spend on our wants.

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