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Lifestyle
inflation
Lifestyle
inflation indicates the rise in your lifestyle expenses, which you
need to consider even if the headline inflation — the data
published every Thursday is not soaring. There are two versions of lifestyle inflation.
One expensive tastes and desires, which is also the
function of choices available, coupled with higher purchasing
power. For example, earlier you would have been watching movies in
a small theatre in your neighbourhood . But now, you would have
upgraded to multiplexes. That simply means a jump in your ticket costs from Rs 100 to Rs 250.
This jump in lifestyle costs is lifestyle inflation.
Another way to define your lifestyle inflation is the nature of
your consumption. For example , if your hobby is to travel and
explore the earth, then it is expensive today, considering the
soaring oil prices
Earlier, the
concept of lifestyle inflation was not prevalent. The reason
being, the growth in income of most individuals was usually 5%
over and above the inflation. Hence, people in earlier generations
saw lesser or no surplus income in the individual’s hands. Now,
the income grows a minimum of 10% in excess of inflation.
Second, the salary structures of people working in the
private sector realise higher disposable income as most companies
don’t deduct retirement benefits. So, the affordability is much
higher which makes people succumb to aspirational and peer pressures.
Third, people have to actively save and invest to live off their savings in future.
The lifestyle inflation bug hits individuals who are in the
range of 30-45 years. This is the age where individuals stretch
themselves to buy the latest car or the LCD TV even if that siphons off their bank balance.
They are ready to take higher EMIs for their Honda City and
subsequently replace it with a Toyota Corolla even before
completing the loan tenure. If an individual is over 40 years,
they show more maturity and just look at a car more from the
utility perspective than the status symbol. Also, an
individual doesn’t expect as sharp an increase in his income at
this age as in his thirties, experts say.
Costly
car
Costly mobile
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