Lifestyle creep, also known as lifestyle inflation, is a phenomenon that occurs when, as more resources are spent on standard of living, former luxuries become perceived necessities. [1] [2] [3]
Lifestyle creep, also known as lifestyle inflation, is a phenomenon that occurs when, as more resources are spent on standard of living, former luxuries become perceived necessities. [1] [2] [3]
An individual's discretionary income could increase as a result of increased income or decreased cost, such as paying off a mortgage. [1] As discretionary income increases, individuals are able to spend money on things that were previously unaffordable. [1] Lifestyle creep occurs when spending increases at the same rate as income. [3] It can be reflected in purchases, such as expensive vehicles or a second home. [1] [2] Spending money on things with ongoing maintenance costs, such as club memberships, also are demonstrated in lifestyle creep. [4]
Lifestyle creep tends to be insidious, so it can be difficult to realize it is occurring. [2] [5] [6] This is why some experts have called it a “silent inflation”. [5] Although it is difficult to perceive, it can be contagious as people compare their own lifestyle with others. [5] Signs of lifestyle creep could include difficulty saving money and increasing debt. [2] Making a budget and setting a limit on expenses could potentially limit lifestyle creep. [2]
This phenomenon is common among young adults in their mid-twenties to early thirties. [5] In this age group, rapid career advancements lead to more discretionary income which can lead to excess spending. [5] Reasons also include spender's need to project a certain image and social status onto others, thus buying expensive gadgets and items just to fit in. [7]
It can also become a particular problem near the age of retirement, where individuals tend to have the highest earning potential and decreased costs, such as not having the financial burden of raising children. [1] When individuals retire and try to maintain a formerly lavish lifestyle, they can suffer financially. [1] Furthermore, it is challenging to downgrade lifestyle. [5] [6]
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes national, regional, and global economies. Macroeconomists study topics such as output/GDP and national income, unemployment, price indices and inflation, consumption, saving, investment, energy, international trade, and international finance.
In economics, inflation is a general increase in the prices of goods and services in an economy. This is usually measured using a consumer price index (CPI). When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of CPI inflation is deflation, a decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index. As prices faced by households do not all increase at the same rate, the consumer price index (CPI) is often used for this purpose.
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slowdown in the inflation rate; i.e., when inflation declines to a lower rate but is still positive.
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