Getting Lifestyle is a new fashion trend for the youth belonging to Gen Y (Millennials) or Gen Z generation. For them having everything that provides comfort and luxury even if it is costly, branded & meant for high net worth (HNI) categories. Whether it is a big premium car or bungalow or high-end mobile or big TV or big flat or staying in a 5-star facility.
Not everyone is a celebratory nor business tycoon and spending too much on this stuff just to show off put them into a debt trap, anxiety, and finally into depression, if they fall into a middle-class category. Maintaining a lifestyle is not an easy task unless you have a huge cash flow to support expenditures. Everyone should know their limit at least for expenses and try to maintain it as far as possible.
One should focus on increasing your income/revenue first rather than expenses straight away. Funda should always be... first you earn, invest, and then spend. And should not be like overspending through a credit card or taking a huge loan and keeps on paying EMI throughout a lifetime.
If you have limited resources for income and belong to a middle-class family, better focus to create assets rather than creating liabilities. And this is the foremost reason why people are not able to upgrade their living status just because they keep on buying liability rather than assets. Always know what is your needs and wants. Finally, create an asset first, and from that asset, income is required to be generated to cope with your expenses and lifestyle.
Lifestyle inflation is over & above general inflation. Normally the general inflation we get around 8% p.a. appx. and add a further 4% towards your lifestyle inflation, again this depends on how deep you are into that kind of luxury & comfort.
Let me quote some live examples... if you own a two-wheeler costing Rs. 75,000 and that provides an average of 50 km/liter. Now you upgraded to a sedan car worth 10 lacs that provides an average of 15 km/liter. Now depending upon your monthly usage, one can calculate how much it would put an extra burden on your daily expenses. Moving from 2 bhk to 3 bhk just because you have got a good salary hike or upgrading your existing hatchback car to a sedan car as you have got handsome incentives & bonuses are some of the examples of lifestyle inflation that are bound to destroy your financial lives.
It also doesn't mean that one should never upgrade in their life or maintain lifestyle. The motto should be to acquire assets first and generate returns from them before you plan to opt for another liability with you!
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