Do you know that people have a tendency to becomeless rich each year, even though they earnmore money through their salary increase? The main reason is due tosomething called “ lifestyleinflation” and in this videoI will tell you all about it, Hey and welcome I’m Andreas Larsson andas. You know i’m all about gaining thatfinancial freedom, Consider subscribingif, you’re interested in personal finance, So lifestyle inflation it pretty much meansthat, even though you earn more money, you overtime spend more money as well, So at the endof the month you still don’t save more money. Take housing, for example, most people start offwith a small apartment when they’re studyingand, then, when they finally get that nice job thatthey want, they think they deserve a better lookingapartment Ten years later, that apartmentbecomes a big house to support the family. So there was nothing wrong with that oldapartment. Maybe it was a bit smaller. Maybe it was in a bit worse condition: ormaybe the neighborhood. Wasn’T too good.
But after all many times, youtrade up, not because you need to, but rather because you wantto It’s a convenience, And if you do that in toomany aspects of your lifethat’s, when lifestyle inflation, becomesa difficult subject and eventually it canlead into debt, or at least it willlimit. Your ability to build wealth There’s a saying that you need to keep upwith the Joneses. So if your neighbors arebuying a new car, you need a new car. If they’rebuying a vacation home, you need a vacation homeand, it rallies and rallies, and you can feel thesame pressure in your work environment as well. If everyone is wearing a fancy suit, maybe youneed to a fancy suit as well, and maybe you don’twant to have the worst car on the parking lot evenif, that 10 year old Honda Civic, runs just fine Lifestyle. Inflation can creep into many aspectsof your life and you might not even notice themat first, Maybe you start going to more fancierrestaurants or buying more fancy. Groceries.You think that one Netflix subscription is notenough. You need to have all streaming services.
And when you’re used to this kind oflifestyle, it’s not so easy to cut backbecause, you have got a taste for it. Butremember, just because the Joneses seem rich doesn’t mean that they are rich. A great book recommendation on this topicis “ Rich, Dad Poor Dad” by Robert Kiyosaki, However, spending more sometimes canactually be a financially sound, decision.Take housing, for example. It might be worthwhileto, get a more expensive home closer to the officeand. By doing so, you can reducethe time and cost of commuting A fifteen minute walk to the office or an hoursitting in the car. I know what I would choose, But take one or three different subscriptionservices, maybe doesn’t provide the same value.
Spending some extra money on yourself or onyour family can actually be a good financialdecision as well. For example, spending moneyon education can help you in your career andin your life. What we’re looking for is thathealthy balance between spending and saving Many times it’s hard to avoid lifestyleinflation altogether. If you’re startinga family, you need a place for thebaby and when your family growsso does the need for a bigger house and abigger car compared to when you’re single And remember that each purchase thatyou make actually is a withdrawal. Fromyour retirement account That new iPhonewith compound interest over 50 years or soactually becomes quite more expensive than thethousand dollars or so that it originally cost
So, in the end, while an income increase is alwaysnice, it is as easy to go into debt or become brokeif. You earn 20.000 or 200.000 a year, Thisis proven time after time, with all the proathletes that have fancy cars, fancy houses, andthe party lifestyle And then, when their careerends they lose all that because they don’thave any more money coming in each month. That’S why everyone need to start planningfor the future to be in control of theirown personal finances and that’s what we’retrying to improve here on this YouTube channel. See you next time bye, bye,