You got a raise—congratulations! But before you book out a celebratory HDL dinner with your friends or start looking at condo listings, let’s have a heart-to-heart about something sneaky: lifestyle inflation.
Yep, I’m talking about that annoying habit of upgrading your spending as your income increases—quietly robbing you of long-term financial success. Don’t worry—avoiding it doesn’t mean eating using CDC vouchers for the rest of your life (though, what’s the problem in that).
Here’s how to dodge the trap while you still waltz through life, enjoying its infinite splendour.
How to Avoid Lifestyle Inflation
- What is lifestyle inflation?
- Why is it so tempting?
- How to avoid the trap (without being miserable)
- What happens if you avoid lifestyle inflation?
- Closing thoughts
What is lifestyle inflation? (AKA, why you’re broke after a raise)
Lifestyle inflation happens when you increase your expenses in lockstep with your income. Got a pay bump? Suddenly, you’re justifying a home upgrade, pricier coffee, or a new boujee raw food diet for your dog (I’m guilty as charged).
At its core, lifestyle inflation isn’t just about spending more—it’s about shifting priorities. Instead of sticking to financial goals, the extra income gets absorbed by small, incremental upgrades: a slightly nicer car, slightly fancier dinners, slightly trendier clothes. But those “slightlys” add up fast.
The trouble starts when your spending rises so much that your savings rate stays the same—or worse, shrinks. If you’re constantly spending what you earn, you’re living paycheck to paycheck, regardless of whether that paycheck is S$50,000 or S$500,000 a year.
The worst part? Sometimes you can’t even tell.
This behavior can be subtle. You’re not necessarily splurging on a brand new Rolex or designer clothes—it might be small indulgences, like shopping at NTUC Finest instead of Sheng Shiong, an upgraded phone plan, or ordering more GrabFood deliveries in the week.
These expenses are easy to justify and even easier to ignore. Over time, they erode your ability to save and invest. The plus side is that 1 in 4 Singaporeans have clocked this and seem like they’re attempting to save more in 2025 according to NielsenIQ’s latest report.
Why is it so tempting? (Hint: Instagram and FOMO are culprits)
Kendrick Lamar summed it up perfectly in his recent track, “Man at the Garden”—when he said “I deserve it all.” And let’s be honest, it’s a feeling we all know too well. It’s all too easy to justify splurging on ourselves.
Social media doesn’t help. When your feed is full of influencers flaunting exotic vacations or luxury goods, it’s natural to want in on the action. But here’s the thing—most of those people have the means to enjoy treats like this or are simply living paycheck to paycheck. Comparison is the thief of joy and savings.
The psychology behind it
Lifestyle inflation is rooted in human psychology—specifically, the concept of the hedonic treadmill. This principle explains that while earning more money or upgrading your lifestyle might provide a short-term happiness boost, it doesn’t last. You quickly adjust to your new standard of living, and the thrill fades.
Here’s an example: Remember how excited you were about your first car or that luxury handbag? It felt amazing for a while, but eventually, it became just another part of your everyday life. Meanwhile, the costs—monthly payments, maintenance, or the dent in your savings—remain.
Multiple studies have shown that people adapt to positive changes in their lives faster than they expect, which leads to a perpetual desire for more. This is why no pay raise or new gadget will ever feel like “enough” for long. You’re constantly chasing a moving target.
FOMO (fear of missing out) used to make this cycle worse. A 2018 survey by Credit Karma revealed that over 40% of millennials admitted to overspending to keep up with their friends, while 30% had gone into debt for it. It’s a vicious loop of keeping up appearances, fueled by social pressures and momentary happiness.
However, the tide is turning
However, the tables have turned more recently. A more recent study by Credit Karma revealed that more than one-third of Gen Z and millennials (36%) feel driven to overspend by their friends, creating a cycle of debt that’s hard to escape. And the stakes are higher than you might think: many young adults are considering ending friendships over this financial tension.
Even more surprising? Income compatibility is now a factor in choosing friends. Younger folks increasingly value friendships with people in similar income brackets. Why? Because keeping up with wealthier friends often means stretching your finances thin. It’s a subtle but powerful pressure that can lead to overspending, FOMO, and, eventually, resentment.
These dynamics show how lifestyle inflation isn’t just about personal habits—it’s also about navigating social expectations. The key is to stay mindful of these influences and resist the urge to keep up with appearances that don’t align with your financial goals.
How to avoid the trap? (without being miserable)
Here are actionable tips to keep lifestyle inflation at bay while still living well:
1. Pay yourself first
Out of sight, out of temptation. Before your pay even hits your checking account, set up an automatic transfer to savings or investments. This could mean boosting CPF or retirement contributions, setting aside a percentage of your salary for retirement, or moving funds into a high-yield savings account.
For example, if you get a $500 raise, allocate at least half of that to your savings goals. This method helps you build wealth on autopilot. Tools like robo-advisors or apps that round up spare change can also give your savings an extra nudge without much effort.
2. Set clear financial goals
Define your goals, whether it’s buying a home, retiring early, or traveling debt-free. But don’t stop there—write them down, break them into smaller steps, and add timelines.
For instance, “Save for a house” is vague. Instead, aim to save $50,000 for a down payment over 5 years, which means setting aside about $833 per month. Use tools like a mortgage calculator to understand exactly what you need. Then, when temptation strikes, ask yourself: Does this $300 handbag bring me closer to my goal or further away?
Future-you will want to kill you less for choosing wisely.
3. Practise conscious spending
Splurging isn’t evil—it just needs to be intentional. Like when I spend that little extra on my fur buddy. Ensuring she has a proper, personalised diet so she lives a nice and long life? Definitely one of my key priorities. Hence, the splurge is warranted.
Allocate funds for things like that, while cutting costs on things you don’t care about (e.g., a fancy gym membership you attend maybe twice a year). Then again, if you’re on a fitness grind and basically plan to live at the gym—then that’s probably one of the priorities you want to funnel extra money into. It’s honestly case-by-case.
Consider using a “values-based budget” where you assign your money to the things that bring you the most joy. Divide your expenses into needs, wants, and savings, but allocate more toward the things that genuinely make you happy. Apps like YNAB (You Need a Budget) can help you track your spending and ensure it aligns with what matters most.
4. Resist subscription creep
Take a hard look at your recurring expenses. Do you really need 6 streaming services? If not, cancel and redirect that money to something more meaningful. A 2023 survey found that the average person underestimates their subscription costs by nearly 40%. Use a subscription tracker app like Rocket Money to identify and cancel services you don’t use.
If you’re stuck on which services to keep and which to ditch, we have a full list of streaming services that you can prioritise. Take your pick and ditch the rest. Then, redirect that money toward your savings or an investment account. Cha-ching.
5. Celebrate wins strategically
It’s okay to enjoy your success—just don’t blow the whole raise on a weekend binge. Treat yourself in moderation. Allocate 10% of your raise to a fun purchase or experience, like a nice dinner or a short getaway. Then, direct the remaining 90% toward savings or investments.
This approach lets you celebrate the moment without sacrificing long-term financial security. Think of it as a way to enjoy life and build wealth at the same time—a win-win.
6. Make your money work while you chill
That extra money you have because you didn’t spend more this month? Invest it. You could throw it in a blue chip stock, T-bills, or any other investment you deem useful. The money you save and invest today grows substantially over time, thanks to compound interest.
If you’re feeling brave, you could choose higher risk investment options like stocks, mutual funds, and ETFs. A modest S$10,000 saved in your 30s can turn into over S$100,000 by retirement (assuming a 7% annual return).
What happens if you avoid lifestyle inflation?
Yeah, sure you can do all those things. But what do you get out of it? Let me paint you a hypothetical picture just so you’ve got some motivation to make some lifestyle changes.
1. Your long-term goals suddenly become not-so-long-term goals
By resisting the urge to splurge, you create room to build an emergency fund and grow your investments. The ultimate gift? Freedom of choice. Want to take a sabbatical, start a business, or retire early? Well, these options become yours. Picture this: you can be fully relaxing at a villa somewhere in the Maldives by the time you’re 50. You just gotta be smart about your spending today.
2. You’re dramatically less stressed about money and the future
Curbing lifestyle inflation isn’t just about spending less—it’s about rewiring how you approach money. By delaying short-term gratification, you’re not just cutting back on impulsive splurges—you’re actually prioritising stability. This mindset shift allows you to build healthier financial habits, like saving consistently or budgeting intentionally.
Over time, these habits lead to greater financial freedom. Imagine being able to handle unexpected expenses without breaking a sweat or finally seeing your savings grow. The peace of mind that comes with financial stability isn’t just a dream—it’s a habit you can build, one small decision at a time.
3. Your family is going to thank you for it (And so will your future self)
By avoiding debt and building wealth, you’re in a position to support your family, leave an inheritance, or contribute to causes you care about. It’s all about leaving a legacy that you can look down (or up, depending) and be proud of.
Closing thoughts
Avoiding lifestyle inflation isn’t just a financial strategy—it’s a change in mindset. It’s learning to separate needs from wants and recognising that happiness doesn’t come from chasing endless upgrades.
The truth is, saying no to some things today lets you say yes to bigger, better opportunities tomorrow. It’s the freedom to choose—a life where you’re not controlled by money, but instead use it as a tool to build the future you deserve.
So the next time you’re tempted to head to Black Tap at MBS for the second time in a month (I’m looking at you, KC), pause and ask yourself: “A gourmet burger now? Or a holiday to Bangkok next year?”
Spoiler alert: Choosing the future will always be the right answer.
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About the author
Having been writing for a little over 10 years, KC has flexed his pen in a variety of industries—think automotive, fitness, entertainment, and finance. He’s ultimately on a mission to prove that any topic, no matter how serious, can be made fun.
Off-duty? It’s all about food, drinks, parties, and gaming marathons.
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