A promotion often comes with a much-needed salary increase. With an increase in income, many people tend to increase their spending. If left unchecked, it can lead to less savings and even debt. For example, every time Tommoy Kashyap gets a promotion, he indulges in fine food like sushi and spends on lifestyle and home décor.
“By the end of the month, I eat out less, use Blinkit and Instamart less and barely go out at all. When times get tough, I even turn to close friends,” says Kashyap, 24, a PR consultant. If this scenario sounds familiar, you might be going through a lifestyle change that slips into your budgeted life without you even realizing it.
Simply put, a lifestyle change occurs when your monthly expenses increase significantly as your income increases.
What is driving this lifestyle change?
Renowned sociologist Pranay Agarwal said that as education and job opportunities rise, people are escaping poverty and increasing their purchasing power. Many people assert their freedom by spending, and soon their wants become wants and then needs.
“People also experience relative deprivation,” Agarwal explains, “where a particular possession is perceived to be in short supply among their peers, motivating them to acquire it to avoid feeling left out.”
“Lifestyle changes can creep into our lives in innocent ways, such as spending money when we feel strong emotions, good or bad, or the temptation of instant gratification through impulse shopping,” says Nishta Jain, counselling psychologist at LISSUN. She attributes this behaviour to hedonic adaptation, where people quickly adjust to a higher standard of living and continually seek greater gratification.
“What were once considered luxuries become necessities over time. People often see increased spending as a reward for hard work. They anchor their expectations at these new levels, making it difficult for them to go back to their previous habits,” Jain said.
Mumita Das Lala, 31, who works in a law firm, cited a colloquial proverb that goes, “Never do more than you can manage.” It is human nature to want to spend more when your salary increases, she said, stressing the need to create a budget and save.
Conspicuous consumption is the main driver behind these non-essential purchases. (Source: Freepik)
What do they usually spend their money on?
Sandy Dasari, 24, said her recent salary increase has led her to allocate a significant portion of her disposable income towards buying electronic devices like smartphones and MacBooks, as well as investing in home furniture like beds, mattresses, sofa sets, etc. She added that her purchases are “often driven by the need to keep up with technological advancements and remain productive, both professionally and personally.”
“In the first few days, 80 percent of my salary is spent on celebrations, and I can only spend 20 percent for the rest of the month,” said Sonia Jakwal, 29, which has led her to cut back on ordering takeout, hanging out with friends and other lavish spending.
Hemangi Mapulkar, a psychologist at Mpower, said that today’s young people, who earn income through work and personal interests and are exposed to various global influences, are more likely to rely on technology and services than to do things themselves. “Some people believe that spending more will motivate them to earn more and enjoy greater benefits,” he added.
The rise of social media, e-commerce, increased earning power, and the belief that money can buy anything have led to a trendy change in lifestyle. (Source: Freepik)
Is that the same as being a spendthrift?
Conspicuous consumption is a big driver of these non-essential purchases, as people want to show off their purchases to their peers in order to gain respect and admiration. “Being a spendthrift is a bit different as self-image is not the motivator for buying, but with a lifestyle change, what you buy reflects how you want others to perceive you and what image you want to project to society,” explains Mhaprolkar. “This type of spending is more planned and intentional.”
“There’s been a big change in the lifestyle that our grandparents and parents lived, our lives and the lives of our children, and it’s clear that we want to do better because we can afford to,” she said.
Maprolkar emphasised that lifestyle changes are becoming more common due to factors such as exposure to social media, e-commerce, the potential for increased income and the perception that money can get you anything.
How can we fight back?
“Automating your investments is a step towards achieving financial freedom. As soon as you get your paycheck, allocate a portion of it to your investment portfolio. Investing money is always preferable to not investing, and it’s the easiest way to get your time back,” advises Aparna Mundani, CFA, vice president, PeakAlpha Investments.
Mundani emphasised the importance of mindset rather than simply cutting back on spending: “Conscious and intentional spending habits are key to curbing unnecessary spending. For impulse buys, consider leaving the item in your cart for a week before reconsidering it, making sure you really need it,” she said.
“We often underestimate big and small purchases that we don’t normally account for, like gifts during the holiday season, unexpected date nights, impulse buys while window shopping at the airport lounge, late-night food deliveries, etc. Keeping a record of these and setting aside a separate fund for them can help you plan your future expenses appropriately,” Mundani said.