Wednesday, February 4, 2015

Lifestyle inflation

Sometime back, Subra did a wonderful post on Lifestyle Inflation. For those who do not know the term, lifestyle inflation implies the increase in the cost of living and it is self inflicted. This is different from the normal inflation. The normal national inflation is the rise in cost of the thing/service over a period of time. Government, international scenes, weather, GDP, political scenarios and other various factors influence the national inflation. However, we ourselves are responsible for lifestyle inflation.

I remember, in one of the post, Subra gave an example for this: Consider a person X who has to travel around the world due to his job requirements. His company every time books him a business class tickets. He is habituated to the business class travel. Now, whenever he goes on a personal tour or a vacation, he will choose business class travel over economy class. The same person who use to travel by train now prefers only business class journey. This is lifestyle inflation.

The reason for this post is – I am myself guilty of lifestyle inflation expenses.

Photo Credit: Flickr - Ged Carroll

Due to my job requirement, I had to stay abroad for few months. Over there, everybody had fruits or oats bar as evening snacks. I loved this habit. I started the same thing. Moreover, I also continued the same habit after coming back home (I do not regret this move. At least, I am having healthier stuff). Earlier, I use to have samosa or some chat items in canteen in the evening. This use to cost me around 25 per day i.e. 125 per week i.e. 500 per month. Now, the fruits cost me 250 per week i.e. 1000 per month. However, this saves me from eating the junk food and in turn saves additional sugar being put around my waist. Also, my family enjoys the fruits from the weekly quota. So, overall, this is a good decision.

During the abroad stay, I was living in a 3 start hotel for good amount of time i.e. around a month or so. So when I went to Udaipur recently on a vacation, I was looking at hotels with similar facilities. I quickly realized my folly that the abroad stay was sponsored by my company while this stay would burn hole in my pocket. I settled for ‘above normal’ hotel but managed to avoid the temptation of 3 star hotel. Had I not stayed in that posh hotel, I would have even settled for normal hotel in Udaipur. So instead of spending 2k/night, I was spending 4k/night for above normal hotel. Thankfully that was approved by my home minister.

Commuting: This has nothing to do with my abroad stay. However, this is regarding the core topic i.e. lifestyle inflation.

My earlier expenses (from July 2012 to June 2014):

Travel to and fro from my house to nearest station by public bus: 22 (11+11)

Train journey to and fro: 20 (10+10)

Travel to and fro from my office to the nearest station to office: 12 (6+6)

Total amount 54 per day.

For travel from my office to nearest station, I use to take BEST bus. For that, I had to walk nearly 10 mins to get to the bus stop. Total time to and fro is 20 mins. This becomes extremely tiring and perspiring in summer and rainy season. So finally, 6 months back, I upgraded from BEST travel to share auto travel. So now, for #3, it is 20 per day (10+10). Therefore, daily expenses are 22+20+20 = 62 i.e. 14% shoot.

Note: I have not considered the hike in train and bus fares from 2012. The figures are post hike and latest (applied in retro fashion). This is just to show the lifestyle inflation. The actual inflation in this case would be different and we will have to consider the actual fares during 2012 and not the latest.

The point is how everything gets doubled and we feel that we are entitled to it:

Snacks doubled from 500 per month to 1000 per month

Hotel stay doubled from 2k per night to 4k per night

Commuting from 12 per day to 20 per day (in case of #3)

Although, the amount seen is paltry, it has huge effect on overall finances. This is the killing factor. It can harm the finances more than the actual inflation. As long as the total investment is as per the goals (or minimum 10% of the net take home salary), the things are manageable.

Note: I feel guilty to write about my lifestyle inflation. Moreover, my commuting expenses are likely to undergo further increase. It would be likely to 85-95 from current 62. Not sure when, but definitely sooner than later. 


  1. What a timely post. Although I doubt many 'll not be able to understand the core message.