Here’s all you need to know about lifestyle inflation

Singapore’s a dream to live in – we’re a major metropolis with tree-lined highways, a litter-free environment and possibly some of the world’s best museums and architectural icons. A potpourri of cultures and races co-exist in harmony and live in safe neighborhoods.

However, the Economist Intelligence Unit (EIU)’s survey early this year ranked Singapore as the world’s most expensive city for the third time running. A report from CNN states that the Certificate of Entitlement (COE) made Singapore the most expensive place to purchase and run a car. Our MRT system costs 2.7 times more than New York’s.

Thankfully you’re earning well. You’ve got a decent five-figure salary and MRT or even cab fares aren’t a bane to you. Yet, you sometimes wonder at night if the cost of living here is eating up your salary.

You’re earning more compared to a few years back, but there’s hardly a healthy bank balance as the month draws to a close.

Here’s a thought – have you considered that you might be suffering from lifestyle inflation?

Lifestyle what?

In simple terms, lifestyle inflation means that as your income increases, you spend more. You’re stuck in the same monetary level (or worse!) as you’ve not put much effort into increasing your savings.

Here’s a graph that shows the steady increase in spending by Singaporeans for the past three years:

Expenditure, expenditure

Certain shoppers are loyal to a particular brand. If it’s a phone, it’s got to be an iPhone. But while you’re being enticed with special invites and the like, your brand loyalty might just be taking your experience for a run.
So your iPhone 7 doesn’t have a headphone jack – but does this new feature justify the price of the phone itself? Right now, it’s retailing at S$1,048.

Moving on to the new era of splurging – online shopping. You can do it at any ungodly hour of your choice, and via a series of apps and sites –  think Zalora, Lazada, Asos, Amazon and good old eBay.

Rahul Shinghal, the general manager of PayPal Southeast Asia, shared in July that 80% of Singapore’s millennials shopped online in the past 12 months. 69% of them have made cross-border online transactions, with one out of three of these purchases going towards a tablet or a smartphone.

There are other favorite picks for online shopping here – event tickets, travel and digital entertainment or education.

Here’s an example of event ticket prices – the tickets for the 2016 Formula 1 SIA Singapore Grand Prix were sold at between S$258 and S$898.

Is it really worth it?

You worked your butt off for pay raises and it’s certainly improved your lifestyle in a way or two. Nicer dinners and more exotic travel destinations are great once in a while; these are bonuses you can pamper yourself with.

Just avoid falling into a cycle of endless extravagance and you’ll be able to save yourself from the trappings of lifestyle inflation.

Here’s a provoking thought:

When it comes to growing money, people understand that their own intuition might not be able to make the best judgment call – and this is where a rising number of financial advisers come into the picture. But on the other side of the coin, spending money is done solely based on gut feeling – what people think would make them happy.

So, what actually makes you happy? The expenditure or the experience? Ultimately, it boils down to whether you feel fulfilled by what you’ve just signed off for.

*Originally published by ZUU online. 

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