To an extent, there is nothing wrong with limited lifestyle inflation. It is natural. Once you start making more money, it’s only natural to feel that you can spend more. (After all, you’ve earned it, right?) As earnings increase, we want to move to bigger or better-situated housing, purchase better-quality goods and services, and spend more on food and entertainment. While that’s definitely true, if you don’t make a plan for how exactly you want to spend your money, you can throw yourself into a vicious cycle of earn-more-spend-more.
Issues arise when lifestyle inflation is unconscious or uncontrolled.
It can lead to situations where families live paycheck to paycheck, no matter how much their income increases. Lifestyle inflation can make it difficult to save money, manage personal finances, or pay off debts.