General
Lifestyle Inflation
Also known as: Spending Inflation, Lifestyle Creep
The tendency to increase spending proportionally with income growth, reducing savings rate.
Detailed Explanation
Lifestyle inflation refers to the common behavioral pattern where people increase their standard of living and spending as their income rises, often leaving their savings rate unchanged or even reduced. This prevents wealth accumulation despite higher earnings. Strategies like automatic investment increases (SIP step-ups) and percentage-based savings help combat lifestyle inflation by ensuring wealth building keeps pace with income growth.