As Anurag Singh saw his salary surge to almost twice of what he was earning in 2023, he felt his money anxieties melt away. He no longer fretted over high fares as he swapped the auto for a cab; expensive salons and branded clothes became de rigueur; vacations saw an upgrade from 3-star to 5-star accommodation; and expectedly, he moved to a more premium neighbourhood, paying double the rent he was paying earlier. “I want to show my family and friends that I have moved up in life,” says the 40-year-old Mumbaikar.
He has just one niggling concern. “My expenses have increased so much that I’m saving lesser than I did when my salary was lower,” he says. Singh’s concern is valid: his savings rate has dropped from 29.9% in 2023 to 9.4% in 2026, even though his salary has grown nearly 83%.
Singh is experiencing what’s known as ‘lifestyle inflation’ or ‘lifestyle creep’. It occurs when an increase in income is accompanied by a surge in expenses, but there is no corresponding rise in savings, which either remain stagnant or decline. “As earn ings grow, people may gradually spend more on housing, travel, dining out, and other discretionary expenses without proportionately increasing their savings,” says Saurabh Jain, Co Founder & CEO, Stable Money.
As expenses surge and lifestyles are upgraded, people normalise the new comfort level till ‘wants’ become ‘needs’ and ‘luxuries’ become ‘necessi ties’. “This is a psychological phenom enon known as ‘hedonic adaptation’ (people quickly return to baseline level of happiness after any life change) and it is one of the key drivers of lifestyle inflation,” says Preeti Zende, Founder, Apanadhan Financial Services.
“We’re wired to becoming used to things very quickly. Whatever felt like a treat last year quietly becomes the new normal this year. The excite ment wears off; the bill doesn’t,” says Rohit Shah, Founder & CEO of GYR Financial Planners.
The endless pursuit of a better life and higher social status is increas ingly funded by debt—credit cards, personal loans and equated monthly instalments (EMIs)—that keeps ris ing. “We begin measuring our lifestyle against that of others, rather than against our own needs and priorities, and smaller expenses often escape scrutiny,” says Zende.
Another factor that fuels this expense rise is the assumption that income growth will continue indefinitely. “People get used to receiving salary increments and begin to believe that regular income growth will remain constant. As a result, they may commit to higher expenses based on the ex pectation of future income increases,” says Santosh Joseph, CEO, Germinate Investor Services.
“If you choose to improve your standard of living with a rise in income, there should be a deliberate effort to choose better eating patterns, comfortable living, meaningful improvement in investments, and an increase in emergency and medical kitty,” says Zende. If this is not happening and you are only spending on impulse purchases, it’s a sign of lifestyle creep without a reasonable improvement in one’s standard of living.
It’s also easy to confuse lifestyle inflation with general inflation because both result in an increase in expenses. The difference, however, lies in the reason for the rise. In case of general inflation, expenses shoot up due to the sustained increase in the over all prices of goods and services over time, which reduces the purchasing power of money. In contrast, lifestyle inflation sees a rise in expenses due to the altered consumption habits and spending resulting from a hike in income.
General inflation, therefore, raises the cost of maintaining an existing lifestyle without an increase in consumption. According to the Ministry of Statistics and Programme Implementation, India’s retail inflation stood at 5.54% in September 2026, food inflation was 7.74%, and transport inflation was 5.01%. “The distinction is be tween spending more because prices have increased and spending more due to a rise in income,” says Jain.
To ensure you reach your goals without being waylaid by lifestyle inflation, watch out for the following signs. The foremost indicator is that your savings and invest ments remain stagnant or fall despite income growth. “I realised that despite an income growth of nearly 15% in two years, my savings had dropped to 9% from 12%, and my mutual fund systematic investment plans (SIPs) had remained static at Rs.25,000 a month,” says Ritika Sahdev, a 37-year-old marketing manager from Delhi.
Second, your fixed household expenses are a higher percentage of your monthly income, leaving lesser for your future financial needs. For Singh, these include the house rent, which has shot up to Rs.46,500 from Rs.23,000 earlier, and child’s education, which has risen to Rs.10,000 from Rs.3,000 a month after shifting to a more expensive school.
“The next indicator is that there is an in creased reliance on credit for discretionary items, be it dining, travel or entertainment,” says Rushabh Desai, Founder, Rupee with Rushabh Investment Services. This means your credit card usage rises, and more often than not, you are rolling over the outstanding amount instead of paying the bill in full. You also tend to purchase lifestyle products on EMIs due to reliance on notional income. “If your EMIs cross 40% of your take-home pay, consider it a warning sign,” says Shah.
Fourth, the surging expenses often leave you without any surplus by month-end and you are forced to dip into your savings, de spite a high rise in salary. Finally, you are repeatedly forced to postpone important goals such as retirement or buying a house because you prioritise maintaining the cur rent lifestyle. “Such changes may not cause an immediate concern, but they should de mand attention if they become a consistent pattern,” says Vishwanathan.
General inflation Not Equal lifestyle inflation
In general inflation, expenses rise due to a hike in prices of goods & services, while lifestyle creep sees an expense rise after a hike in income. Here are the year-on year inflation rates for various categories, as per an ET Wealth survey among 20 financial planners.
Calculate your lifestyle inflation
Suppose Mr. A had an annual income of Rs.12 lakh and his annual expenses were Rs.8 lakh, in 2024. Here’s how he can calculate his in come and expense growth in 2026.
6 signs you are facing lifestyle creep
Salary has risen, savings haven’t
If your income has increased, but the rise in expenses is much higher, and the savings rate has remained either stagnant or has fallen, you are experiencing lifestyle infla tion.
Luxuries are now necessities
A common indication that you are experiencing life style creep is that you have moved from unbranded to branded acces sories and clothes, or upgraded from economy class to business class, and consider these your new normal.
Comfort trumps cost
You no longer bother about high prices or discounts, focusing only on the brand or convenience. For instance, you no longer wait for festive sales to buy an expensive gadget, or take a cab instead of an auto while commuting.
You try harder to keep up with the Joneses
Matching your rela tives’ social media posts on foreign travel or your neigh bour’s new car has become a compulsion, making you spend more than you can afford.
You rely more on credit cards, EMIs
Higher income creates a false sense of security and you finance the life style purchases with credit cards, believing you will always have the money to pay the bills.
You no longer feel the need to budget
You feel you have enough money to take care of all your expenses and no longer need to track your spending and savings. Not having a budget, whether your income is high or low, can easily jeopardise your financial goals.
To avoid falling into the inflation lifestyle trap, it’s best to know how to deploy the salary increment or bonus instead of spending it randomly on lifestyle purchases. A simple approach is to save first, spend later, and reduce the percentage of income that goes towards expenses. “When salaries increase, people tend to spend the entire increment, if not more. A better option is to keep less than 50% of the incremental salary for new expenses or lifestyle upgrades,” says Joseph.
For example, if your salary in creases from Rs.50,000 to Rs.1 lakh, try to limit the additional lifestyle expenses to around 50% of the increment. This means spending no more than Rs.25,000 on new expenses and directing the remaining Rs.25,000 towards savings and investments. Zende agrees: “At least 50% of their increased income should be invested for long-term goals, 20-25% should be used to repay the existing loans, and the remaining 25% can be used to upgrade lifestyle."
“For someone who has not built an adequate emergency fund or has a high-cost debt, a larger share of the increment may need to go towards strengthening their finances,” says Jain. Those who have met their sav ings targets can have greater flexibility to spend on lifestyle upgrades.
One way to maintain discipline is to automate savings on salary day. “Set up automatic transfers to investment or savings accounts on payday before funds hit your checking account,” says Desai. For any non-essential purchase over a certain threshold, wait 48 hours (or 30 days for major items) to eliminate impulse buying driven by income availability, he adds.
It is also useful to set a budget for discretionary categories such as din ing out, shopping and entertainment, and to review large purchases in terms of their total cost, including mainte nance, interest and other recurring commitments. “Individuals can prioritise upgrades that provide lasting value instead of automatically increasing spending across every category after a salary increment,” says Jain.
“For most families, keeping discre tionary expenses at 25-50% of necessities is a healthy zone. If your savings rate is at least 30% of the take-home pay, you have enough liquidity, and your goals are on track, you can spend on what matters to you,” says Shah.
He has just one niggling concern. “My expenses have increased so much that I’m saving lesser than I did when my salary was lower,” he says. Singh’s concern is valid: his savings rate has dropped from 29.9% in 2023 to 9.4% in 2026, even though his salary has grown nearly 83%.
Singh is experiencing what’s known as ‘lifestyle inflation’ or ‘lifestyle creep’. It occurs when an increase in income is accompanied by a surge in expenses, but there is no corresponding rise in savings, which either remain stagnant or decline. “As earn ings grow, people may gradually spend more on housing, travel, dining out, and other discretionary expenses without proportionately increasing their savings,” says Saurabh Jain, Co Founder & CEO, Stable Money.
As expenses surge and lifestyles are upgraded, people normalise the new comfort level till ‘wants’ become ‘needs’ and ‘luxuries’ become ‘necessi ties’. “This is a psychological phenom enon known as ‘hedonic adaptation’ (people quickly return to baseline level of happiness after any life change) and it is one of the key drivers of lifestyle inflation,” says Preeti Zende, Founder, Apanadhan Financial Services.
“We’re wired to becoming used to things very quickly. Whatever felt like a treat last year quietly becomes the new normal this year. The excite ment wears off; the bill doesn’t,” says Rohit Shah, Founder & CEO of GYR Financial Planners.
The endless pursuit of a better life and higher social status is increas ingly funded by debt—credit cards, personal loans and equated monthly instalments (EMIs)—that keeps ris ing. “We begin measuring our lifestyle against that of others, rather than against our own needs and priorities, and smaller expenses often escape scrutiny,” says Zende.
Another factor that fuels this expense rise is the assumption that income growth will continue indefinitely. “People get used to receiving salary increments and begin to believe that regular income growth will remain constant. As a result, they may commit to higher expenses based on the ex pectation of future income increases,” says Santosh Joseph, CEO, Germinate Investor Services.
Lifestyle inflation vs living standard vs general inflation
Since most people improve their standard of living as their income grows, how does it differ from lifestyle inflation? “A reasonable improvement in one’s standard of living is different from lifestyle inflation because the former is supported by financial planning,” says Jain. For instance, moving to a better flat after a salary increment can be a reason able decision if the higher rent is affordable and the amount saved each month continues to increase. “The key is to ensure that life style upgrades do not come at the cost of long term financial security,” he says.“If you choose to improve your standard of living with a rise in income, there should be a deliberate effort to choose better eating patterns, comfortable living, meaningful improvement in investments, and an increase in emergency and medical kitty,” says Zende. If this is not happening and you are only spending on impulse purchases, it’s a sign of lifestyle creep without a reasonable improvement in one’s standard of living.
It’s also easy to confuse lifestyle inflation with general inflation because both result in an increase in expenses. The difference, however, lies in the reason for the rise. In case of general inflation, expenses shoot up due to the sustained increase in the over all prices of goods and services over time, which reduces the purchasing power of money. In contrast, lifestyle inflation sees a rise in expenses due to the altered consumption habits and spending resulting from a hike in income.
General inflation, therefore, raises the cost of maintaining an existing lifestyle without an increase in consumption. According to the Ministry of Statistics and Programme Implementation, India’s retail inflation stood at 5.54% in September 2026, food inflation was 7.74%, and transport inflation was 5.01%. “The distinction is be tween spending more because prices have increased and spending more due to a rise in income,” says Jain.
Indicators of lifestyle infl ation
How do you know you are facing lifestyle creep? “One of the challenges with rising ex penditure is that it often goes unnoticed as long as individuals can comfortably manage their monthly expenses. However, maintaining a certain lifestyle does not necessarily mean one’s finances are on track,” says Ramesh Vishwanathan, CEO, Financial Planning Standards Board, India.To ensure you reach your goals without being waylaid by lifestyle inflation, watch out for the following signs. The foremost indicator is that your savings and invest ments remain stagnant or fall despite income growth. “I realised that despite an income growth of nearly 15% in two years, my savings had dropped to 9% from 12%, and my mutual fund systematic investment plans (SIPs) had remained static at Rs.25,000 a month,” says Ritika Sahdev, a 37-year-old marketing manager from Delhi.
Second, your fixed household expenses are a higher percentage of your monthly income, leaving lesser for your future financial needs. For Singh, these include the house rent, which has shot up to Rs.46,500 from Rs.23,000 earlier, and child’s education, which has risen to Rs.10,000 from Rs.3,000 a month after shifting to a more expensive school.
“The next indicator is that there is an in creased reliance on credit for discretionary items, be it dining, travel or entertainment,” says Rushabh Desai, Founder, Rupee with Rushabh Investment Services. This means your credit card usage rises, and more often than not, you are rolling over the outstanding amount instead of paying the bill in full. You also tend to purchase lifestyle products on EMIs due to reliance on notional income. “If your EMIs cross 40% of your take-home pay, consider it a warning sign,” says Shah.
Fourth, the surging expenses often leave you without any surplus by month-end and you are forced to dip into your savings, de spite a high rise in salary. Finally, you are repeatedly forced to postpone important goals such as retirement or buying a house because you prioritise maintaining the cur rent lifestyle. “Such changes may not cause an immediate concern, but they should de mand attention if they become a consistent pattern,” says Vishwanathan.
General inflation Not Equal lifestyle inflation
In general inflation, expenses rise due to a hike in prices of goods & services, while lifestyle creep sees an expense rise after a hike in income. Here are the year-on year inflation rates for various categories, as per an ET Wealth survey among 20 financial planners.
Calculate your lifestyle inflation
Suppose Mr. A had an annual income of Rs.12 lakh and his annual expenses were Rs.8 lakh, in 2024. Here’s how he can calculate his in come and expense growth in 2026.
6 signs you are facing lifestyle creep
Salary has risen, savings haven’t
If your income has increased, but the rise in expenses is much higher, and the savings rate has remained either stagnant or has fallen, you are experiencing lifestyle infla tion.
Luxuries are now necessities
A common indication that you are experiencing life style creep is that you have moved from unbranded to branded acces sories and clothes, or upgraded from economy class to business class, and consider these your new normal.
Comfort trumps cost
You no longer bother about high prices or discounts, focusing only on the brand or convenience. For instance, you no longer wait for festive sales to buy an expensive gadget, or take a cab instead of an auto while commuting.
You try harder to keep up with the Joneses
Matching your rela tives’ social media posts on foreign travel or your neigh bour’s new car has become a compulsion, making you spend more than you can afford.
You rely more on credit cards, EMIs
Higher income creates a false sense of security and you finance the life style purchases with credit cards, believing you will always have the money to pay the bills.
You no longer feel the need to budget
You feel you have enough money to take care of all your expenses and no longer need to track your spending and savings. Not having a budget, whether your income is high or low, can easily jeopardise your financial goals.
How to avoid the trap
If discretionary expenses continue to rise and savings fall, your lifestyle may become unsustainable and push the financial goals out of reach. “Reviewing household expens es, savings and progress towards financial goals can help identify where adjustments may be necessary,” says Vishwanathan.To avoid falling into the inflation lifestyle trap, it’s best to know how to deploy the salary increment or bonus instead of spending it randomly on lifestyle purchases. A simple approach is to save first, spend later, and reduce the percentage of income that goes towards expenses. “When salaries increase, people tend to spend the entire increment, if not more. A better option is to keep less than 50% of the incremental salary for new expenses or lifestyle upgrades,” says Joseph.
For example, if your salary in creases from Rs.50,000 to Rs.1 lakh, try to limit the additional lifestyle expenses to around 50% of the increment. This means spending no more than Rs.25,000 on new expenses and directing the remaining Rs.25,000 towards savings and investments. Zende agrees: “At least 50% of their increased income should be invested for long-term goals, 20-25% should be used to repay the existing loans, and the remaining 25% can be used to upgrade lifestyle."
“For someone who has not built an adequate emergency fund or has a high-cost debt, a larger share of the increment may need to go towards strengthening their finances,” says Jain. Those who have met their sav ings targets can have greater flexibility to spend on lifestyle upgrades.
One way to maintain discipline is to automate savings on salary day. “Set up automatic transfers to investment or savings accounts on payday before funds hit your checking account,” says Desai. For any non-essential purchase over a certain threshold, wait 48 hours (or 30 days for major items) to eliminate impulse buying driven by income availability, he adds.
It is also useful to set a budget for discretionary categories such as din ing out, shopping and entertainment, and to review large purchases in terms of their total cost, including mainte nance, interest and other recurring commitments. “Individuals can prioritise upgrades that provide lasting value instead of automatically increasing spending across every category after a salary increment,” says Jain.
“For most families, keeping discre tionary expenses at 25-50% of necessities is a healthy zone. If your savings rate is at least 30% of the take-home pay, you have enough liquidity, and your goals are on track, you can spend on what matters to you,” says Shah.
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