The Main Reason You re Struggling Financially

Does it seem like no matter how much money you make, it isn't enough? Maybe your financial struggles are due to not enough income, lack of financial literacy, or an unexpected expense. While these factors may contribute, I believe the primary reason why most people are struggling financially is due to lifestyle inflation. But what exactly is lifestyle inflation? Also known as lifestyle creep is when spending increases as income increases. It's when former luxuries are now new necessities. It's when you make more, you spend more. It could be a never-ending cycle. Work harder, get a raise, earn more, spend more, run out of money, and rinse and repeat. This is the rat race. No matter how much money you make, it will never be enough. What are some examples of lifestyle inflation? Increased income from a raise, promotion, switching employer, changing careers, a side hustle, a part-time job, graduating from school often prompts conspicuous consumption such as purchasing a new car, a bigger house, expensive vacations, or expanding the family. Then there's silent lifestyle inflation, which is less noticeable but equally impactful. Examples include paying full price for an item instead of looking for a deal, eating out more frequently, updating subscriptions and plans, more expensive clothing, or favoring brand-name products over generic alternatives. Most of these examples aren't absolutely necessary and can be avoided. However, there is lifestyle inflation that is unavoidable. Like if you got a new job, you might need a new wardrobe to suit the role, spend more on gas and maintenance for commuting, childcare, or needing to move to a more expensive area for a job opportunity. Then there is lifestyle inflation that is necessary. This may be neglected spending areas like diet, dental care, fitness and health, personal hygiene, car and home maintenance, heating and cooling for home comfort, time with family, and moving to a safer neighborhood. Lifestyle inflation can be a big-ticket item or can be a bunch of little things that add up. Either way, this increased spending never allows you to get ahead and may cause you to struggle financially. What Causes Lifestyle Inflation? One of the root causes of lifestyle inflation is the social pressure and a desire for peer validation. The constant exposure to the lifestyles of others, especially through social media, can fuel a desire to keep up with the perceived standard of success. This external influence can lead to spending decisions based on comparison rather than individual financial needs. In other words, keeping up with the Joneses. Most people look like they're doing well financially but that's only because we can't see their bank account and how much debt they actually have. If you try to live the same lifestyle, you may look successful on the outside, but you could be struggling financially just like them. Another cause of lifestyle inflation is a sense of entitlement that often accompanies income growth. You worked hard for that raise, you deserve to increase your standard of living as a reward for your efforts. Isn't that the reason we work and make money? To improve our standard of living? And all this happens automatically. We keep benchmarks in our minds where if we reach a certain position, we feel entitled to a new car or a bigger house. And like I already mentioned, some lifestyle inflation is inevitable and just comes with the job. Additionally, you'll want to know the signs of lifestyle inflation. These include stagnant savings, increased spending, and increased credit card debt and other debts. So how can we mitigate lifestyle inflation? The first thing you can do is be aware of it and know how to recognize it. And if you're watching this video, you should already be more conscious of it. Just by knowing what lifestyle inflation looks like, you can take a proactive approach to curb it. As for silent lifestyle inflation, it may be harder to identify. This is where having a budget comes in. If your spending increases in a certain category, then it's possible that lifestyle inflation is the culprit. Another way to minimize lifestyle inflation is simply by doing the math. Let's say you got a $5 raise and now you want to finance a new car. Do the math on how much Don't forget to account for taxes. Let's say this raise increases your monthly income by $300. You now know if you finance a car, it shouldn't be more than $300. Now, if you were to finance a car for $300, this wouldn't give you any extra savings and no room for unintentional increased spending in other categories. Additionally, you'll want to create short and long-term financial goals. Allocate funds to your goals before spending on your wants. This way, you aren't sacrificing your goals to improve your standard of living. The easiest way to accomplish this is by paying yourself first. You can do this by setting up automatic reoccurring transfers. First, use your budget to figure out how much discretionary income you have. Then create a financial goal like saving up for a down payment on a house. Open up a savings account and set up an automatic reoccurring transfer. Once you get paid, money will automatically transfer from your checking account to your savings. Then take care of all your needs and debt obligations. Then with whatever money you have left, can go towards spending on your wants. Doing this is a surefire way to prevent lifestyle inflation while working towards meeting your financial goals. Okay, so what if you already fall in prey to lifestyle inflation? You may not want to hear it, but you need to reset your baseline budget and lower your standard of living to the appropriate level according to your income. If you work at McDonald's, you shouldn't even consider having a car payment. If you're stocking shelves at Walmart, you shouldn't have the newest iPhone and be rocking a pair of Yeezys. And if you're a secretary, you shouldn't have a Louis Vuitton purse and Lou Vuitton heels. You could, but that's the reason why you're struggling financially. Live within your means and spend according to your income. If you're not saving at least 5% of your monthly income, you're spending too much. If you can't pay off your credit cards in full each month, you are spending more than you make, essentially getting yourself into debt. If this is the case, you'll want to get rid of the credit cards and line of credits to prevent further debt. If all your expenses are truly necessary or add significant value to your life, you will need to play the catch up game. I love that game. Meaning increase your income and not increase your spending. This creates a buffer between your income and spending. Once you have a decent buffer room, new income increases can be used to treat yourself. And don't just think you can earn your way out of a spending problem. You need to lower your standard of living, delay gratification, and actually learn how to save and manage your finances. You also need to change your mindset on money and educate yourself on financial literacy and be grateful for what you have. Like TI says, stop looking at what you ain't got and start being thankful for what you do got. This way, when you do increase your income, additional funds go towards accomplishing financial goals and building wealth and ultimately liberating you from the confines of the rat race and ending your financial struggles. If you're interested in building your savings, watch one of these videos next. Thanks for watching. Keep making money moves.