Lifestyle Inflation
BudgetingGlossary term
Definition
The tendency to increase spending as income rises, keeping the gap between income and expenses roughly the same. Also called lifestyle creep, it can prevent wealth building even as earnings grow significantly over a career.
Related terms
- Living Below Your MeansA financial philosophy of spending less than you earn, creating a surplus for saving and investing. This habit is the foundation of building wealth over time, regardless of income level. It requires distinguishing needs from wants.
- Savings RateThe percentage of income that is saved or invested rather than spent. Calculated by dividing total savings by total income. A higher savings rate accelerates progress toward financial goals and financial independence.
- Discretionary SpendingNon-essential expenses you choose to make, such as dining out, entertainment, subscriptions, and hobbies. This is the most flexible part of a budget and usually the first area to cut when trying to save more or reduce expenses.
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