Have you noticed some of the bigger houses in your neighbourhood? Maybe even your own extra-large house? Our eyes tend to size up our neighbours’ things more than ours. It’s like you are sitting in the restaurant and the next table’s rump steak looks bigger than yours. It’s all 250g, the chef weighed them.
Lifestyle inflation is self-made inflation. Unlike economic inflation that you cannot control, your lifestyle costs are something you can control. It’s a tough race to run with baggage on your back, that’s lifestyle inflation. Bigger is not always better. Here is an uncomfortable truth before you complain about your salary, first look at your lifestyle costs. Don’t jump into your savings pot in the two-pot system to fund your lifestyle costs either.
Is a R100k Salary Enough? The Trap of Lifestyle Inflation
The other day I read an interesting story of a mom complaining that her R100k salary is not enough. Ah, that sounds absurd to most of my friends and most people I know. How can a R100,000 salary finish before the month is gone?
This individual went a step further on Instagram and showed her expenses. At first glance you would say poor lady, she needs a salary increase. Not so fast. After taking a closer look at her bucket, you can’t help but see many holes leaking cash.
You can’t collect water if your bucket has visible holes, plug these today. The problem with lifestyle inflation is your eyes can become blind to the holes leaking cash. You can even start to confuse needs and wants. This is how people are wired. We often exaggerate our problems.
It’s like a child with a scratch on the leg who reasons, “I am hurt since it’s bleeding.” My son had his first rugby game the other day. Brave young dude, he was putting his body on the line. He managed to score his first try. I asked him afterwards when I saw him limping and he said he almost popped his intestine in a tackle 😀 classic children’s exaggerated story.
The Math Behind Financial Freedom: How to Stop Leaking Cash
Listen, lifestyle inflation is not child’s play. Before you feel sorry for yourself, give yourself tough love. I mean check all your numbers intently.In fact, if you are earning R100k per month, please don’t complain to me. I am nowhere near your fat payslip. Jokes aside, even your employer will not be impressed by you complaining about your R100k salary SMS. If you consistently save and invest 15% of a R100k salary, in 10 years you could end up with over 2 million rand. Just imagine. Since financial freedom equals income minus lifestyle costs, it is highly important to lower your lifestyle costs. Most households fail not because of low income but because their lifestyles expand faster than their salaries.
Financial Freedom = Income − Lifestyle Costs
For sure, if you are serious about blocking leakages in your financial bucket, you will be able to come up with savings and investments. Cheer up if you are like me and my friends who don’t earn anywhere near R100k, the math still works nevertheless. It only requires discipline and consistency.
Life is about choices. You can buy all your groceries at Woolworths and say your salary is not enough, while neglecting Checkers, Spar or another cheaper option. It’s not a secret that some retailers cost an arm and a leg for the same things you could get for less somewhere else.
Woolworths vs. Checkers: The Real Cost of Retail Convenience
Let’s take blueberries for example. Apparently, these black coloured fruits we call blue are packed with antioxidants. Talk about colour blind 😀
The other day I bought a 400g blueberries tub for R117,99 at Woolworths, good quality, right? Checkers had the same quality 350g tub for R89,99. That’s a R28 difference. Obviously, Woolworths is a bigger tub, the bigger the better. It’s like paying R15 for 50g of berries. Not sure how many berries weigh 50 grams.
Do the math and make your choice. It’s not that the antioxidants in Woolworth berries are more than those in the Sixty60 motorbike. Talking about the delivery motorbike, these speedsters come with added cost. You are better off walking in the store on your own. It’s your money after all. You decide how much you would like to pay.
European Luxury vs. Chinese SUVs: A R300k Budget Decision
If you want financial freedom, you need to know your real lifestyle costs. Leave it to chance and whatever you are earning will not be enough.
Please don’t be lazy. Advertisers will tell you what you need in your life if you allow them. Be a tough cookie, my life my rules. Following the normal life blindly leads to a programmed inflated lifestyle.
No wonder you reason that your top of the range luxury European SUV is a need. Have you seen how many Chinese SUVs are currently flooding the South African market? Most people are tired of following brands for the sake of it. Cost is a real consideration, not just brand names. Instead of spending R800k on a European midsize SUV, many South Africans are now choosing tech-loaded Chinese HEVs closer to R500k. We are talking a difference of R300k that you could invest in your tax-free ETF.
Your lifestyle should be tailored to your needs, not your neighbours’. In order to calculate your financial independence number, you need to calculate your actual lifestyle costs. The bigger the lifestyle costs, the bigger your financial independence number. No wonder it feels impossible for some people to pursue financial independence. For you, your financial independence number might end up being more than R30 million over time if you are spending at least R100k per month.
How to Calculate Your Financial Independence Number & Plug the Leaks
Do you remember those days we used to visit clothes tailors? The tailor needs to measure your waist before making your gown.
It’s the same with your lifestyle, specifically suited to you. Run your numbers, don’t just copy your friends. You might end up with extra-large pants and no more waistband folding tricks. Visit the tailor and adjust them. The bigger the better is not particularly true for your lifestyle inflation. Careful, you might just be making yourself poorer in the process.
Lifestyle inflation in South Africa might be one of the main issues why so many people stay behind financially. Chasing higher salaries is not the solution.
Your practical weekend homework:
- Track your leaks: find the hidden holes in your financial bucket this week.
- Audit your needs and wants: Befriend a highlighter and your bank statement.
- Create your own intentional spending plan: If you don’t have a budget, start here. Don’t let advertisers choose where you should spend.
Financial freedom is not built by impressing strangers with large lifestyles, it’s built by controlling your money before it controls you.
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