Don't let your job cause lifestyle inflation!
I believe that lifestyle inflation is one of the most prominent causes of personal finance struggles for many people. For those who don't know, lifestyle inflation refers to the gradual increase in spending and lifestyle to match increases in income. It's one of the reasons why you see people making six figures living paycheck to paycheck. One of the major contributors to lifestyle inflation is corporate perks, especially company-paid events. These events are usually designed to reward employees for their hard work and to promote a sense of camaraderie among the team. However, these events can also encourage employees to spend beyond their means, leading to a pattern of unsustainable spending.
How Can My Job Influence Lifestyle Inflation?
Imagine that your company is hosting an all-expenses-paid team building weekend in a luxury resort. During the weekend, you and your colleagues are treated to five-star meals, spa treatments, and endless activities. While the experience may be enjoyable, it can also lead to lifestyle inflation. You may become accustomed to the luxurious lifestyle and start spending more on similar experiences outside of work. For client facing personnel, you may also experience the following:
Your team has taken clients out to lunch consistently for the past few weeks at one of the nicer steakhouses in town, and now you want to go there every time you have a guest.
Company sponsored happy hours I've gotten you in the habit of going to nicer places more frequently when you want to hang out with your coworkers after work, even if the company isn't paying for it.
Your company has sent you on business trips with first class or business class seats, and it's really hard for you to go back to coach.
Moreover, these events can create a sense of competition among colleagues, leading to a "keeping up with the Joneses" mentality. If you see your coworkers spending extravagantly on travel or other experiences, you may feel pressured to do the same to keep up with their perceived level of success.
It's important to note that corporate events aren't inherently bad, and they can be an excellent way to build relationships with colleagues and reward hard work. However, it's crucial to be mindful of the impact these events can have on your personal finances. Here are some tips to avoid lifestyle inflation caused by corporate perks:
Set a budget: Before attending a company-paid event, create a budget for any additional expenses you may incur. Stick to this budget and avoid overspending.
Focus on the experience: Instead of viewing these events as an opportunity to indulge in excess, focus on the experience and the relationships you'll build with colleagues. This will help you stay grounded and avoid overspending.
Be honest with yourself: If you find yourself feeling pressure to keep up with your colleagues' spending habits, take a step back and assess your priorities. Remember that everyone's financial situation is different, and it's okay to prioritize your financial goals over lavish experiences.
Corporate perks can be an excellent way to reward employees and build team morale. However, it's crucial to be mindful of the impact these events can have on personal finances. By setting a budget, focusing on the experience, and being honest with yourself, you can avoid lifestyle inflation and achieve long-term financial stability.