PRETORIA - Almost a decade ago I got my very first permanent job. In the ten years since, my career has progressed. It has taken a few exciting and some unexpected turns and in this time, my paycheque has also increased quite substantially.

But here’s the kicker: I was able to survive on that first paycheque. And not only survive. I was able to afford petrol for my car (which I was privileged enough to receive as a gift from my parents), I could make the rent, I could eat. Actually, if I want to be honest about it, I didn’t just survive. I lived quite comfortably on that level of income. I went out with friends for a night on the town. I enjoyed my favourite escapism pastime of going to the movies often enough. I even spent money regularly on my guilty pleasure at the time – buying books.

So why is it that now, ten years later and earning multiples more, I sometimes get severely nervous that I will be struggling with cash flow issues before the next paycheque arrives? And why am I not insanely rich, seeing as those multiples could have been invested on the JSE with the All Share Index climbing 55% in the last five years?

Of course I couldn’t always live like that. There are definite stages in any person’s life and inevitably that comes with extra expenses and responsibilities. I would imagine my two-year old son would not be too comfortable if we were still living in a one-bedroom granny flat behind someone else’s house; neither would I. I had to upgrade the turquoise Nissan Sentra to a younger model that would be reliable for longer trips. I had to start paying for medical aid.

But, there has also been a healthy dose of lifestyle inflation thrown in the mix.

Lifestyle inflation is the unnecessary expansion of spending to match an increasing income. I suddenly earn more, so it becomes The Year of the New Couch. That was in 2010. Or The Year of the New Flat Screen TV (still to come, will keep you posted). On a higher income level it can become the The Year of the Porsche 911 and beach house in St. Francis Bay.

The latest Old Mutual Savings and Investments Monitor, released in July this year, shows that 16% of South Africa’s youth are not saving at all at the moment. There are various reasons for this, a particularly important one being that many of South Africa’s younger earners are taking care of older dependents in their extended families. Still, South Africans are not known for having a penchant for saving.

The modern consumer seems to rather like spending his or her money and often spends money that he or she does not even have. In a 2011 ScienceDirect article scientists Elizabeth Dunn, Daniel Gilbert and Timothy Wilson state that the shift toward immediate enjoyment and delayed payment represents a fundamental change in our economic system that undermines wellbeing in two ways.

The first is that it leads people to engage in short-sighted behaviour – people rack up debt and don’t provide for retirement. The second is that it eliminates anticipation, diminishing the happiness experienced when anticipated results are achieved – like saving for a year to buy that flat screen TV. Instead of enjoying the long-anticipated television, you stress about the instalments on your credit card.

So instead of being in a better financial position after you get a raise, you remain in exactly the same position because of lifestyle inflation. You keep chasing a higher lifestyle level, running like crazy on that hedonic treadmill.

This last term, coined already in 1971 by Brickman and Campbell, simply means that as you make more money, your expectations and desires rise in tandem with the increase in income, and therefore there is no permanent improvement in happiness. We always want more.

Some possible signs of lifestyle inflation are the following:

1. You always have a balance on your credit card.

2. You pay a substantial amount of money per month on the instalment of a flashy, expensive car.

3. You never save your bonus (if you’re lucky enough to get one), but plan months in advance how you are going to spend it. Or even worse, need to use the whole bonus to pay off your credit card debt as you’ve spent it already.

4. You are one paycheque away from serious financial trouble.

5. Buyer’s remorse is a term you know well.

6. You don’t just know the phrase “Keeping up with the Jones’”, you live it.

I have challenged myself with the following: The next time I get a windfall amount or a raise, I am maintaining the same lifestyle I currently have and putting the extra money away in some sort of savings or investment vehicle. And I am following my brother’s advice: Never, ever leave that money lying around in your bank account. You will find ways to spend it. Put it to work somewhere or in a notice account until you decide what to do with it.

So, be gone curse of the hedonic treadmill and lifestyle inflation! I know I can be frugal. And I choose to try to be.

Source- Moneyweb

'Desiji,
This is such a beautiful piece.
And this is the kind of write-ups I wish Nairalanders would do.
There is so much desire out there for the "next" big thing...
Pastors have made it worse.
They call it "the next level", shouting it at the top of their voice on the pulpit.
But truth is, how can you continue to create false hope for a people who know the real status of their finances?
It's not evil to want to make progress in life, especially finance.
But make sensible decisions galvanized by sensible hope that has a clear plan, not just wishful 'prophetic' hope.

I hope the few who read and ponder carefully on this will take home the lessons learnt.
Thanks bro.
You've said it well - Nigeria is suffering helplessly from this mentality.
God help us.
Cheers.