Lifestyle Inflation / It’s not how much you make, but what you save that matters

Your credit card lifestyle looks good but show me the money!

A question was posed by a young, single professional guy working in manila, in an online forum. He asked, can he live on a PhP 20,000.00 (roughly USD 425.00) monthly salary*? He wants to buy a condo, a car and save for his retirement. There were mixed responses.

Most were skeptical and felt that a PhP 50,000.00 minimum monthly salary is required in order to comfortably live in Manila and that’s excluding any hope to buy the condo, etc. Others were aghast. If others can live on a PhP 10,000.00 monthly salary, with a wife and kids, why can’t he? Many shared their optimism and experience of being able to save despite earning a low salary. Others expressed their priority of investing first in order to establish earning passive income before buying the house, condo, etc. I hold the latter view.

YES, you can live and still save, on PhP 20,000.00 a month in Manila

Indeed, most of us will initially view the amount of the monthly salary as significant, especially if one is a fresh grad like the yuppie above. However, I’ve learned that no matter how high or low the salary is, what matters is how much you actually save. As a fresh grad working in Makati, I look back on my salary with fondness. I remember feeling like it was the most that I have been paid in my life! Now, it is not haha.

I don’t think I was earning that much but I was able to budget and mostly save a portion (20%) of my monthly salary. I lived within my means and even had fun money to shop with. Meanwhile, others who earn upwards of PhP 100,000 a month, like ofws, still find their salary lacking and fail to save anything at the end of the month. Thus, it doesn’t really matter how much you make, it’s how much you save that matters.

The PhP 20,000.00 monthly salary is enough to live and even save, in Manila. Unfortunately for this male yuppie, his dreams of condo and car ownership and retirement savings, are still far beyond his reach at this time. The cost of living in Manila is so high that he can only hope to save, but at such a slow rate. He will eventually attain his goals though, with time and maybe luck in his investments (if any).

Resist the call of lifestyle inflation

Clearly, yuppie guy was prematurely bitten by the bug that is lifestyle inflation, which typically occurs once an individual starts earning an above-average salary. And this guy didn’t even get a raise yet! For the highly paid ofws, they never feel that they earn enough money usually because of lifestyle inflation.

Lifestyle inflation is simply spending more, once your income increases. It usually occurs once a person gets a raise or increase in his/her income, thereby perpetuating a life of debt. Persons who succumb to lifestyle inflation will always want something more, spend more and eventually need more income, which they feel will never be enough. They will never attain good financial health nor build up their net worth. They will always be stuck like a hamster running on a hamster wheel, always running (working) to earn more money.

While some form of lifestyle inflation is bound to occur, too much can be harmful – like what yuppie guy is contemplating. He is already planning to spend way beyond his means with money that he doesn’t even have yet.

Lifestyle inflation is a big hazard especially for lawyers, who are expected to dress well and live well, in court, with clients and in life. Society expects a certain lifestyle from us, and this is mostly harmful if lawyers allow this expectation and pressure to delude themselves to thinking that this is a sustainable lifestyle and then start living way beyond their means.

Let us always be vigilant and avoid lifestyle inflation. With every raise, there doesn’t always need to be a corresponding increase in expenses. Personally, with every raise, I try to challenge myself and increase my saving rate. I am now up to a 35% saving rate. On some months, I loosen up and go back to 30% haha. I am a work in progress after all, just like you.

In conclusion, I feel optimistic that yuppie guy can live on a PhP 20,000.00 salary. For every salary, anything is possible, as long as we prepare and stick to a budget.  How do you budget your salary?


20 something lawyer

*I use salary interchangeably with income here.  Most 20 somethings do not earn any income outside of their monthly salary.


6 thoughts on “Lifestyle Inflation / It’s not how much you make, but what you save that matters

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