April 5, 2024
Navigating Lifestyle Inflation in the Age of Social Media
Lifestyle inflation is not a new phenomenon as most of us have been cautioned about “keeping up with the Joneses,” read the statistics and stories from The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley, watched Lifestyles of the Rich and Famous and MTV Cribs, or heard from the various financial pundits regarding debt and budgeting. However, in an era dominated by the 24-hour news cycle and social media, it’s become easier to fall prey to the allure of lifestyle inflation. Lifestyle inflation can be defined as the tendency to increase spending as income rises. The following article explores lifestyle inflation in the current media environment, as well as discusses a few of the dangers of social media on your happiness and lifestyle.
Social media platforms offer a glimpse into the glamorous lives of others; they also contribute to the perpetuation of lifestyle inflation. Carefully curated snapshots of lavish lifestyles fill our feeds as we scroll through Instagram or Facebook, flashing images of luxurious vacations, designer wardrobes, and extravagant dining experiences. Friends, acquaintances, social media influencers, and celebrities showcase their seemingly flawless lives, creating a perception of wealth and success that may not align with reality. This constant exposure to excess can subconsciously influence us to adjust our spending habits to match the experiences we are seeing online.
The risk of lifestyle inflation has been around for centuries. A new term has emerged to describe the distorted view of one’s finances, “money dysmorphia.” According to a recent report by Credit Karma, while 29% of Americans indicate that they are experiencing money dysmorphia, many of these same individuals have above average savings. The distorted view of their financial picture is likely having a negative impact on their happiness and self-esteem.
The Wall Street Journal recently reported on the world’s happiest countries based on data collected from the 2024 Gallup World Poll for the World Happiness Report. The United States fell from 15th place in happiness in the prior year’s poll to 23rd in the 2024 poll. More alarming was that Americans 30 years old and younger ranked 62nd in the poll. According to researchers, the decline in happiness for younger adults is likely attributable to spending less time interacting with people in person than on social media.
As individuals strive to maintain appearances consistent with the inflated standards set by social media, debt often becomes a consequence. The pressure to live up to unrealistic standards can drive individuals into debt traps. High-interest credit cards and loans become the means to sustain a lifestyle that is unsustainable in the long run, jeopardizing their financial stability and future goals. Establishing clear financial goals and priorities can serve as a shield against the temptation of lifestyle inflation. By distinguishing between needs and wants and adopting a disciplined approach to spending and saving, individuals can mitigate the adverse effects of social media-induced financial pressure.
Recognizing this article has presented social media only in a negative light, there are benefits such as unprecedented connectivity and exposure to opportunities for new experiences. However, social media also presents inherent dangers in a negative, potentially distorted, view of one’s situation fueling lifestyle inflation and dissatisfaction with your current circumstances. Knowledge and awareness will assist individuals in mitigating the adverse effects of social media on lifestyle inflation. Know your priorities for spending and learn how to balance your short-term enjoyment without harming your long-term goals.
As wealth management advisors, we are able to play a role in guiding our clients through the complexities of personal finance, particularly in navigating the challenges posed by lifestyle inflation. Education on budgeting, investing, and debt management empowers our clients to make informed decisions aligned with their long-term financial goals and objectives. Awareness of the influence of social media on spending habits may encourage an evaluation of your consumption patterns and adoption of strategies for financial success.