Lifestyle inflation refers to the phenomenon where individuals increase their spending as their income rises. While it's natural to want to enjoy the fruits of one's labor, unchecked lifestyle inflation can lead to overspending and financial instability.

One way to avoid lifestyle inflation is by practicing mindful spending and prioritizing long-term financial goals over short-term gratification. For example, instead of immediately upgrading to a larger house or a luxury car when receiving a raise, individuals can choose to allocate a portion of the additional income towards savings, investments, or paying off debt.

References:

• Investopedia - Lifestyle Inflation
• NerdWallet - Avoiding Lifestyle Inflation