Bill has been in the new job for six weeks. He likes it. The work is more interesting, the colleagues are sharper, the city is bigger. He is also spending in ways he was not spending before, not extravagantly, but consistently.
A gym membership in the new city: 35 euro per month. A coffee most mornings near the office: roughly 50 euro per month. A streaming service his flatmates recommended: 13 euro. A monthly train ticket home to see his family: 60 euro. None of these were in the May budget.
Lifestyle inflation is the tendency for expenditure to rise in proportion to, or faster than, income. Bill's income increased by 500 euro per month in September. His unplanned recurring costs in October add up to 158 euro per month. He has not noticed because each item felt like a reasonable response to his new context.
The revised monthly outflow is now 1,453 euro. Income: 1,400. The surplus has gone from a planned 185 to an actual deficit of 53 euro.
Bill is earning 56 percent more than he was in August. He is saving less in absolute terms than he saved in his first month of work.
The tip
After any income increase, run a recurring cost audit before the third month. Lifestyle inflation does not announce itself. It accumulates one reasonable decision at a time until the raise has disappeared.
Lifestyle inflation, October 2025: income +500 vs August. New unplanned recurring costs: 158 per month. Revised monthly result: -53 (deficit). Saving rate: negative. The raise has been fully absorbed.
Bill is 25. Every episode, we read his personal ledger through accounting eyes. / FY 2025 ledger