I’ve arrived. Now what?

What this means for managing your investments and insurance

Lifestyle inflation is often your biggest expense

Society often implies that your lifestyle costs should increase immediately when you earn more – often called lifestyle inflation or lifestyle creep. For example, the first thing people often do after getting a promotion or increase is upgrade their car. But the net result is that whatever disposable income uplift you’ve realised quickly gets swallowed up in your new monthly vehicle repayment. The reverse, however, is rarely true because if income falls people are far less likely to give up their cars. Experts calls this addiction asymmetry, and it explains our tendency to create habits around consumption more easily than reduction. Learning how to avoid lifestyle inflation is a smart money habit for young professionals looking to secure financial stability.

A higher income naturally means more choices, but this also creates more opportunities for debt lock-ins in forms like vehicle financing and home loans. While there is nothing wrong with these purchases since everyone needs a place to live and the ability to be mobile, if you’re willing to delay the bigger purchases by keeping your student car a little longer and continuing to rent, you may find that being more nimble and flexible means it’s easier to take the kind of opportunities that can broaden your career.

Pay yourself first. Spend afterwards.

Time is your greatest asset in growing wealth, so start saving as soon as possible.

A good rule of thumb is to allocate at least 20% of your income to savings and wealth protection, which you can use for emergency funds, debt payoffs, retirement annuities and wealth protection with life insurance for young professionals. When you’re younger, the regular habit of saving and investing is often more important than the value you put away. Just don’t leave everything in your bank account, since inflation erodes the purchasing power of money over time, causing wealth-building to stagnate. Talk to your financial adviser about investment options that offer both growth and easy access, with a level of risk that’s appropriate to you.

Protect your wealth from day one

In the same way that vehicle insurance protects your pocket against theft and accidents, life insurance for young professionals protects an even more valuable asset: you. It pays you an income if you’re severely ill and cannot work, including lump-sum payments for conditions like cancer and a stroke. Remember: you are most vulnerable to the impacts of anything permanent when you’re younger because you have your entire working life ahead of you. Taking out life insurance early also means your premiums are lower, with fewer exclusions for conditions you may have already developed.  If you have group benefits from your employer, check them carefully so you know your cover limits and what happens if you change jobs.

FAQs

What is lifestyle inflation?

Lifestyle inflation means spending more as you earn more, often on luxuries like cars or expensive homes. It limits savings and financial flexibility, making it harder to build wealth. Avoid it by budgeting wisely, saving first, and prioritising needs over wants to secure long-term financial stability and freedom.

Why is it important to start saving early?

Starting to save early helps your money grow over time through compound interest, making it easier to build wealth. It provides financial security, prepares you for emergencies, and allows for smarter investments. The earlier you start, the less you need to save later to reach your financial goals.

What does pay yourself first mean?

‘Pay yourself first’ means saving a portion of your income before spending on anything else. It ensures you prioritise savings, investments, and financial goals instead of just covering expenses. This habit helps build wealth, prepare for emergencies, and secure your future without relying on leftover money at month’s end.

Disclaimer

Disclaimer

The information contained in this video is intended for information purposes only and should not be regarded as financial advice.

Investec Life Limited, a member of the Investec Group, is a licensed Life Insurance Company and an authorised Financial Services Provider (FSP number 47702). Terms and conditions apply.

Investec Wealth & Investment International (Pty) Ltd, registration number 1972/008905/07. A member of the JSE Equity, Equity Derivatives, Currency Derivatives, Bond Derivatives and Interest Rate Derivatives Markets. An authorised financial services provider, license number 15886. A registered credit provider, registration number NCRCP262.

Focus and its related content is for informational purposes only. The opinions featured on the site are not to be considered as the opinions of Investec and do not constitute financial or other advice. The information presented is subject to completion, revision, verification and amendment.