I have observed that if you increase your needs, the new 'increased need state' becomes your new norm after a while. For example, if you didn't have car before but then you purchase it, use it regularly and then when you don't have it anymore — you'll miss your car, you'll feel like you can't live without it even though you managed to live without it before.
Do you agree with this observation? Would you agree that it's better to not increase your needs in first place?
I agree with you OP. However, if you have improved your financial situation and you can afford to improve your standard of living, there's nothing bad about it. However, you should also consider the liability aspect of upgrading your lifestyle, if you can still continue to maintain that standard or not before upgrading to that level.
If you can maintain your new standard, there is not bad to improve your standard of living, but if you will not be able to maintain your new upgraded lifestyle, it's better that you stay the way you are, until the right time comes for improvement. You need to have a proper financial cash inflow management to know when to improve your standard of living or not.