Why a ₹20 Lakh Salary Can Still Feel Like Being Broke: A CA’s Take on the Middle-Class Money Trap
Thank you for reading this post, don't forget to subscribe!Even with what many consider a dream salary, a large portion of India’s middle class feels stuck in a financial bind. Chartered Accountant Nitin Kaushik explains this paradox, revealing that the problem isn’t the income itself, but a “financial ambush”—a perfect storm of taxes, inflation, and poor financial habits.
The Numbers Don’t Lie
While a ₹20 lakh annual salary sounds impressive, the reality is stark. After subtracting ₹2.5-3.5 lakh for income tax, there’s a huge chunk gone. Add major monthly expenses like home and car EMIs, rent, school fees, and daily living costs, and there’s often very little left over. As Kaushik points out, what you earn isn’t wealth; what you manage to keep and grow is.
The Single-Paycheck Vulnerability
A critical issue is the reliance on a single income stream. Most middle-class professionals depend entirely on their 9-to-5 job. If that salary stops, so does their financial stability. This is in stark contrast to the wealthy, who build diverse income sources from investments, rental properties, or side businesses, ensuring cash flow even when they aren’t actively working.
The Asset vs. Liability Trap
Many people confuse assets with liabilities. That brand-new car or fancy apartment might seem like a symbol of success, but the EMIs are a continuous outflow of cash that doesn’t build wealth. Instead of purchasing things that depreciate, Kaushik suggests investing in real assets that appreciate, like stocks or real estate that generates rental income.
The Illusion of Safety
Parking large sums of money in a savings account may feel safe, but it’s a trap. With bank returns of 2.5-3% and inflation often double that, your money is losing value every year. The goal, he advises, is to make your money work harder than inflation, not to watch its purchasing power shrink.
The Mindset Barrier
Perhaps the biggest hurdle is the mindset. Many professionals spend their time on entertainment instead of financial literacy. They mimic the flashy lifestyles of the rich—buying designer items and dining out frequently—but they ignore the essential steps that lead to true wealth: creating an emergency fund, starting Systematic Investment Plans (SIPs), and owning equity.
True financial freedom doesn’t come from a bigger paycheck; it comes from what you choose to do with it. To break this trap, Kaushik’s final advice is to intentionally grow your income streams, spend mindfully, own real assets, and continuously upskill.
