Why A High Income Can Make You Poorer

Let’s have a real chat. You, me, this metaphorical coffee we’re sharing. Let’s talk about the one number that quietly defines our lives, fuels our anxieties, and dominates those awkward family dinner conversations: income .

You know the drill. An uncle cornering you at a wedding, asking with a sly grin, “So, beta, what’s the ‘package’ these days?” Or that silent, mental calculation you do when a friend mentions they just crossed the mythical ₹1 lakh-a-month mark. It’s the benchmark, the socially accepted certificate of having “made it” in modern India.

But here’s the thing, and it’s a truth that’s making a lot of us feel quietly crazy: that magic number doesn’t feel so magic anymore. You hit the target, you get the salary credited text, and yet… by the 25th of the month, you’re wondering where it all went. The big salary feels surprisingly small. The financial freedom you expected feels more like a slightly fancier cage.

This isn’t just you. It’s a widespread phenomenon I call the Great Indian Income Illusion. And understanding why this is happening is the first step to actually taking control of your financial life. So, let’s break it down.

The Magic Number Fallacy | Why We’re Chasing a Ghost

Our obsession starts with a simple, seductive idea: the CTC, or Cost to Company. It’s a big, beautiful number that HR departments love to dangle. But let’s be brutally honest CTC is a marketing gimmick. It’s the “MRP” of salaries; nobody actually gets that much.

Think about it. Your CTC includes things you never see in your bank account: the employer’s contribution to your Provident Fund (which is your money, just locked away), a hypothetical performance bonus that may or may not materialize, and sometimes even the cost of the subsidized lunch you get in the office cafeteria.

What really matters is your in-hand salary. And after TDS (Tax Deducted at Source), PF, professional tax, and other alphabet-soup deductions, that shiny ₹1 lakh CTC often shrinks to a much more modest ₹75,000-₹80,000. Right off the bat, 20-25% of your “magic number” has vanished into thin air. It’s the first crack in the illusion.

But the deductions are just the beginning of the story. The real culprits are two silent thieves working in the background.

The Silent Killers | Inflation and Lifestyle Creep

This is where the analyst in me gets really fascinated. It’s not just about what’s taken out of your paycheck; it’s about what your remaining money can actually buy. This is the core of the problem.

First, there’s The Inflation Beast . We hear the word on the news, but we rarely internalize what it means. In simple terms: the ₹100 note in your wallet today will buy you less dal, petrol, and movie tickets than it did last year. According to official data, India’s retail inflation has been a persistent challenge. For a deep dive into the numbers, you can check sources like theWorld Bank’sinflation data. What this means is that if your salary grew by 7% last year, but inflation was also 7%, you didn’t actually get a raise. You just broke even. Your purchasing power, the real measure of your income , stood absolutely still.

It’s a treadmill. You have to run faster every year just to stay in the same place.

Then comes the second, more insidious thief: Lifestyle Creep .

Remember when you got your first job? A shared flat, cooking Maggi for dinner, and taking the local train was perfectly fine. But with your first raise, you moved to a 1BHK. With the next, you started ordering from Swiggy more often. Then came the car EMI, the weekend trips, the subscription to five different streaming services. Your income grew, but your lifestyle grew right alongside it, and sometimes, even faster.

This isn’t a moral failing; it’s human nature. But it’s also a trap. We think a good salary in India should afford us a certain lifestyle, but we rarely stop to question if that lifestyle is actually making us wealthier or just making us run faster on that treadmill. This is why a person earning ₹2 lakhs a month can still feel “broke” if their expenses are ₹1.9 lakhs.

Beyond the Paycheck | The Metrics That Truly Matter

So, if CTC is a mirage and in-hand salary is being eaten away, what should we focus on? It’s time to upgrade our financial vocabulary. Here are the numbers that actually define a ‘good income’.

Your Savings Rate: This is it. The holy grail. It’s not what you earn; it’s the percentage of your in-hand income that you keep. Someone earning ₹70,000 and saving ₹20,000 (a ~28% savings rate) is in a far better financial position than someone earning ₹1,50,000 and saving ₹15,000 (a 10% savings rate). Your savings rate is your real measure of progress. It’s the money you pay yourself first, the capital that will eventually work for you.
Your Location-Adjusted Income: Let’s be real, the cost of living in India varies wildly. A ₹1 lakh salary in Mumbai, where a decent 1BHK can cost ₹40,000 in rent, is functionally very different from a ₹70,000 salary in Indore or Jaipur. The person in Indore likely has significantly more disposable income and a much higher quality of life. Stop comparing absolute numbers and start thinking about your purchasing power where you live.
Your Income Security: How fragile is your income? Is it 100% dependent on a single job in a volatile industry? Or have you started building a small, second stream of income? This could be freelancing, a small online store, or even rental income. Having multiple sources, even if one is small, dramatically increases your financial resilience. This is similar to how investors diversify their portfolios, a topic you might explore in a sun pharma share price analysis to see how different factors affect a single asset.

Redefining ‘Rich’ | Shifting from High Income to High Net Worth

This is the final, most important mental shift. Society teaches us to chase a high income. But the truly wealthy chase a high net worth .

What’s the difference? Income is a flow. It’s the money that comes in every month and, for most people, goes right back out. Net Worth is a snapshot. It’s the value of everything you own (your assets: savings, investments, property) minus everything you owe (your liabilities: loans, credit card debt).

You can have a very high income and a very low (or even negative) net worth if you spend everything you earn. Think of a high-salaried professional with a massive home loan, two car loans, and significant credit card debt. Their lifestyle looks amazing, but their financial foundation is shaky.

The real goal isn’t just to earn more. It’s to convert your income into assets assets that grow in value and, eventually, generate their own income. This could be through stocks, mutual funds, real estate, or even investing in a promising business. It’s about building a machine that makes money for you, which is the foundational idea behind things like anmb engineering ipo analysisevaluating a business’s potential to generate future value.

FAQs About Understanding Your Income in India

Is ₹1 lakh per month a good salary in India?

It depends entirely on your location, lifestyle, and savings rate. In a metro like Mumbai or Bengaluru, it can feel average once you account for high rent and living costs. In a Tier-2 or Tier-3 city, it can provide a very comfortable life with a high savings potential. The number itself is less important than what’s left after all your essential expenses are paid.

What are some high income skills to focus on?

Skills in technology (like AI/ML, cybersecurity, cloud computing), sales and business development, digital marketing, and product management are consistently in high demand. However, the best skill is one that you can turn into a service or business, creating multiple income streams instead of just one salary.

How can I fight lifestyle creep?

The best strategy is to automate your savings. The moment your salary increases, automatically increase your SIPs or transfers to your savings account. This “pays yourself first” method ensures that your savings grow with your income, before you get a chance to spend that extra money.

What’s more important for financial planning | income or net worth?

Income is the tool, but net worth is the goal. You need a decent income to build wealth, but your primary focus for long-term financial planning should be on steadily increasing your net worth by acquiring assets and reducing liabilities.

So, the next time you find yourself in that conversation about salaries, try to shift the focus, even just in your own mind. The most powerful question isn’t “How much do you earn?” but “How much of your life do you own?”.

It’s not about rejecting ambition or the desire for a higher income . It’s about channeling that ambition smartly. It’s about breaking free from the illusion and starting to build real, lasting wealth, one smart decision at a time. That’s a number worth chasing.