Why earning Rs 20 LPA still feels like being broke -- CA explains middle-class money trap

Despite earning what many would call a dream salary, a significant portion of India’s middle class still feels financially trapped. Chartered Accountant Nitin Kaushik recently took to X to explain this paradox, highlighting why professionals earning Rs 15-25 lakh a year often feel like they're barely getting by. According to him, the issue isn't their income, but a "financial ambush"—a system that silently traps them in a cycle of stagnation. This ambush is a perfect storm of taxes, inflation, lifestyle debt, and a lack of financial education that silently drains even high earners.

A salary of Rs 20 lakh may sound impressive on paper, but the reality is stark. Once you subtract a substantial portion for income tax (around Rs 2.5-3.5 lakh), add major monthly commitments like home and car EMIs, school fees, rent, and basic living expenses, there's surprisingly little left. Kaushik argues this isn’t about being broke, but about being left with no disposable income to truly invest or build wealth. As he aptly puts it, "What you make isn’t wealth. What you keep and grow is."

Single paycheck

A critical point Kaushik raises is that most middle-class professionals have no income beyond their 9-to-5 job. Their entire financial life depends on a single paycheck. If the salary stops, so does everything else. This creates a state of extreme vulnerability, unlike the wealthy, who build layers of income from diverse sources like stock dividends, rental properties, or successful side businesses. The middle class survives on an income that comes with a giant pause button, while the wealthy have built a system that keeps generating cash flow, even when they’re not working.

Fancy new car vs stock investment

Another mistake Kaushik points out is the confusion between liabilities and assets. That fancy new car or apartment may look great, but the EMIs are a liability—a continuous outflow of cash that doesn't build wealth. Instead of purchasing an asset that appreciates in value, such as a stake in a company or real estate that generates rent, many are sinking their future earnings into things that either depreciate or simply eat into their cash flow. This is a crucial distinction that can mean the difference between a life of debt and one of financial freedom.

The I-trap

Kaushik also criticises the habit of parking large sums of money in savings accounts. With returns of 2.5-3% and inflation often running at 6% or higher, that money is effectively losing value every year. A Rs 10 lakh savings account might look safe, but its purchasing power is steadily declining. The goal, he says, should be to make your money work harder than inflation, not to watch it shrink.

The mindset issue

Perhaps the most significant barrier is the mindset. Many professionals shy away from financial literacy, often spending hours on Netflix or social media instead. They mimic the wealthy's lifestyle—buying designer shoes or dining out every weekend—but they skip what actually matters: establishing an emergency fund, starting SIPs (Systematic Investment Plans), or owning equity. The financial freedom we seek doesn’t come from a bigger paycheck; it comes from what we choose to do with it. Kaushik’s final advice is to break this trap: grow income streams, spend intentionally, own real assets, and upskill often.