Earn more, save less? How lifestyle creep is quietly destroying your wealth; experts on how to break free

Earning a comfortable salary doesn’t automatically lead to financial success — and one real-life example makes that clear. A client of CA Abhishek Walia earned Rs 80,000 a month for five years. His lifestyle was modest — rent, groceries, EMIs, and an occasional weekend outing. Nothing extravagant. Yet, his net worth barely moved. Despite a stable income, money always seemed to slip away. The problem wasn’t what he earned — it was how he handled it.

The silent wealth drain

Each time his salary increased, so did his spending. A Rs 5,000 hike became a new subscription, while a Rs 10,000 raise turned into a new phone or dining upgrade. Slowly, expenses grew to match his income, leaving no room for meaningful savings. This subtle but dangerous pattern, known as lifestyle creep, quietly robs people of wealth.

“It’s not income that builds wealth — it’s behaviour,” says Walia. “When your spending grows with every raise, your savings don’t stand a chance.”

By the end of five years, despite earning over Rs 9.6 lakh annually, his savings rate was near zero. The financial treadmill kept him running but never moving forward.

Paycheck trap

The client’s situation wasn’t unique — it’s part of what experts call the “paycheck trap”. This occurs when income rises but savings stay stagnant.

Several factors fuel this cycle:

Higher taxes: As salaries increase, people often move into higher tax brackets, leaving less take-home pay than expected.

Lifestyle upgrades: Raises trigger new expenses — bigger apartments, expensive gadgets, or fine dining — that quietly erode financial gains.

Long-term EMIs: Bigger loans for homes or cars increase monthly commitments and interest costs, limiting flexibility and saving potential.

Social pressures: The desire to match peers leads to spending more on events, gifts, and experiences, diverting money from investments.

Mental accounting: Many treat raises and bonuses as “extra” cash meant for indulgence rather than investment.

Recognising these patterns is the first step to breaking free from the paycheck trap — and turning higher income into genuine wealth creation.

The fix

Instead of relying on willpower, Walia helped his client design a system that worked automatically.

30% of income was auto-transferred to SIPs and an emergency fund the moment his salary arrived.

He used two separate cards — a debit card for essentials and a credit card for discretionary spends.

Monthly reviews helped identify leaks and reset goals.

Six months later, without a raise, his savings grew to ₹1.9 lakh. The change didn’t come from earning more — it came from building smarter systems.

The lesson

Wealth isn’t built on big paychecks — it’s built on discipline, intention, and consistency.

CA Nitin Kaushik says 2025 is the year salaried Indians must “play the smart money game.” His advice:

Live on half your salary and invest the rest.

Diversify — mutual funds, gold, stocks, retirement schemes, or crypto (if understood).

Build a second income stream.

Get term and health insurance.

Avoid lifestyle leaks and peer pressure.

A Rs 70,000 vacation brings joy for a week. A Rs 70,000 SIP brings peace for life. In the end, smart money habits — not salary hikes — define true financial freedom.