It’s Not Your Income That Builds Wealth. It’s What You Spend.
Last month, I met a gentleman in his mid-40s. Well-dressed, articulate, and successful by most people’s standards. He worked in a multinational company and earned a handsome package—over ₹50 lakhs a year. His wife was also working, bringing in another ₹20 lakhs annually. With two bright kids, an owned house, and multiple vacations a year, it seemed like the dream life.
He came to me with a question:
“Can I retire at 50?”
As always, I began with the basics—income, savings, existing investments, liabilities, and monthly expenses. Income was strong, no doubt. Investments? Not bad, though not exceptional. Liabilities? A few EMIs—home loan, 2 car loans. And then came the expenses. Read more: Home Loan Repayment Strategy: Is it Better to Increase the EMI or Tenure?
I asked him, “How much do you spend every month?”
He paused, smiled, and said, “I don’t know exactly. Maybe ₹1.5–2 lakhs?”
I requested him to fill up numbers on a data sheet, for which he needed his wife’s help, and ended up with something closer to ₹3.5 lakhs.
To me, this was Normal. Not the numbers, but the shock he got after seeing the big difference between his assumptions and actual figures.
The Hardest Number to know is your expenses.
Ask people about their salary—they’ll tell you down to the last rupee. Ask them how much they’ve invested—they’ll proudly share their mutual fund folios and real estate portfolio. Ask them their goals—they’ll list child education, retirement, travel, home upgrade, startup dream, the works. Also Read: Why is Retirement considered to be the Most Important Goal?
But ask them how much they spend—the number is either a guess or a dramatically underestimated figure. And I don’t blame them. It’s not easy to look at your expenses honestly. Because it’s not just about numbers—it’s about choices, habits, emotions, and in many cases, guilt.
Expenses are personal. They reveal what we value, what we fear missing out on, and what we think we need to look successful.’ That’s why, even in financial planning, getting an honest picture of expenses takes the most time. Not because people are hiding anything—but because they genuinely don’t know.
Is Spending Bad? No, Not at All.
Let’s set the record straight: Spending is not the villain here.
Life is to be lived, and that often involves spending. As you grow, your expenses will naturally grow too—with inflation, lifestyle upgrades, children’s needs, aging parents, and evolving aspirations. Read more: What is Inflation and how it impacts your Financial Plan?
But here’s the catch:
If your spending grows unchecked, without giving enough attention to saving and investing for your future, that same lifestyle becomes a trap.
You spend to feel good today, but end up anxious about how you’ll maintain it tomorrow.
The real problem isn’t spending. It’s spending without a system.
It’s when your income rises and all of it flows into better clothes, fancier dinners, bigger cars, lavish holidays, and upgraded homes—but nothing flows into investments.
That’s when we see people earning ₹60 lakhs a year, living paycheck to paycheck.
A lot of this spending pattern comes from our past.
Some of us grew up in families where money was always tight. We saw our parents count every rupee, postpone every purchase, and prioritize needs over wants. Now, with good incomes and easy access to credit, we want to give ourselves and our children everything our parents couldn’t. It’s not about ego—it’s about healing an old wound.
Some others grew up in abundance, or at least saw parents who never worried much about spending. That sets an unconscious pattern—spend first, plan later.
In both cases, the pattern continues—until one day you wake up and realise that though you earn more than most, you have little to show for it.
Lifestyle Creep: The Silent Killer of Financial Freedom
There’s a name for this phenomenon. It’s called lifestyle inflation or lifestyle creep.
It happens when every increase in income leads to a corresponding (or even higher) increase in expenses. You were earning ₹10 lakhs and spending ₹8 lakhs. Now you earn ₹20 lakhs and spend ₹18 lakhs. Technically, you’re still saving the same. But in reality, you’ve missed a golden opportunity to build wealth. Read more: Achieve Financial Freedom – Work responsibly with money
You’ve made your lifestyle the priority. Not your future.
This is where most people get stuck. They think they’ll start saving more next year. After the next bonus. After the loan is repaid. After the child’s admission. After that one big vacation. But life keeps throwing new expenses. And savings remain a good intention, never a habit.
You need a simple mindset shift that changes everything:
“Income – Savings = Expenses”
Not “Income – Expenses = Savings.”
This one formula, if followed consistently, can change your financial life.
But for that, you need to know your expenses. Not vaguely. Not roughly. But clearly.
You need to sit down and ask:
- What do I spend every month, really?
- What portion of it is essential?
- What portion is emotional?
- What can be delayed, reduced, or consciously avoided?
It’s not about cutting everything. It’s about aligning your spending with your values and your long-term goals. Read More: Budgeting – Be aware of your expenses
Why Your Expenses Matter More Than Your Income
Your income gives you capacity. But your expenses determine sustainability.
Most financial goals—be it retirement, buying a house, funding education—depend on how much you need, not how much you earn.
You could earn ₹1 crore, but if your lifestyle demands ₹90 lakhs a year, you’re closer to financial anxiety than freedom.
On the other hand, a person earning ₹20 lakhs but spending ₹10 lakhs wisely may retire earlier and live better.
Wealth is not created by income. It is created by surplus.
Your expenses reflect what you value, what you prioritise, and what you’re building your life around.
If 80% of your expenses are impulse-driven or to maintain a social image, you’re likely not building a stable financial foundation.
But if your spending includes intentional joy, planned indulgence, and consistent investments for the future—you’re on the right path.
So next time you feel proud of your income (and you should!), also ask:
- Does my spending reflect my long-term priorities?
- Am I living today in a way that won’t sabotage tomorrow?
Because it’s not your income that will give you financial freedom.
It’s how well you understand and manage your expenses.
