The paycheque is bigger, but the wallet feels thinner. Across urban India, many salaried professionals are earning more than they did five years ago, yet they’re still anxious at the end of each month, juggling EMIs, credit card bills, and shrinking savings.
The culprit isn’t just stagnant salaries or rising costs. It’s what personal finance experts call lifestyle inflation—the quiet, creeping habit of spending more as you earn more.
And it’s starting to show up in debt data.
WHAT IS LIFESTYLE INFLATION?
Lifestyle inflation refers to the tendency to increase spending in line with income growth. A salary hike often triggers upgrades: a bigger house, a newer car, fancier gadgets, or more frequent eating out. But these expenses can quickly outpace actual earning power if not kept in check.
“It’s a major concern,” says Abhishek Kumar, SEBI-registered investment advisor and founder of SahajMoney. “Even professionals earning substantial salaries are left with limited disposable income. As their income grows, so do their expenses, often faster than the income itself.”
Over time, this pattern erodes financial flexibility. A higher salary that once promised upward mobility ends up funding short-term gratification and long-term liabilities.
A SALARY HIKE, FOLLOWED BY AN EMI
With every job switch or annual raise, many professionals slide into bigger EMIs and costlier routines. But when those income jumps are modest, the math doesn’t hold. “High earners are increasingly falling into what I call the ‘new middle class.’ They earn well but feel stretched every month,” says Kumar.
Buy Now, Pay Later (BNPL) schemes, no-cost EMIs, and credit card offers make it easier than ever to overspend. “These products change behaviour. They make expensive purchases seem affordable by breaking them into smaller chunks, but the cumulative burden strains monthly budgets,” he adds.
Debt often creeps in gradually until repayments consume a third or more of someone’s income.
THE WARNING SIGNS
The red flags of lifestyle overextension often go unnoticed. “Living paycheck to paycheck despite a good salary, relying on credit for groceries or bills, dipping into savings for everyday needs—these are all warning signs,” Kumar says.
Frequent use of short-term loans, missing credit card due dates, and falling credit scores are also markers that someone is living beyond their means.
These patterns are no longer rare. Personal loan growth among salaried urban professionals is at a record high, and delinquencies in BNPL accounts have been rising steadily.
CHASING SOCIAL MEDIA TRENDS
The psychological triggers behind lifestyle inflation are just as strong as the financial ones. “FOMO is real,” Kumar notes. “Social media creates the impression that everyone else is doing better. That pressure pushes people to upgrade faster than they can afford.”
A curated life on Instagram or an aspirational reel can influence everything from vacation plans to restaurant bills. But these comparisons often come at a financial cost.
COMPROMISED SAVINGS
Perhaps the most damaging effect of lifestyle inflation is what it crowds out: long-term savings. “When people spend more on lifestyle, they invest less for the future. And those early years are critical for building wealth,” Kumar says.
Missing out on compounding in your 20s or early 30s can delay financial goals by years. A few indulgences now might mean postponing retirement or taking on more risk later.
Financial restraint doesn’t mean austerity, but balance is key. “Start with the 50-30-20 rule. Allocate 50 percent to needs, 30 to wants, and 20 to savings and investments. It helps you stay grounded,” Kumar suggests.
He also recommends automating investments, limiting EMIs to essential purchases, and using a 24-hour pause before big-ticket buys. “Clarity is crucial. It’s not just about what you earn, but how you make that income work for your life goals.”
Because income alone doesn’t build wealth. Discipline does.