Why Most People Stay Broke Despite Earning More

You recently got a raise, a promotion, or you've just closed a huge deal. Yet, your bank balance doesn't seem to change; it still looks the same or worse. Why?

You're not alone. I too used to wonder why. Here's a story from my personal experience. I am a full-time stock trader who has his ups and downs. I've given back a lot to the market in the name of learning and experience. I started trading back in 2019, and 3 years later, through many highs and lows (it was hard, trust me), I started becoming a consistent trader. I started to trade for a living. I was earning enough to have savings and provide back to my family. But during the first year of consistent earning and profits, I couldn't save anything. My bank balance, most of the time, remained the same. There were also times when I used to withdraw some of my trading capital in case of emergency, which is a clear sign of poor money management. I needed to change. I was good with trading and its related activities but a total loser in money management. I started reading books that can help me become better at personal finance, and that's when I realized I wasn't alone. Just like me, most people stay broke not because they don't earn enough but because they don't manage what they earn right.

The Myth of Income as a Wealth Builder

You're probably thinking that the solution for you to get out of the spending trap and finally start saving and investing is to earn more than what you do right now. It sounds applicable in theory, but not so much in real-life situations. If you can't save anything now, you won't save anything later in spite of salary hikes and promotions. Trust me. This is why "Earn more and you'll save more" is a false assumption and a trap that the majority of us fall into.

You might've heard of the concept of Lifestyle Creep or Lifestyle Inflation. Lifestyle Creep is the reason why I wasn't able to level up my personal finance game. And I firmly believe that it's the same for you. Lifestyle Creep is the tendency to spend more as your income rises. Instead of allocating the extra income as savings or investment, we, as humans, by default, simply spend more. It's wired to our brain by default, and you're not at fault here if you are not aware of it, but it is otherwise. This constant urge to spend more leads to wanting a higher standard of living, like buying better quality clothes, a better car, a better house, and many other leisurely spendings. And this, my friend, is that trap—the trap that makes your bank balance look the same even when you're earning more and more. You fall into this trap, you never save and invest for your future self, your present eats away your emergency medical funds, your future fees, and most importantly, your future earnings.

Invisible Money Leaks

When I started really auditing how I spent my earnings, I came to the realization that more than 50% of my spending went without my notice. In other words, my money was leaking, and it was invisible—I didn't notice it at all. Most of the time, these invisible money leaks were:

• Subscriptions. OTTs, music streaming, and app subscriptions that I don't even use. I'm not saying that you must not subscribe to anything, but don't overdo it. You need a music streaming app? Good, subscribe to one platform, and that's enough. The same goes for the others as well. The point is—cut the unnecessary.

• Emotional spending. If you're a spur-of-the-moment person like me, then probably you have this too. I go out for a walk, I see something, I make up a story in my head of how I needed it. And just like that, another Rupee spent. This is emotional, and there is no clear logic behind it. I've learned to avoid this by thinking it through more than twice, and if it's costing me more than 10% of my income, I like to use the 72-Hour Rule to think it through. The 72-Hour Rule is when you give yourself 72 hours for reflection, cooling off, and thinking clearly if you really need to make the buy.

Financial Literacy is a Bigger Problem than Low Income

The average monthly salary in India typically ranges between ₹15,000 and ₹20,000 from recent reports. Whether it's a good or bad number is not for me to decide, but in my opinion, if the financial literacy in India is higher than what it is right now (currently 27%), we will have a better standard of living in spite of whatever the average monthly salary is. The global financial literacy rate is 42% (on average), and as Indians, we still have a lot of work to do.

Honestly, most schools don't teach us about money skills, how we should manage it, save it, and invest it. The only way we acquire this knowledge is through the experiences of others and no formal education. This is the main reason why I started this brand.

Why Budgeting Alone Doesn't Work

The first thing that comes to our mind when we think of budgeting is allocating strict fixed percentages of our income to different categories like savings, investing, personal spending, fuel, blah blah blah. That's the traditional way of budgeting. But the problem with this system is that it's really frustrating and restrictive. One needs a heck of a discipline to stay on track, and it's almost impossible unless you are a flawless being. Instead of the traditional approach, what really works is conscious budgeting and spending.

What Actually Works

In conscious budgeting and spending, you automate a certain percentage of your income as savings and investments—this is your way of securing your future and uncertainties and there should be minimal or better no involvement from your side at all, for example, on your payday, 30% goes to investment instrument directly and 10% goes to your savings account by automation, no question asked. After automating your savings and investments, you spend your earnings only on assets and things that you truly love and enjoy. I've been practicing this lately, and I think this method is what will be working for me.

Build a vision and upgrade your financial literacy regularly.

Conclusion: Break the Cycle

Now that you've understood why most people earn more but couldn't save, it's your turn, and I truly hope you break this cycle of earning more and spending more.

Don't just make more. Manage better and grow wealth with intent.

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