Recently, a post by Dr. Garg went viral. He talked about a couple who together earn ₹3 lakh every month. But despite this, they are unable to save anything at the end of each month. In fact, the various news reports and social media discussions around this showed that this is not an isolated case. Many high earners in India are facing the same problem. So in this post, with proper research, we will see what the root cause is, how couples are getting trapped in this financial trap today, and most importantly, whatever your income, how you can get out of it. We will look at a simple, easy framework. And yes, there are two main aspects to getting out of a financial trap.
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| One Couple Salary Is 3 Lakh But Savings 0 |
The first is that we should be able to save some money every month, and also invest that money properly. If a family's income is ₹3 lakh per month, generally, you would think these must be quite well-settled people. They would live in a big house, drive an expensive car, send their children to a good school, and even then they would be planning their retirement quite well. But let's see what came out of the post that Dr. Garg shared. He took a real-life example from a metro city, where a couple has a combined family income of ₹3 lakh. But their expenses are also quite high. So out of that, the rent or EMI they pay is around ₹60,000–₹70,000. Their school fees are ₹25,000–₹30,000 every month. These are the biggest expenses. Apart from this, there is also a sizable car EMI, fuel, support for the family, daily lifestyle expenses, house help and subscriptions. And all these third-category expenses together take around ₹1.5 lakh. In the end, nothing is left.
How to Detect Financial Trap?
So the question now is: is a couple like this actually in a financial trap or not? How do we find out? For this, we need to ask ourselves three questions. First, can my family survive for 6 months on just one income? In fact, you can ask yourself this question too if you are unable to save. In this case, if we look at it, the answer is a clear no. Both incomes are already required to cover the monthly expenses. Second question: is there any fixed cost right now that can be reduced? In our test case, their major fixed costs are the home EMI, school choice, or car EMI. Can these expenses not be reduced? The answer is no. Third question: is there an actual backup plan that if one person's income in the couple stops, can the expenses still be managed? For example, do they have an emergency fund? Or if someone loses their job, is there a solid plan to get a job again? In this case too, the answer is no. You can ask yourself the same type of questions if, by chance, you are not able to save. If two or more of these questions have no answer, then somewhere, you are in a financial trap. And something similar can be seen in this couple's case as well. But I will show you another real-life example of a couple later in the post, where the income level is similar and they are able to save and invest quite well. But before that, let's understand what the reasons are. This two-income trap that we have started seeing in India today. There are two reasons behind this two-income trap.
Behavioral Pattern
The first and primary reason is behavioral patterns. People think growth will continue, raises will keep coming. That's why we can afford it. This feeling comes automatically because we have two incomes. A lavish house was chosen because there are two incomes. Expensive schools were chosen because there are two incomes. We upgraded the car because we still have two incomes. Luxury lifestyles, like eating out four times a month or buying a good phone even if it has to be bought on EMI. Foreign vacations— we can easily afford all these things because there are two incomes. But do we really need all of these? Our decisions are not being made according to our needs.
Bidding War
The secondary reason is the bidding war. Let's understand this a little more carefully. Imagine there is a good, safe locality where everyone wants to live. The number of houses in that locality is fixed. Earlier, when most people were single earners, their affordability determined the prices there. But now you can pay more money for the same houses. Most families have two incomes and banks are also approving loans based on two incomes, your affordability increases. Because of this demand-supply mismatch, house prices in micro-markets have increased significantly. This is why today many families end up spending 50% of their income on home-loan EMIs. Because we are targeting those same micro-markets and we are ready to buy those houses at whatever maximum price we can afford. Similarly, take the example of schools. In the top school where you want to educate your children, many people want to send their children. But seats are limited. The same bidding war is happening there. Supply is limited, demand is so high, so school fees keep increasing. This is what we call a bidding war. This is also a major reason why our expenses keep increasing while our savings become negligible.
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Are Savings Impossible?
But is nobody able to save in these cities? For that, we need to look at another example of another couple, where the income bracket is the same, in a similar type of city. The combined in-hand income is ₹3.5 lakh per month. But they are investing ₹2.5 lakh every month. That means they are able to invest roughly 70% of their income. Their reasoning is: we don't want to buy a house because 60–70% of our income could go into EMI. This is a major reason why they currently prefer to live on rent. They live on rent. They have only one car, which they paid off quickly, rather than taking another loan to buy a luxury car. And they are investing in their biggest monthly line item, rather than a leftover item, which is a mistake many of us make. Let's understand this a little more carefully.
Traditional vs Investor Mindset
Look, most people who do their financial planning every month—how do they do it? Our salary comes in, our income comes in, whether it is business income, professional income, or any other type of income. From that, we first deduct all our expenses. Then if any money is left, we either save it or invest it. So the traditional mindset is: income minus expenses equals savings. This is what generally happens. So what happens? Our expense bracket becomes so large that many times it becomes almost equal to our income. So our savings become zero. But on the other hand, if we adopt an investor mindset. What is an investor's mindset? Whatever income comes in, we save or invest first. After that, whatever money remains is used to run the household, meaning for expenses. This can make our expense planning much better. That is what we are seeing in the second example. The main target of that couple is to save and invest their money. But the question is: is it really necessary to save and invest so much? Shouldn't we live a good lifestyle today as well, and why shouldn't we enjoy a good lifestyle? Yes, you are absolutely right. You have every right to enjoy a good lifestyle. But the question is: will we be able to maintain this same lifestyle for our entire lives? Have we planned for emergencies? What if one of the two salaries goes away for some reason? Number two: after retirement, will you still earn as much money as you are earning today? The first thing is that most people today do not have a pension. We have to plan for our retirement ourselves. The lifestyle we want to live today is something we want to continue living in the future too. That is why saving and investing becomes important. So from these examples, what is the biggest takeaway? Look, the difference is not in income. The difference is what you do with each unit of income. Suppose, out of ₹3 lakh, one person's income is ₹2 lakh. That income can be used to create the entire household budget. The second income can be kept completely as a reserve. Now how you plan that reserve—whether you invest it fully or do something else— depends on you. Here, your personal finance is obviously your personal decision. You may think: if monthly expenses are already so tight, how can we keep the second income as a reserve? If that doesn't seem practical, there is another easier way. Don't look at the combined income as two separate incomes. Treat it as one income instead. You can plan that total income.
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Frameworks to Avoid Two Income Trap
Now if the total income is ₹3 lakh, can we save ₹1 lakh out of it? At least, in one example we saw a couple with ₹3.5 lakh income saving ₹2.5 lakh as well. We are simply asking: can we save just ₹1 lakh? Suppose the husband and wife have equal incomes. If each earns ₹1.5 lakh, can they save ₹50,000 each every month and invest it somewhere? Now your next big question will be: how do we save roughly one-third of our income? So here, first rationalize our major expenses. For example, can we rent a home? Is it necessary to pay a ₹70,000 EMI? Generally, rent is cheaper in any metro city in India, so you can live on rent at a lower cost, or you can buy an affordable home. And even for buying an affordable home, the EMI should not exceed 30% of your combined salary for the home loan. Then we saw another major monthly expense: school fees. A lot of money is going into this. So can this also be rationalized? Can we do a little more research and identify a school that is good for the children, but at the same time is also good for our pocket? The third major expense we saw was that people also have a very large car EMI. Can we rationalize this too? Instead of buying a car worth ₹15 lakh or more, can we manage with a ₹7 lakh car? Instead of buying two cars, can we manage with just one car? We can use public transportation for the rest of the time. Then whatever we are spending on travel and luxury. Many people today want to go on foreign vacations. Look, early in life, if we start spending so heavily on travel when our pocket does not allow it, many times people even start taking loans for it. Buying very expensive phones, spending so much on gadgets—look, I am not saying you should not do these things at all. It's simple. You have to decide what is most important for me. For that, make your own budget so that you will not spend more than this amount every month on all these luxuries. Once you rationalize all these major expenses and reduce them a little, you can easily save ₹1 lakh. if we are taking the example of a ₹3 lakh income.
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And if we save ₹1 lakh per month, how large a corpus can we get after retirement? So, suppose you have 15 to 20 years left until retirement, and we assume you earn a 12% return on it, this can create a good retirement fund of around ₹5 crore to ₹8 crore for you. And naturally, you won't save only ₹1 lakh. Your salaries will also increase in the future. You can increase this amount further. And this post is not just for one household. It is also important for new couples and singles who are just starting their lives and are about to make decisions about big houses, big cars and so on. I am sure many people will have questions about how much money to save and how to do it. This post may be helpful for them.
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