₹1 crore salary trap: Why high income does not equal financial freedom; CA identifies dangers of expensive lifestyle

Chartered accountant Anil Sagayanathan has sparked a significant conversation on LinkedIn. His post challenges a widely-held assumption about high salaries and financial security.

Sagayanathan points to a striking shift over the past decade. A ₹25 lakh salary once provided genuine comfort and stability. Today, even a ₹1 crore salary often leaves people feeling financially stretched.

The reason is lifestyle inflation, according to him. It quietly expands to consume every additional rupee of income.

As income rises, expectations tend to rise at the same rate. A bigger home replaces a smaller one. A luxury car replaces a modest vehicle. International holidays replace domestic ones.

Premium schools, higher EMIs, and aspirational purchases are gradually becoming the new normal. Income grows, but financial freedom does not follow. CA Sagayanathan identifies four ‘real traps’ that ensnare high earners.

The first is the CTC illusion. A ₹1 crore CTC does not mean ₹1 crore is available for spending. Taxes and deductions reduce the actual take-home figure by a considerable margin.

The second is invisible lifestyle inflation. A ₹40,000 EMI feels burdensome at ₹25 lakh income. At ₹1 crore, a ₹1.5 lakh EMI suddenly feels manageable. However, he believes that it does not mean such expenses are wise simply because they are affordable.

The third trap is peer group pressure. Social circles shift as income rises. Luxury that once seemed aspirational becomes the new baseline. The danger is not one expensive purchase but a permanent redefinition of what feels normal, he feels.

The fourth and most dangerous trap is high dependency. One employer, one salary, one large EMI and one expensive lifestyle do not constitute financial independence. They constitute high income tied to high vulnerability.

Anil Sagayanathan reframes the entire purpose of earning ₹1 crore. The goal should be to build assets that eventually make such income unnecessary. He does not recommend living in a way that requires that income indefinitely.

“The real objective of earning ₹1 crore isn't to look like someone earning ₹1 crore. It is to build enough assets that, someday, you don't need to earn ₹1 crore to maintain your lifestyle,” the LinkedIn post read.

He closes with a question worth sitting with: “So the right question to ask oneself: If my salary stopped tomorrow, how long could my current lifestyle continue without borrowing or selling assets? That answer may reveal more about your financial health than your salary slip.”

Social media reaction

“These high-paid jobs are always fragile, not dependable. You need to be careful while you plan your lifestyle. Save maximum, and then you spend. Otherwise, you are trapped,” wrote one LinkedIn user.

“A few years back in the US, an Indian was getting a very high salary, and he was having a cushy time. One day, he was fired, that's all. The entire family committed suicide,” the user added.

“Control your unnecessary spending, and your salary will look big,” suggested another user.