Is it a good idea to invest in LIC stocks in 2026? Welfin Best Financial advisor in Kolkata
For most salaried employees in India, the monthly “Salary Credited” notification is a moment of brief joy. However, for many, that joy is quickly replaced by the stress of EMIs, utility bills, and the dreaded “month-end crunch.” But why does this cycle persist even as your income grows?
The problem usually isn’t the size of your paycheck; it is the hidden leaks in your financial bucket. A recent study by Finology paints a worrying picture: one in four salaried individuals cannot survive even a single month if they lose their job. We are earning more, but we are living more dangerously.
To turn your paycheck into a path toward freedom, you must avoid these five common financial pitfalls that trap the modern salaried class.
1. Living Without a Safety Net (The “One Paycheck” Risk)
The biggest mistake is Optimism Bias the belief that your monthly salary is a permanent guarantee. This false sense of security leads to a lifestyle where income exactly equals expenditure, leaving zero room for error.
According to a survey of over 3 lakh millennials, 75% of Indians do not have an emergency fund. This means the majority of the workforce is operating without a financial shock absorber. A mere 30-day delay in salary could force a significant portion of the salaried class into immediate distress.
When you don’t have liquid cash during a crisis, you are forced to raid your future. The study shows that 57% of people would have to sell long-term investments (like breaking FDs or stopping SIPs) just to pay their EMIs if their income stopped. Worse, 15% said they would simply have to skip EMI payments, permanently damaging their credit scores.
2. Funding “Lifestyle” Instead of Assets (The Debt Trap)
Our parents mostly borrowed to build assets like constructing a home. Today, the trend has flipped. We are increasingly borrowing to fund a lifestyle we cannot yet afford.
Recent data shows that 55% of total household debt in India is now for “non-housing retail loans.” This means borrowed money is being spent on depreciating items like cars, gadgets, and vacations. This “Instant Gratification” culture is fueling a fire: credit card spending has surged 13x over the last 13 years. Using “Buy Now, Pay Later” schemes for luxuries effectively mortgages your future income, forcing you to pay interest on past expenses instead of earning interest on your surplus.
3. The “Mañana” Syndrome: Delaying Retirement Planning
“I am too young to think about retirement” is the most expensive sentence in personal finance. The math of compounding is brutal for those who wait.
Data shows that 93% of people above age 50 regret delaying their retirement planning. There is also a massive reality gap: while 55% of people expect a monthly pension of over ₹1 Lakh, only 11% are confident their current savings can deliver that. Many rely on corporate gratuity as a safety net, yet 99% of people eventually find that gratuity is woefully insufficient to cover actual retirement needs.
4. Being “Risk Averse” to the Point of Real Loss
Salaried people often confuse “safe” investments with “smart” ones. Fear of market volatility leads many to keep their entire corpus in savings accounts or traditional low-yield policies. According to SEBI, 80% of Indian households still prefer this “capital preservation” approach.
The problem? “Safe” money is silently losing value to inflation. With edible oil prices up by 17.4% and fruits by 13.8%, money sitting in a savings account at 3% interest is shrinking in purchasing power. By trying to avoid the “risk” of the market, you are guaranteeing the loss of value to inflation.
5. Confusing “Employer Insurance” with “Real Protection”
A common blind spot is over-reliance on company benefits. Many believe their Group Health Insurance is sufficient, ignoring that this cover vanishes the day they leave or retire.
This creates a dangerous “protection gap.” Currently, 82% of life insurance holders lack adequate coverage to replace their income for their families. Furthermore, 69% lack critical illness cover, meaning a single major diagnosis like cancer or heart disease could wipe out years of savings because a standard corporate policy isn’t designed for such high-cost events.
The Solution: Implement the 70-10-10-10 Rule
Identifying mistakes is easy; fixing them requires a behavioral guardrail. Instead of eating the “income pie” randomly, slice it the moment your salary hits:
- 70% for Living Expenses: Covers both Needs (Rent, EMI, Groceries) and Wants (Travel, Dining). If your expenses exceed 70%, you are living beyond your means and must cut lifestyle costs, not savings.
- 10% for Retirement: This is non-negotiable. Move this to an NPS, PPF, or equity fund immediately. Don’t be part of the 93% who regret waiting.
- 10% for Emergency & Debt: Use this to build your 6-month buffer or aggressively pay off high-interest credit cards.
- 10% for Wealth & Growth: Invest this in high-growth assets or upskilling. This is the money that builds your “rich” life, while the other buckets keep you “safe.”
Conclusion
Wealth isn’t just about how much you earn; it is about how few mistakes you make. If you can plug these five leaks, your financial future will stabilize itself. The market will always fluctuate, but your discipline is the only variable you can truly control.
WELFIN INSIGHT
“The right insurance amount is not the cheapest or the highest it’s the one that fits your life.”
