As we speak to more and more people, a common refrain emerges: “I have no savings and cannot invest.” We hear this from not only people who have just entered the workforce bu seven from those who are in their mid-40s. Whether you’ve just started earning after completing your education or have been working for years with little to show for it, the lack of an emergency fund or investments can lead to a cascade of financial challenges. This problem is not confined to one region or income group—people from both rich and emerging economies struggle to save, let alone invest.
Even in the United States, which boasts a per capita GDP of over $80,000, many citizens remain unsatisfied with their incomes. While some Americans earn well above $150,000 a year, the average worker—such as those in manufacturing or port operations—earns closer to $60,000. By comparison, in India, where the per capita GDP hovers around $3,000, even top graduates like MBAs or chartered accountants might start with salaries around $12,000, and the brightest from premier institutes may earn about $25,000. The key issue is not income alone—it’s the ability to manage expenses and build a financial cushion.
The Underlying Problem: A Behavioural Issue
The root cause of inadequate savings isn’t solely a financial one; it’s psychological. Many people struggle to control their expenses, driven by impulses and societal pressures. In the United States, the phrase “keeping up with the Joneses” captures the challenge of matching peers’ lifestyles. In India, the pressure might be to emulate the spending patterns of high
profile families such as your friends and relatives. Our desires and expectations often outstrip our income, and without control over our impulses, the gap between our expenses and our earnings continues to widen.
Recent events—such as the COVID-19 pandemic—have underscored the risks of assuming that our income and health are guaranteed. Without adequate savings, investments, and insurance, any sudden downturn can trigger a spiral into debt and financial distress.
Why Do People Struggle with Debt and Savings?
Several factors contribute to financial distress and the inability to save:
- Low Income and High Expenses
– Incomes often do not keep pace with inflation, making it difficult to cover basic necessities.
– Rising costs of housing, healthcare, education, and daily expenses leave little room for savings.
– Further, the urge to do or get the best in everything adds to the problems. Sending children to the most expensive schools, buying SUVs and that too the most expensive model are examples of expenses that can cause trouble. The big items of expenditure always cause the biggest issues. An expensive trip to Europe or the USA and that too on EMIs is an invitation for trouble.
– We inherently have this urge to do better than our parents and family. If our parents didn’t have a car, we will probably have two and change the same every five years. Our parents lived in one house for thirty years and spent almost nothing on the interiors, we will change our house every ten years. Our parents went to Lonavala, Mahabaleshwar, Agra, Darjeeling for holidays, we will go to Paris, Vienna, Athens, etc. Our parents sent their kids to the neighbourhood English school with monthly fees of less than Rs 100, our kids will go to IB schools and colleges with fees close to Rs one lakh a month. One can do this after putting away 25 – 30% of their income as savings.
- Living Paycheck to Paycheck
– Many individuals struggle to cover their monthly bills, leaving minimal room for savings. – Unexpected costs—such as medical bills or car repairs—can quickly derail finances. – The absence of a financial buffer makes long-term planning challenging and adds to stress. 3. Lack of Financial Literacy
– Many people are not taught the fundamentals of personal finance, leading to poor money management decisions.
– Impulsive spending, misuse of credit cards, and reliance on high-interest loans can accelerate debt accumulation.
- Unplanned Emergencies
– Job losses, medical emergencies, or other unexpected events can drain any savings and force reliance on loans or credit cards.
– Without an emergency fund, even a short-term setback can have long-term financial repercussions.
- Psychological Stress and Mental Health Issues
– Constant financial strain can lead to stress, anxiety, and even suicidal thoughts.
– The pressure to match the lifestyles of more affluent peers can deepen feelings of inadequacy.
- Cultural and Social Pressures
– Societal expectations often push for extravagant spending on weddings, social status, and luxury items.
– The desire to maintain a certain lifestyle can lead individuals to live beyond their means.
Solutions to Overcome Financial Struggles
While financial difficulties may seem overwhelming, practical steps can help break the cycle of debt and pave the way to stability:
- Financial Education and Budgeting
– Gain a solid understanding of personal finance, budgeting, and investment strategies.
– Track every expense—write down all expenditures and review them weekly or monthly to identify areas where you can cut back. Remove all auto renewal subscriptions. You will quickly determine that you do not need most of the OTT subscriptions that you already have. Mobile phone, Broadband, OTT, apps, etc are fees that have a habit of creeping up over time. Review all such subscriptions and delete the ones that you no longer deem necessary.
– Download an expense app that will help you record and review all your expenses. Generally, when things become easy to order, your expenses climb. Easy usage on food delivery apps, leads you to order more that not only depletes your savings but adds to your waistline. Neither is good for you.
– Aim to spend on your safety and future first rather than on your present. Save at least 25% of your income and spend the rest. If there is no money left, postpone or do not spend on that item at all.
- Debt Management Strategies
– Avoid taking loans other than for education or a house. Both add to your wealth or income. They are good debt. Pay them off first even before you invest. Dont buy vehicles, vacations and consumer durables on loans. At the most, go in for zero interest EMIs but hidden charges and fees are likely to increase the cost. Do what your parents did, save and buy.
– Prioritise the repayment of high-interest debt using methods like the snowball or avalanche approaches.
– Consider seeking professional debt counselling to create a structured repayment plan.
- Building an Emergency Fund
– Set aside a portion of your income each month in a separate savings account. Invest the same in a liquid or short duration debt fund which is easily accessible.
– Aim to accumulate an emergency fund that covers at least six months of expenses. Additionally, consider saving extra for potential medical emergencies if your insurance is insufficient.
- Mental Health and Financial Counseling
– Don’t hesitate to seek support from mental health professionals if financial stress becomes overwhelming.
– Financial advisors can help you develop a roadmap for getting out of debt and building long-term wealth.
- Exploring Alternative Income Sources
– Consider side hustles, freelancing, or skill-based gigs to supplement your income, provided your main employer allows you to do so. Do not jeopardise your main source of income for a few extra rupees.
– Investing in further education and upskilling can open doors to better job opportunities and increased earnings.
Final Thoughts
Financial struggles are a harsh reality, but they are not insurmountable. Understanding the underlying causes—both financial and behavioral—is the first step toward breaking free from the debt trap, increasing savings and building a decent corpus. By implementing disciplined budgeting, strategic debt management and proactive planning, you can build a more secure financial future. Remember, seeking help from experts, support groups, or mental health professionals is a sign of strength, not weakness.
About EquiZen
EquiZen is a registered mutual fund and PMS distributor that offers personalised financial solutions focused on safety and transparency. Our goal is to help you achieve financial freedom —the freedom to do what you want and to realise your dreams. We do not push financial products; instead, we believe in using them judiciously to meet your specific needs. Learn more at [www.equizen.in](http://www.equizen.in) or contact us at +91 9820605203 or via email at sanjay@equizen.in.
