Even a monthly salary of ₹1 lakh can vanish within days if you’re not handling your finances wisely. With rising inflation, unpredictable expenses, and growing job insecurity—especially after massive layoffs at global tech giants like Amazon, Google, Microsoft, and Apple—many salaried individuals are struggling to manage their income.
For households where a single person is responsible for all expenses, the pressure becomes even greater. In many families, the salary gets credited and disappears almost immediately, leaving them wondering where the money went. The truth is: most people make financial mistakes that look harmless but silently eat into their income.
Here are the 9 biggest money mistakes that can drain even a ₹1 lakh monthly salary.
This is one of the most common and costly financial mistakes. Many people buy endowment or money-back policies thinking they are “investments.” In reality, these policies offer low returns and limited protection.
Financial advisors strongly recommend choosing term insurance for pure protection and investing the remaining money in mutual funds, which have the potential to grow significantly over 10–20 years.
Becoming a guarantor for a friend or relative may seem like a favour, but it carries serious financial risks. If the borrower fails to pay EMIs, the responsibility shifts to the co-signer. This can damage your CIBIL score and affect your own ability to take loans in the future. Always assess the risk before agreeing to co-sign.
Credit cards often charge interest rates as high as 36–40% per year if you pay only the minimum due. This can quickly double your outstanding balance. A bill of ₹50,000 can cross ₹1 lakh in just two years. The safest option is to always settle the full amount by the due date.
Whether it’s crypto, NFTs, or “guaranteed” schemes, investing without proper knowledge can be dangerous. A good rule of thumb is: if you can’t explain the investment in one sentence, don’t put money into it. Always study the product or consult an advisor before investing.
This is known as lifestyle inflation. When people start earning more, they often begin spending more—upgrading phones, buying cars, and indulging in luxury purchases. Savings stay the same, or worse, start shrinking. Financial experts suggest increasing investments proportionally whenever your income grows.
The moment you buy a new car, its value drops by nearly 20%. Add to that 5–7 years of EMI payments, and it becomes a long-term financial burden. Experts recommend purchasing a car only if your financial situation is strong, or opting for a second-hand or smaller vehicle instead.
Depending on a single investment can expose you to high risk. A balanced approach—combining equities, mutual funds, gold bonds, and other instruments—is much safer. Diversification protects you from market volatility and builds stable wealth over time.
A home loan that consumes half of your salary can severely restrict your financial freedom. Experts advise keeping your EMI below 25–30% of your monthly income. Over-borrowing reduces your ability to switch jobs, save for emergencies, or meet other financial goals.
Instant loans or payday loans may look convenient but often carry 40–50% interest. These can trap you in long-term debt and destabilize your financial planning. Creating a monthly budget and maintaining an emergency fund is a far safer alternative.
Managing money wisely is more important than earning a high salary. Even ₹1 lakh a month can feel inadequate if you fall into these common financial traps. By avoiding these mistakes, planning your expenses, and investing strategically, you can build long-term stability and ensure your salary truly works for you.
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