‘You aren’t building wealth’: CA Nitin Kaushik’s blunt warning about salary hikes and lifestyle upgrades

A salary hike feels like a reward for hard work, but what happens after the extra money hits your account can shape your financial future. Many young professionals quickly turn a higher income into higher expenses, leaving little room for investments. CA Nitin Kaushik has highlighted this common lifestyle inflation trap and shared a simple approach to make salary increments work harder. His advice is straightforward: instead of immediately upgrading your lifestyle, direct a meaningful portion of every raise towards investments and let compounding do the heavy lifting.

Salary hikes can quietly fuel lifestyle inflation

CA Nitin Kaushik took to X and warned that spending an annual salary increment on lifestyle upgrades can leave your savings rate “STUCK”. According to him, young professionals often increase their expenses as soon as their income rises. He pointed out that someone receiving a 15% salary hike may quickly shift to a more expensive flat or purchase a luxury car. These decisions can absorb the additional cash flow before any of it reaches investments.

The result is a familiar cycle: income rises, expenses rise alongside it and the amount available for wealth creation barely changes.

Kaushik’s 50% salary hike investment rule

Instead of allowing the entire increment to disappear into lifestyle upgrades, Kaushik suggested directing at least 50% of every salary hike towards existing monthly SIPs.

The idea is simple. If your regular income increases, your investments should increase too. By putting a portion of the additional income into SIPs, investors can potentially accelerate the effect of compounding and build a substantially larger corpus over time.

Importantly, this approach does not require people to cut their existing standard of living. The remaining portion of the salary hike can still be used for lifestyle improvements, while the other half is channelled towards long-term wealth creation.

The difference between earning more and building wealth

Kaushik’s larger point is that a higher salary alone does not automatically translate into greater wealth. If every increment is followed by higher rent, a more expensive car, bigger purchases and other lifestyle upgrades, the additional income can quickly disappear.

His warning is blunt: if investments do not grow alongside income, you may not actually be building wealth. Instead, as Kaushik put it, you are “just upgrading your expenses”.