How is Gen Z affording iPhones, cafés and weekend plans on Rs 30,000-50,000? CA explains the uncomfortable truth

Recently, CA Nitin Kaushik took to social media to ask a question regarding one of the most commonly discussed topics: How does Gen Z afford their lifestyle with a Rs 30,000 to Rs 50,000 salary? He shared that Gen Z is able to afford iPhones, branded sneakers, cafés, cab services, food delivery and weekend plans. At first glance, it may look like they are high-earning individuals. However, the truth is that “looking financially comfortable and being financially comfortable are two very different things.”

Rs 50,000 is not the average Gen Z salary

The first thing that the CA pointed out is that Rs 50,000 is not the average Gen Z salary. He explained that freshers' incomes may vary from industry to industry and across cities. So while IT or service industry CTCs may start around Rs 3.5 lakh to Rs 6 lakh per annum, many non-tech graduates start closer to Rs 2.5 lakh to Rs 5 lakh per annum. Top product companies’ CTCs may be much higher. So, Rs 50,000 is not the typical Gen Z salary.

How come their lifestyle looks so expensive then?

According to CA Nitin Kaushik, Gen Z is not necessarily paying the full amount today for what they are purchasing. It means that phones are bought on EMI, shoes are purchased on credit, and holidays are paid for through EMIs. Food is ordered through apps and cabs are used instead of public transport. So, Rs 70,000 does not necessarily mean the entire amount was debited from their account. This can be one reason why visible consumption can be a bad indicator of actual wealth, as per the CA.

EMI economy

Loans and EMIs are not just about buying a house or funding education anymore. “Consumption-related borrowing has now become a significant part of household debt,” said the CA. For many salaried individuals in India, EMIs might already be taking a large chunk out of their monthly income. So, if someone is earning Rs 50,000, they may not necessarily have Rs 50,000 available to spend.

Small luxuries

The CA shared that, unlike the previous generation, which often saved money for years to buy a house, car or plot, the current generation thinks differently. They pay Rs 250 for coffee, Rs 500 for a cab, Rs 1,500 for dinner and Rs 2,000 for a concert ticket. When looked at individually, these purchases may not seem like much, but repeating them every week can quietly replace the money that could have been used for a bigger financial goal.

Lipstick effect

According to the CA, the lipstick effect is not about “iPhones or expensive lifestyles.” The idea became popular when a luxury brand’s CEO observed that lipstick sales were rising during the 2001 recession. The basic idea was that when people cannot justify a big or luxurious purchase, they tend to settle for a “smaller, affordable indulgence” that will make them feel good. So, Gen Z buying an expensive phone is not because of the lipstick effect. Instead, the CA says it might be because they cannot afford the big financial goal and hence indulge in small treats.

Defining normal

The CA says that social media has changed the meaning of normal. Nowadays, one does not have to be wealthy to look wealthy. Going to a café every weekend, wearing a branded outfit, purchasing a new phone or vacationing every few months, when one is exposed to seeing this often on social media, stops feeling like luxury and is considered “normal life.” Once normal gets defined as expensive, the salary starts feeling smaller even when there is a hike in income.

The CA asks if Gen Z is financially worse off. He then shared that this might not necessarily be the case. He pointed out that Gen Z has access to things that the previous generation did not, which include:

- Multiple ways to earn money

- Remote work and global opportunities

- The creator economy

- Digital investments

- Easier access to information

- More flexible career paths

But on the flipside, “consumption has also become frictionless.” The CA pointed out that digital payments make spending effortless, EMIs have started to make expensive products feel like they are affordable, food and cabs now arrive at your doorstep, and social media is constantly creating new wants. The challenge, according to him, is not earning money but keeping enough of it as wealth.

How much of Gen Z lifestyle is funded with wealth?

The CA shared that someone earning Rs 50,000 and investing Rs 15,000 every month may be building more wealth than someone earning Rs 1 lakh and spending Rs 95,000. An expensive phone, fancy dinners and frequent holidays may mean higher consumption, not higher wealth. Income can tell you what someone earns, spending indicates what they consume, however, it is net worth that tells you what they have actually built.