Biggest threat to middle-class is not layoffs, market crash or inflation: Gujarat CA reveals one thing quietly making all three worse

For India's middle class, financial insecurity is often associated with three major concerns: losing a job, a stock market crash or rising inflation. But a chartered accountant has highlighted another financial habit that could make all three problems much harder to handle over the next decade: excessive dependence on lifestyle EMIs. In a social media post, the CA argued that people often worry about market movements and job security but pay little attention to how much of their monthly income is already committed to loan repayments. This, according to the post, could become a bigger financial risk for middle-class households.

The problem is not necessarily taking a loan to purchase a house or meet an important financial requirement. It is the growing tendency to finance everyday lifestyle choices through EMIs, even when people can technically afford to make the monthly payments.

A smartphone purchased on EMI, a two-wheeler financed through a loan, a holiday booked using a no-cost EMI offer and even wedding expenses funded through personal loans may appear manageable individually. However, when these payments accumulate, they can leave households with very little financial flexibility.

Why lifestyle EMIs could become a bigger financial problem

The CA explained that excessive EMIs can make an already difficult financial situation considerably worse. Consider someone who loses their job unexpectedly. A person with limited monthly loan commitments may be able to manage expenses using savings while searching for another opportunity. But someone who spends nearly half their salary on EMIs could quickly find themselves struggling to meet basic household expenses.

The same problem can emerge during a stock market downturn. Investors who have sufficient savings and stable cash flows can potentially wait for markets to recover. Those who need money to pay monthly instalments may have little choice but to withdraw investments or sell assets at an unfavourable time.


Inflation creates another challenge. When food, fuel, education and healthcare expenses increase, households normally try to reduce discretionary spending. However, loan repayments remain fixed obligations. This leaves people with fewer options to adjust their budgets.

In other words, lifestyle EMIs do not necessarily cause a financial crisis. But they can make the consequences of one considerably more painful.

How much of your salary should go towards EMIs?

One of the suggestions in the CA's post is to calculate the total EMI burden rather than looking at individual loan payments.

The post offers the following broad guidelines based on monthly take-home income:

• Below 30%: A relatively comfortable level of EMI commitments.
• Above 40%: A warning sign that household finances may be becoming stretched.
• Above 50%: A high-risk situation in which even one unexpected expense or income disruption could create serious difficulties.

For example, someone earning Rs 1 lakh per month and paying Rs 20,000 towards different loans has an EMI-to-income ratio of 20%. However, if the same person is paying Rs 45,000 towards a car loan, personal loan, smartphone and other purchases, nearly half their monthly income is already committed.

The calculation should also account for credit card dues, buy-now-pay-later services and other short-term borrowing. Looking at each payment separately can hide the actual financial burden.

Your month-end bank balance could reveal the problem

The CA also suggested paying attention to how long monthly income lasts. If a salaried person consistently runs out of money before the month ends and starts using credit cards to purchase groceries or meet routine expenses, it could indicate that fixed financial commitments have become too high.

This is an important warning sign because the problem may not be a low salary. It could be the amount of income that is already committed before the month even begins. Many people track their investments, mutual fund returns and stock portfolios regularly. However, they rarely calculate how much of their salary is left after all loan repayments.

What should middle-class households do to protect themselves?

The post recommends changing the order in which people allocate their monthly income. Instead of paying EMIs, spending on lifestyle choices and investing whatever remains, households should prioritise building an emergency fund.

The suggested approach is to:

1. Build an emergency fund: Keep savings equivalent to at least six months of essential expenses in an easily accessible form.
2. Calculate total EMIs: Include every loan, credit card repayment and pay-later commitment to understand the actual debt burden.
3. Prioritise savings: Transfer a portion of your salary towards emergency savings and investments as soon as it arrives.
4. Avoid unnecessary borrowing: Think carefully before taking loans for purchases that lose value over time, particularly when they are not essential.

The underlying argument is that people do not necessarily need a higher salary to improve their financial position. Sometimes, controlling fixed expenses and reducing unnecessary borrowing can make a meaningful difference. A market crash, inflation or a layoff may be beyond an individual's control. But the proportion of monthly income committed to lifestyle purchases is something households can examine and change.