Why India’s middle class is finding it harder to manage money than earn it

How much should go into an SIP? Should you use your surplus to prepay your home loan or invest it? Is your health insurance enough? Should you save for your child’s education first or focus on retirement? And if you open social media, you’ll probably come across another expert recommending a new investment idea.

For India’s middle class, earning money is only one part of the financial journey. Managing that money is probably even tougher than earning it. With hundreds of financial products, endless advice on social media and changing financial rules, making the right money decisions often feels harder than earning the money itself.

The picture was different about 20 years ago. Most families had only a handful of savings options, such as bank fixed deposits (FDs), the Public Provident Fund (PPF), the Employees’ Provident Fund (EPF) and life insurance. That meant they had to make fewer decisions, resulting in less confusion. Today, there are scores of investment options. Making the investor’s task more difficult are finfluencers advising on a range of products across various financial platforms.

Have so many options made India’s middle class better investors, or have they left them more confused than ever? This is a big question.

Earning hasn’t become easy, but managing money has certainly become harder

The financial responsibilities of middle-class families have increased significantly compared to the past. Balancing all the needs with a single income is no easy task. At the same time, access to financial products and digital platforms has become easier than ever. However, as the number of options has grown, so has the number of financial decisions people have to make.

Adhil Shetty, CEO of BankBazaar, says, “For many middle-class families, earning is only one part of the financial journey. Managing money has become equally important because households today have to balance EMIs, children’s education, healthcare, insurance, retirement planning, and rising living costs—often all at once.”

In other words, while the challenge used to be simply about increasing one’s income, the challenge now also lies in effectively allocating that same income across various financial goals. A single wrong decision can impact several other financial goals as well.

That is why many people today feel that managing money properly has become more difficult than earning it.

Options were limited in the past; now, there is an abundance of choices

If we look back 20–25 years, financial choices for the average Indian family were quite limited. A portion of one’s salary would go into bank savings, while the rest was allocated to fixed deposits, PPF, EPF, or LIC schemes. Few people invested in the stock market, and mutual funds were largely out of reach for the average investor.

Today, the picture has changed completely.

There are now hundreds of mutual fund schemes available for investment. Additionally, options such as ETFs (exchange-traded funds), bonds, REITs, digital gold, direct equity, NPS, small savings instruments, and many others exist. Investing has become easier than ever. One can open an account and start investing via a mobile phone in just a few minutes.

Real challenge lies not in starting to invest, but in choosing the right option

Arjun Guha Thakurta, Executive Director at Anand Rathi Wealth Limited, says, “20 years ago, most families preferred physical assets, fixed deposits, and traditional insurance products, with assured returns often taking priority regardless of whether the goal was 1 year away or 20 years away. Mutual funds and equities were available, but investing was far less accessible and awareness was limited.”

He adds, “Today, investors have access to thousands of mutual fund schemes, direct stocks, bonds, commodities, REITs, crypto assets, and constant advice online. While this has expanded investment opportunities, it has also created more confusion, with many investors chasing what has performed recently instead of following a disciplined investment strategy.”

In other words, having more options is not inherently bad. The problem arises when investors start chasing every new trend instead of defining their own goals. An investment that delivered the highest returns over the past year often becomes the most popular choice for the next. However, not every investment is suitable for every individual.

This gives rise to a new issue that many experts term ‘financial decision fatigue’ or ‘decision overload.’ When there are too many options, making the right decision becomes harder rather than easier.

The real issue isn’t investment itself, but how financial priorities are set

Today, middle-class families earn more than they used to. However, their expenses and responsibilities have risen just as rapidly—home loan EMIs, children’s education, parents’ healthcare needs, retirement planning, vacations, cars, housing, and ever-increasing daily living costs. Meeting all these needs from a single income is no easy task.

This is why many families fail to save despite having a good income. At the end of the month, the question often arises: “Where did the money go?”

Arjun Guha Thakurta believes the problem lies not just in earning, but in directing money effectively. He states, “Many families struggle to grow their wealth despite earning more because the real challenge today is not earning money, but managing it wisely. While incomes have increased, inflation has steadily reduced purchasing power, making it harder to build real wealth. Many households continue to keep a large part of their savings in bank accounts or traditional deposits that often fail to generate inflation-beating returns.”

In other words, simply earning more isn’t enough. If savings aren’t invested in the right avenues—or if returns don’t outpace inflation—building wealth over time becomes difficult.

There is another issue linked to this: many families spend without a clear budget. EMIs keep rising, yet there is no plan regarding how much to invest each month or for which specific goals.

Addressing this, Arjun Guha Thakurta says, “The biggest challenges for many middle-class families are getting trapped in rising EMIs without a clear household budget, investing without well-defined financial goals, and lacking the discipline to stay invested for the long term. These three gaps often leave families with inadequate savings, delayed wealth creation, and financial stress despite earning a stable income.”

Thus, the problem isn’t merely that people aren’t investing. Often, they do invest, but without a plan. Consequently, every new market trend or piece of advice on social media compels them to change course. Ultimately, the greatest damage stems from a lack of discipline, rather than any single bad investment decision.

Are we overthinking investment?

Interestingly, there is no shortage of information today. In fact, many people are faced with such an overload of information that making a decision becomes difficult.

Many people spend months trying to decide which mutual fund is the best, which SIP will yield the highest returns, or what the right time to invest in the market is. Yet, in the process, certain fundamentals get overlooked.

These include saving regularly every month, budgeting expenses, maintaining an emergency fund, securing adequate health insurance, and staying invested for the long term.

Arjun Guha Thakurta says, “Yes. Many people spend more time searching for the perfect investment than building the right financial habits. Basic financial planning—such as maintaining an emergency fund, having adequate health insurance, and consistently spending less than they earn—often gets ignored. At the same time, investors tend to overanalyze where to invest instead of focusing on staying invested with a disciplined strategy.”

In other words, people often spend so much time trying to find the “perfect” investment that they fail to develop the right habits.

Adhil Shetty points to the same issue. According to him, “In many cases, investors spend more time looking for the best product than building strong financial habits. Choosing the right mutual fund or investment is important, but budgeting, saving regularly, maintaining an emergency fund, and staying invested through market cycles often have a greater influence on long-term outcomes. Over long periods, regular investing and staying invested generally contribute more to wealth creation than frequently changing products or strategies.”

Put simply, the secret to building wealth over the long term isn’t always finding the product that offers the highest returns. Often, seemingly simple habits—such as investing regularly every month and continuing to invest even during market fluctuations—have a far greater impact.

That is why financial experts often say that in personal finance, a plan that can be consistently followed is more important than a “perfect” plan.

When an excess of choices leads to procrastination

One downside of having too many options is that people often fail to make a decision at all.

“Let me understand this a bit better first.”

“I’ll start an SIP next month.”

“Let me find out which fund is the best first.”

“Retirement planning is a long way off.”

Such statements are frequently heard. In an attempt to make the ‘right’ decision, many people keep putting off crucial decisions for months or even years.

Adhil Shetty says, “Financial complexity can sometimes lead people to postpone important decisions because they worry about making the wrong choice. Taking time to understand products is sensible but waiting too long also has a cost, particularly when it comes to retirement planning and insurance. In many situations, starting early with a simple financial plan is more effective than delaying decisions while trying to evaluate every possible option. Plans can always be reviewed and refined as financial circumstances change.”

In other words, the start doesn’t always have to be perfect; the important thing is to simply begin. Investments, insurance, or retirement plans can be adjusted over time, but lost time cannot be regained.

Arjun Guha Thakurta also believes that excessive confusion is compelling many people to postpone important financial decisions.

According to him, “Yes, financial complexity is causing many people to postpone some of the most important financial decisions. With so many products, comparisons and conflicting opinions available, many investors struggle to decide what is right for them and end up postponing important decisions such as starting an SIP, buying adequate insurance or planning for retirement. The cost of this delay is significant because every year lost reduces the power of compounding and often increases the cost of insurance.”

Essentially, the biggest mistake is often not making a ‘wrong’ investment, but rather failing to start investing at the right time. Especially in matters like retirement and insurance, the loss of time cannot easily be made up for later.

What are the decisions that most often leave the middle class in a dilemma?

If you were to ask a middle-class family today about their most difficult financial decision, there wouldn’t be just one answer. Every family’s circumstances differ, yet certain questions arise in almost every household.

The first question concerns when to start investing. Many people keep waiting for the “right time.” Some wait for the market to dip, while others wait for their income to rise; however, years often slip by during this waiting period.

The second major question is where and how much to invest. Merely looking for good returns isn’t enough; determining the level of risk to take, allocating funds across different asset classes, and sticking to a strategy over the long term are equally crucial.

According to Arjun Guha Thakurta, middle-class families grapple primarily with three issues: when to start investing, how to build a portfolio that delivers superior risk-adjusted returns, and how to maintain discipline amidst market volatility.

Meanwhile, Adhil Shetty believes that the challenges facing many families extend beyond just investment choices. He notes, “Three decisions stand out for many middle-class families. The first is deciding how much home loan debt they can comfortably take without affecting other financial goals. The second is balancing current lifestyle aspirations with long-term savings and investments. The third is planning adequately for retirement, which often gets pushed aside because it feels distant.”

In essence, today’s middle class isn’t just deciding where to invest money. They must also determine the appropriate amount of debt for buying a home, strike a balance between current needs and future savings, and decide how much preparation is needed now for long-term goals like retirement.

This is why personal finance has become more individualized than ever before. A decision that works for one family may not necessarily be right for another. Therefore, rather than blindly following trends, social media advice, or the investment strategies of others, it is far more important to make decisions based on one’s own goals, income, and responsibilities.

Conclusion: Is the solution a simple plan rather than an abundance of options?

The financial landscape has evolved significantly. Today, there is a wider array of investment options and far more information available than ever before. This shift is inherently positive, as it has opened up opportunities to the general public that were once accessible only to a select group of investors.

However, this has also brought a new challenge. The proliferation of choices has led to a corresponding increase in the decisions one must make. Often, people become so entangled in the search for the “perfect” investment that they fail to start investing altogether. Some chase every new trend, while others are so overwhelmed by the sheer number of options that they make no decision at all.

In this context, the number of financial products you own matters less than the clarity of your plan and the discipline with which you stick to it.

Ultimately, the fundamental rule of personal finance remains unchanged: regular saving, timely investment, adequate insurance, limited debt, and long-term patience. While these concepts may sound simple, they form the bedrock of a secure financial future.

Perhaps this is why the real challenge for the middle class today is no longer just about earning more. The true challenge lies in directing one’s earnings in the right direction—without the noise, confusion, or haste.

Disclaimer: This article is for informational purposes only and should not be construed as financial or investment advice. Financial decisions should be based on your individual goals, risk appetite and financial situation. Consult a qualified financial advisor before making any investment or insurance decisions.

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