Principle 4: Recognize: Income Problem vs Spending Problem vs Investing Problem

Income vs Spending vs Investing Problem
Note: This article is a part of series called “Six Principles to Achieve Financial Freedom”. I’d strongly suggest starting from Principal 1 it to understand it better. Ignore if not applicable.

Broadly speaking, people have 3 types of financial problems in this world and you must recognize between income problem, spending problem and investing problem.


If you are earning less than Rs.10,000-12,000 monthly (or Rs.6,000 for rural areas, depending on where you live) then you have an income problem.

Until you hit these milestones it’s very difficult to live a financially secure life. You simply don’t have the funds to pay for the things that you need, let alone want.

This is an important distinction to make. I’ve seen people earning Rs.12,000 a month and ruthlessly negotiating with vegetable sellers everyday for a few rupees. Negotiating is good but that’s definitely not an effective use of their time and energy.

However, by learning a new skill, starting a side hustle, freelancing on the side they could easily earn an extra Rs.10,000-Rs.20,000 a month and be able to enjoy a little more of what they need.


On the other hand, if you are earning Rs.15,000+ a month and don’t have any money left over in your savings account or retirement fund, then you have a spending problem. You should control immediately and save the difference.

I’ve seen guys making Rs.1,00,000 a month and spending every last rupee before the month end then waiting for the next payday or constantly working harder to earn more money (while increasing their expenses). That’s ridiculous! That’s pure misuse of money.


If you misuse money, money will misuse you. 

You can see real life examples of people becoming overnight billionaires by winning lotteries and then losing it all in few years. Moral: Even if you have billions, it’ll never be enough if you have spending problem.

By introspection, careful evaluation and controlling spending, many people can easily save away a huge chunk and increase the balance in their savings account or investment account and retire early. Or you can follow minimalism lifestyle to enjoy more in experiences rather than materialistic things


We Indians love to save. We have one of the highest savings rates in the world. At a household level, we save about 24% of our incomes. However, the reality is that our savings are never enough to meet our aspirations, dreams or goals.

If you’re earning a decent amount and also saving a part of it but don’t know where to invest. This is also a serious problem which people don’t identify. These type of people simply invest their money where their friends or relatives are investing i.e. real estate or gold.

Gold and fixed deposit are few favorite investment option in India but little do we know what type of returns we can expect from it. Historically, gold has only been able to offer us less than 8% annual return which just keeps up with inflation.

Imagine you invest the same amount in a better asset class (like mutual funds) that gives 15% annual returns. How much loss are they bearing without realizing it?

Moreover, some people invest money in fraud schemes or in stock market (without proper research) thinking they’ll give better return but end up losing all their hard earned money. After this type of experience, they never think of investing and this topic in their house becomes a taboo.

Lack of education causes of poverty.”

Little do we know, stock market is by far, the best money making machine in the world. But we only hear stories of people losing money in it, why? It’s because of lack of education, understanding problem and acknowledging the problem. 

Do you see the difference?

“The first step in solving a problem is to recognize that it does exist.”

Zig Ziglar

You can check the list of popular investment option in India here.

If you are attempting to become financially (stress)free, you must identify your exact problem and then take action to remedy the situation.

Never confuse one for the other or you will get caught in a game of constantly trying to earn more money or cut more costs without ever achieving the freedom you desire.

Share your thoughts! :)