Fiction : The Intractable economics of an indian freelancer

Chatur is a mid-level MNC manager in India and gets a net cash (post tax and after all deductions) on an average of INR 1.2 million a year ($ 20,000) which comes INR 1 lac per month. He works pretty hard that comes around 70-80 hours a week. He is a married man with a boy child aged 6 and his wife is a homemaker. He never did the calculation but his expenditure statement runs something like this :

  • Home Loan : INR 30,000 per month
  • Car Loan :   INR 5,000 per month
  • Credit Card Debt Servicing : INR 10,000 per month
  • Education fee for the child : INR 6000 per month 
  • Insurance : Medical and others : INR 8000 per month 
  • Utilities (electricity / condo maintenance / Cable TV / internet / phone ) : INR 8000 per month 
  • Domestic Help / Cook / Other labour intensive support : INR 1000 per month 
  • Car consumables (petrol, maintenance, tax, insurance) : INR 3000 per month 
  • Money left for food and other expenses : 29,000 per month 

Considering Chatur manages food and everything else within INR 20,000 a month, he has a disposable of INR 9000 left.  His disposable income is only some INR 10,000 per month. His all other expenses are either borne by other sources or by credit. He actually runs a credit of INR 40,000 which is of course some 3% of the income and is very modest. 

Conclusion : Chatur’s  most important asset is the mortgaged house and it is in use and hence trade value now is zero. He is servicing an asset which is appreciating but he is en-cashing only the use-value as he is living there. His consumption level is high and savings is as modest as his debt 3% of the income. He is living a more or less good life but has less time and lesser liquidity. 

Buddhiraj is of similar age and profile as Chatur and has a net cash of  INR 50,000 a month on an average. This is 50% less than Chatur. His expenditure is like this :  

  • Home Loan : Nil – lives in a very  basic level apartment in a city zone which goes under the label – low budget in real estate industry parlance. He was paying INR 5000 rent a month while a tenant but procured it six years back. Prices were low and being cash payment, it came with a huge discount. 
  • Car Loan :   None. Has an on-demand car. 
  • Credit Card Debt Servicing : Nil – only use for booking tickets at a cheaper price in advance and pays next day after withdrawing money from ATM. 
  • Education fee for the child : INR 3000 per month 
  • Insurance + Investment : Medical and others :  INR  15,000 per month  
  • Utilities (electricity / maintenance / Cable TV / internet / phone ) :  INR 4000 per month
  • Domestic Help / Cook / Other labour intensive support : INR 1000 per month 
  • Car consumables (petrol, maintenance, tax, insurance) : None 
  • Money left for food and living expenses  = 27,000

   Considering INR 15,000 per month as food and living, he saves INR12,000 per month cash. 

Lets see the situation after 2 years :

Chatur : Total cash savings = (INR 1,08,000 + INR 60,000) * 2 = INR 3.36 less INR 40,000 (sundry debts) = INR 3 Lac = Lifestyle Cost of 3-4 months. 

Buddhiraj : Total cash savings = (INR 15,000 + INR 12,000) = INR 6.48 Lac = Lifestyle Cost of 28 months = 2 years and 4 months. 

If today Chatur’s income gets a hit, he will be in panic as he can only survive without income for 3-4 months maximum.

If today Buddiraj’s income gets a hit, he can run at least 2 years at current level of lifestyle without any panic.

Let us consider normal circumstances where all factors are more or less same for both :

Chatur needs to work a year and half more to take a family holiday, may be in Europe for 2 weeks costing INR 5 Lac

Buddhiraj can take it right now with some INR 1.5 Lac to spare

and remember Buddhiraj’s income is 50% less than Chatur’s ! 

How is it happening ?

Truth is stranger than fiction !

All characters and calculations of this story is fictitious  Any resemblance to any living person or acquaintance of yours, including the author is purely happenstance and no further investigation will be allowed as per Federal Law guiding fiction and impact on one’s behavior from fictional characters.  

One response to “Fiction : The Intractable economics of an indian freelancer

  1. Very great situation analysis . Chatur love to explore life , earning high and living to fullest extent . Only catch he is having 2-3 month lead time for survival after losing job . But this type of people always get some way to manage another job . Now recession is there , so very few option left for Chatur if he gets sacked . Buddhiraj’s is safe as long as he has some permanent settlement for managing 50K over years . Again if he is a independent consultant , again he is in danger as no surety there . Anyway , great analysis !

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