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‘Rs 50,000 per month is falling short now’

Amit Shah, a businessman from Mumbai, is not hard-pressed to make ends meet, yet but feels the pressure as expenses - both at home and in office - have shot up. Devraj Uchil reports. See graphics for recommendations by our financial planner

business Updated: Jul 24, 2008 21:52 IST
Devraj Uchil

Amit Shah understands the economics of ‘Roti, kapda aur makaan’. After all, this garment manufacturer is the sole breadwinner of a family of five, comprising his wife, parents and a 4-year-old son.

Shah, who has been running his business out of Matunga, Mumbai for the last 10 years is not hard-pressed to make ends meet, yet. “But, I can feel the pressure as expenses — both at home and in office — have shot up in the last couple of months,” he says.

“A few months ago, when I took my wife and son out for a movie and dinner, Rs 1,000 would have sufficed,” he says, giving an example of how high and rising inflation is hurting his finances. “Now it takes no less than Rs 2,000.”

A monthly income of Rs 50,000 should be comfortable to serve a family of five and generate savings. But with monthly household expenses in the Rs 35,000-40,000 range, Shah says that he is able to save only about Rs 5,000 a month. “About Rs 5,000 is spent on health and medical expenses, which limits my savings,” he rues. “Since the last two months, expenses have almost doubled.”

Though exuberant about his son going to the first standard at school next year, Shah is concerned about the additional pressure it would put on the household budget. “Education has become an expensive affair,” he says. “Including the school fee, which is roughly Rs 28,000 per term, the school bus charge, contribution for extra curricular activities, picnics and tuitions make for a considerable amount.”

Meanwhile, running his business is getting difficult as well. Increases in inventory expenses and transportation costs have made apparel and readymade garments costlier. Workers are demanding higher salaries, and understandably so, because costs are increasing all around.

For the moment, Shah is taking these costs in his stride and not passing them on to his clients. “I have to maintain low rates to attract clients. So I cut on my margin and make it up with turnover.”

Despite rising costs, Shah has tried to maintain a certain level of savings. He has invested Rs 6 lakh in government bonds and has life insurance policy for which he pays Rs 40,000 premium every year. “These are my sole investments.”

Inflation is making people exhaust their earning on food, travel and home loan. Garment is always the last area of spending, he reasons.