Three Demands, One Small Income
Ramen, a Class X student, lives with his parents and a younger sister. His father drives a hired auto-rickshaw and brings home about Rs 15,000 in a good month, but only Rs 10,000–11,000 during the rains. His mother stitches blouses at home and earns about Rs 2,000 in a good month. Rent is Rs 4,000; the children's school fees total Rs 1,200 a month; a shop loan taken for the auto's repair is being repaid at Rs 2,500 a month for eight more months; electricity is about Rs 700. Food and fuel take about Rs 6,000. The family has Rs 9,000 in a savings account. Three demands have come up together: the roof must be repaired before the monsoon, quoted at Rs 5,000; his mother wants a second-hand sewing machine for Rs 4,500 to take bulk orders from a nearby shop; and the school has started sending worksheets on a mobile app, though printed copies can be collected from school. His mother also spends nearly three hours a day queuing at a public tap.
1. Prepare a rough monthly budget for a good month, state the balance, and rank the three demands using needs versus wants, urgency and income generation.
Read the worked answer
Good month: income 15,000 + 2,000 = Rs 17,000. Fixed expenses: rent 4,000 + fees 1,200 + loan 2,500 + electricity 700 = Rs 8,400. Routine: food and fuel Rs 6,000. Total Rs 14,400. Balance Rs 2,600.
The catch: in a rainy month the income is about 10,000 + 2,000 = Rs 12,000 against the same Rs 14,400, a shortfall of Rs 2,400. So the Rs 2,600 is not spare money - it is the buffer for lean months. Any answer that spends it as free cash is wrong.
Ranking:
- Roof repair first - it is a safety need with a fixed pre-monsoon deadline, and delay turns a Rs 5,000 repair into damage to bedding, books, clothes and walls that will cost far more.
- Sewing machine second - this is a want that is also an investment, since it can earn more than its cost over a few months, but it can wait until the shop loan ends in eight months.
- Smartphone last - a want with a free substitute: printed worksheets can be collected from school. Spending Rs 7,000 on it would wipe out nearly all the savings.
2. Can the family repair the roof without borrowing? Show your reasoning and state what must be sacrificed.
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Yes, but only just. Savings are Rs 9,000 and the repair is Rs 5,000, leaving Rs 4,000.
Reasoning: the roof can be paid for from savings, so no interest is incurred. But the family must recognise that the remaining Rs 4,000 is less than two lean-month shortfalls (about Rs 2,400 each). Therefore:
- The roof is paid in cash now, before the monsoon, and the remaining Rs 4,000 is treated as untouchable monsoon reserve.
- In good months the Rs 2,600 surplus must be saved, not spent, to rebuild that reserve.
What must be sacrificed now: postpone the sewing machine; collect printed worksheets instead of buying a phone; cut one non-essential recurring expense (festival spending, cable television) until the shop loan finishes. Reasoning: borrowing for a roof costs more than the repair itself, and a repair done late costs more than a repair done on time.
3. The mother is offered Rs 4,500 by a moneylender at 10% per month. Evaluate this and suggest two alternatives plus one time-and-energy saving change.
Read the worked answer
Evaluation: 10% a month is Rs 450 every month, about 120% a year. The machine would have to earn more than Rs 450 a month reliably from the first month just to stand still, while the family is already paying a Rs 2,500 instalment. If bulk orders dry up in the rains, the interest accumulates, savings are consumed, and an asset may have to be sold. Reject it.
Alternatives: (i) wait eight months until the shop loan is repaid, then buy from savings; (ii) borrow from a self-help group or through a bank's micro-credit/artisan scheme, where the rate is a fraction of the moneylender's; (iii) ask the nearby shop for a piece-rate stitching order or an advance, using the shop's machine until the family can buy its own.
Time and energy: the three hours at the public tap can be halved by taking turns with two neighbouring households to fill and carry water for all three, or by storing rainwater safely during the monsoon. Those hours can then go into paid stitching, which turns a time resource into income.