Commerce Assignment |Personal Finance Planning |MDC| Assignment

Sreehari K August 13, 2025

 

Commerce Assignment |Personal Finance Planning |MDC| Assignment

Case Study – Sreehari K: The Rich Guy with a Cashflow Confusion

Sreehari K, a 17-year-old businessman from Kannur, owns multiple luxury car dealerships and earns a monthly income of ₹4,50,000. Despite his high earnings, Sreehari faces frequent cash shortages due to poor money management. He spends heavily on luxury vacations, high-end gadgets, and hosting extravagant parties for clients and friends. While his lifestyle is enviable, his savings are minimal, and he relies on credit cards for sudden expenses.

One month, a sudden opportunity to invest in a prime piece of real estate came up, but Sreehari could not arrange the required down payment because his liquid cash was tied up in non-essential spending.

Monthly Cashflow Details:

Income:

  • Business Income: ₹4,50,000

Expenses:

  • Rent for luxury villa: ₹80,000

  • Household staff salaries: ₹50,000

  • Luxury vacations & travel: ₹1,00,000

  • Dining out & parties: ₹70,000

  • High-end gadgets & accessories: ₹60,000

  • Car maintenance & fuel: ₹40,000

  • Miscellaneous: ₹30,000

Total Expenses: ₹4,30,000
Surplus: ₹20,000

Issues Identified:

  1. Lack of Savings: Almost all income is spent on lifestyle maintenance.

  2. Overdependence on Credit: Uses credit cards for emergencies instead of savings.

  3. No Investment Planning: Missed profitable opportunities due to lack of liquidity.

Consequences:

  1. Missed Opportunities: Unable to invest in high-return real estate.

  2. Financial Stress: Luxury lifestyle is unsustainable without proper planning.

  3. Wealth Erosion Risk: Income is high but assets are not growing proportionally.

Suggestions:

Sreehari could adopt a disciplined spending and saving plan:

Income: ₹4,50,000

Proposed Monthly Allocation:

  • Rent: ₹80,000

  • Household staff: ₹50,000

  • Vacations & travel: ₹50,000 (reduce by ₹50,000)

  • Dining & parties: ₹30,000 (reduce by ₹40,000)

  • Gadgets: ₹20,000 (reduce by ₹40,000)

  • Car & fuel: ₹40,000

  • Miscellaneous: ₹20,000 (reduce by ₹10,000)

Total Expenses: ₹2,90,000
New Savings: ₹1,60,000

Emergency Fund Plan:

  • Monthly living expenses: ₹2,90,000

  • Goal (6 months): ₹17,40,000

  • With ₹1,60,000 monthly savings, fund can be built in 11 months.

Financial Goals:

Short-term:

  • Build emergency fund within 11 months.

  • Save ₹3,00,000 for business expansion within 1 year.

Long-term:

  • Purchase investment property worth ₹1.5 crore in 5 years.

  • Build diversified investment portfolio for retirement.

Investment Plan:

Monthly savings allocation:

  • Emergency Fund: ₹80,000 (till goal met)

  • Business Expansion Fund: ₹50,000

  • Retirement & Investments: ₹30,000

Monitoring & Adjusting:

Sreehari should review his plan quarterly, ensuring lifestyle expenses remain within limits and savings are invested for asset growth.


CASE STUDY – Alan Paul

Alan Paul is a 20-year-old commerce student living in Kannur. Alongside his studies, he works part-time at a café and earns extra income by selling handmade leather wallets online. His total monthly income is fairly good for a student.

However, Alan has a habit of spending on branded clothing, weekend trips with friends, and upgrading his bike frequently. While his earnings are enough to cover his lifestyle, he finds himself with little to no savings at the end of each month. He dreams of opening his own leather goods business but lacks the capital to take the first step.

Monthly Income

  • Part-time café job: ₹12,000

  • Online wallet sales: ₹10,000
    Total Income: ₹22,000

Monthly Expenses

  • Branded clothing & accessories: ₹5,000

  • Weekend trips: ₹4,000

  • Bike fuel & upgrades: ₹3,500

  • Food outside college: ₹3,000

  • Miscellaneous: ₹2,500
    Total Expenses: ₹18,000

Savings per month: ₹4,000

PROBLEM IDENTIFIED:

  1. Very low savings despite manageable income.

  2. Spending more on luxuries than business-related investments.

  3. No concrete budget for achieving business goals.

CONSEQUENCES:

  1. Slow progress toward starting his leather goods business.

  2. Dependent on parents for emergencies.

  3. Missed opportunities to buy raw materials in bulk at lower cost.

SUGGESTIONS:

  • Reduce branded clothing expenses from ₹5,000 to ₹3,000.

  • Cut weekend trips budget from ₹4,000 to ₹2,000.

  • Limit bike upgrades to ₹1,500 per month.

  • Allocate ₹8,000 monthly to business savings.

New Plan:

  • Monthly expenses: ₹14,000

  • Savings: ₹8,000

EMERGENCY FUND PLAN:

  • Target: 6 months of expenses = ₹84,000

  • Time to achieve: 11 months at ₹8,000 per month.

FINANCIAL GOALS:
Short-term: Build emergency fund, purchase leather crafting tools.
Long-term: Launch a small leather goods brand in 3 years and expand online sales.

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