The wealthy middle class: how they finance their consumption in the contemporary context

In Argentina, inflation and its controls have had a significant impact on the middle-income sector, which has experienced a repeated loss of purchasing power. This situation forces families to reduce spending on leisure and vacations to cover their monthly expenses.

In one of the chapters of “The Simpsons”, Homer expresses one of his greatest thoughts “He’s got all the money in the world, but there’s one thing he can’t buy: a dinosaur.” Clearly middle class in Argentina It increasingly appears to be living in the Triassic transition to the Cretaceous period and is increasingly threatened with extinction.

The Simpson family, consisting of Homer, Marge, Bart, Lisa and Maggie, depends entirely on the salary of the head of the household, who works as a safety inspector at a nuclear power plant. In today’s Argentine context, Homer’s monthly salary would be $1,722,132. With this income, you need to cover three main categories of expenses:

1. Home Services and Security: Includes costs related to electricity, water, gas and home security services.
2. Food, Education and Health: Includes expenditure on food, school enrollment and medical services.
3. Leisure, Entertainment and Vacation: Includes spending on recreational activities, entertainment and travel.

In the Argentinian context, a typical family group would face total expenses of approximately $1,496,367 per month to cover domestic services and security. This amount includes various basic costs such as but not limited to: water, electricity, gas, insurance, internet, cell phone, cable TV, mortgage loan payment, car maintenance.

In addition, the head of the household must consider the costs of caring for Abraham Simpson, Homer’s father. If you choose to use a geriatric facility for your care, this service would have a minimum cost of $668,154 per month, the highest cost in this category.

Currently, it is estimated that a family of five in Argentina needs $443,298 per month to cover basic food needs and avoid being considered destitute.

In addition to these basic expenses, the following additional costs must be considered:

• Education: includes tuition and fees for children’s private school, as well as day care for infants, is $451,004 per month.
• Transportation and elementary school basket: the budget in this area is $155,962 per month.
• Social Work: Family group coverage costs $290,044 per month.

In total, a family needs a monthly income of $1,340,308 to adequately cover food, education and health needs. It is the poverty line.

If the Simpson family decided not only to cover their basic needs, but also to enjoy free time, entertainment and vacations, they have to budget for additional expenses of $946,610 per month. This amount covers: video games $64,200; weekly music lessons $48,000; weekly coffee trips $92,514; food tours $133,000; fast food purchases 84,866 pesos.

Furthermore, if the family wanted to organize a trip to Brazil for their vacation and finance it with a 79% nominal annual rate (TNA) loan to be paid in 36 installments, they would need to have a surplus of 524,031 pesos. .

Together, these expenses reflect the amount necessary to maintain a lifestyle that includes recreational activities and travel, in addition to essential food expenses typical of the middle-income sector.

Considering the three expenditure groups considered, it is estimated that a total of $3,783,286 per month is needed. With a single income from the head of household’s salary of $1,722,132, the family faces a deficit of $2,061,155. This means that your expenses exceed your income by that amount. This situation reflects a common reality among middle-class families in Argentina.

To solve this situation and achieve a family surplus, an exercise in adjustment of expenses is presented with the aim of balancing the budget of the Simpson family and improving their financial situation.

To achieve family surplus, many decide to make a series of significant financial adjustments. First, sell the car for around $17,500,000. With these funds, he was able to invest for a fixed term with an APR of 36%, which brought him an additional monthly income of $517,808. Added to the salary of the head of household, the total income rose to $2,239,940 per month.

In terms of expenses, selling the car made it possible to eliminate the costs associated with insurance, maintenance, garage parking, license plates and PHM. However, these initial adjustments were not enough to achieve the desired balance, so further adjustments were decided upon:

• Education: transfer children from a private school to another in the state;
• Leisure and entertainment: suspend all recreational activities, including video games, music classes, going to bars and family meals at restaurants;
• Vacation: cancel a planned trip abroad.

With these adjustments, expenses will be reduced from $3,783,286 to $1,801,265 per month. With the new income and adjusted expenses, the family in the example managed to end the month with a surplus of $438,674. This surplus allows them to consider resuming some suspended expenses, such as going out for meals.

In Argentina, what used to be the “middle class” was closely related to what the cartoon shows in more than 3 decades of stories. In those 30 years, it came to be called the “rich middle class,” not the “new poor.” The “wealthy middle class” is getting richer. Hidden costs had to be paid and they are paid in spades.

The author is an economic analyst