Should You Move To A Tier 2 or Tier 3 City?

If you buy a bungalow in Kerala, it will probably cost you anywhere around 60-75 lakh rupees.

If you buy the same bungalow in Delhi, it will cost you 4-5 crore rupees easily.

In Mumbai, it could even cost you 50 crore rupees. It sounds mind-boggling, but it could always be a possibility.

The point is, we often think that we have to work really hard, save a lot and invest a lot of money in order to live a fulfilling life.

But if you take a contrarian viewpoint and shift to a tier 2 or tier 3 city, you might not even need to earn that much to begin with, and you could still live very, very comfortably.

The above data suggests a very interesting story. It shows the bifurcation of rent and prices of housing across different cities in India.

This study is done on properties of an area worth 1000 square feet.

You will be shocked to see that a property that costs around 10K (rent) in Indore, costs 4x the amount in Mumbai.

Now your obvious response to this would be that the quality of life in a metropolitan city is way better.

Well, let us look at another piece of data.

Here, you can deduce that in Mumbai and Delhi neither the quality of living is very high, nor the cost of living is very low.

Now that you have some perspective, keep reading further to understand:

Should you live in a metro or should you move out?

A lot of people might raise the argument that although living in metro cities in India is very expensive, the opportunity to make a lot of money here is also high.

This phenomenon could be called the Purchasing Power Parity Fallacy.

Why the word fallacy?

Watch this particular reel to gain a better understanding 

When companies like McKinsey, Google or Facebook are giving you salary as per PPP, that PPP data comes from non-metro cities and villages as well.

If you are living in Mumbai or Delhi, your daily expenses could easily be 3x the amount you would be spending if you lived in a tier 2/3 city.

Now you might be thinking, “Alright, maybe I am not actually making that much money in real terms but opportunities in big cities are massive and how can I give up on them?”

Maybe you are looking at this situation from a myopic view point.

You need to look at where the trend is heading.

This is where the freelance economy comes into picture.

India witnessed a 46% increase in new freelancers from Q1 to Q2 in 2020 as many laid off workers took to freelancing to generate a higher income.

This is a crazy growth rate.

You might say this might just be an anomaly.

But it is 2022, and India is the second largest freelancing economy in the world after the US. So the trend is just increasing.

By 2027 it is estimated that 51% of the workforce in the US will take to freelancing.

The reason we are taking the US into consideration is because every major trend that develops there is soon adapted by most other developing countries.

When should you move to a tier 2 or a tier 3 city?

You should think of your career in 3 phases.

Now this is not a set in stone method to live your life. But it does give you some perspective on how you can plan ahead and set goals for yourself.

How should you shift?

Here are 3 tips:

a) Build a nest-

  • Have an emergency saving(6-12 times of your monthly salary)
  • Funds (18-24 months of your salary)- When you are shifting cities, you might require money to experiment with a few ideas and figure things out for yourself.

b) Have transferable skills.

  • Example- Management consulting teaches you a lot of skills (structured thinking, effective communication, problem solving) which can be transferred to various other careers.

c) Value freedom

  • Living in a tier 1 city, you might realise there is no end to making money. But sometimes you need to take a leap of faith. Living with freedom might become something you value more deeply. 🙂

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