What Drives Us Into Smart Investment

One of my earlier blog stated why we should start investment early (at the age of 25), but it was less effective to start investment for my friends. According to the definition investment means to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future.

So if you are cutting your expenses and putting your funds in bank it is not considered as an investment.

Most of my friends keep postponing the plan for investment and they tend to ignore the inflation. The average inflation (Wholesale Prices Index) over the last 35 years in India has been 7.57%. But our lifestyle inflation that includes education, entertainment, travel, electronic gadgets, expenses dine etc. is believed to be far higher. Keeping this in mind, we’ll require a much bigger corpus to maintain the same standard of living.

How we can accumulate a big corpus I have explained in one of my earlier blogs (jab jaago tab savera), and now here I am trying to explain how much money we want per month at the age of 60 to maintain your same standard of living as of now.

Inflation rate 7%

Age Current monthly expenses Age Current monthly expenses
25 15000
26 16050
27 17173.5
28 18375.645
29 19661.94015
30 21038.27596
31 22510.95528
32 24086.72215
33 25772.7927
34 27576.88819
35 29507.27036 35 25000
36 31572.77928 36 26750
37 33782.87383 37 28623
38 36147.675 38 30626
39 38678.01225 39 32770
40 41385.47311 40 35064
41 44282.45623 41 37518
42 47382.22816 42 40145
43 50698.98414 43 42955
44 54247.91303 44 45961
45 58045.26694 45 49179
46 62108.43562 46 52621
47 66456.02612 47 56305
48 71107.94794 48 60246
49 76085.5043 49 64463
50 81411.4896 50 68976
51 87110.29387 51 73804
52 93208.01445 52 78970
53 99732.57546 53 84498
54 106713.8557 54 90413
55 114183.8256 55 96742
56 122176.6934 56 103514
57 130729.062 57 110760
58 139880.0963 58 118513
59 149671.7031 59 126809
60 160148.7223 60 135686

 

Aged 25 years Aged 35 years
Currently monthly expenses 15,000 25,000
Expenses at the age of 60 160,148 135,686

If we are spending Rs.15,000 per month at the age of 25 than we require Rs. 160,000/month at the age of 60 and if we are spending Rs. 25,000/month at the age of 35 then we require Rs.135,686/month at the of 60 to maintain the same standard of living as of now.

Aged 25 years Aged 35 years
Monthly expenses at age 60 160,148 135,686
Returns after 60 9%  per annum
Inflation Assumed 7% per annum
Corpus required at age 60 Rs.3.46 Cr. (Approx) Rs.2.93 Cr. (Approx)
SIP/Investment to accumulate the corpus (return 12% p.a.) Rs.5316/month

(If existing corpus is zero.)

Rs.9583/month

(If existing corpus is zero.)

Existing corpus Rs.300,000 Rs.500,000
SIP/Investment to accumulate the corpus (return 12% p.a.) Rs.2875/month Rs.5375/month

At the age of 60, the accumulated corpus needs to be investing to generate regular income on a monthly basis. For an individual who is 35 years old, target is to accumulate 2.93 crore in 25 years which is staggeringly difficult as compared with the person who is 25 years old and his target is 3.46 crore in 35 years. Please bother if your existing corpus is nil, required smart investment if you have some corpus.

First you just figure out the objective of your investment then set your goals but don’t stop or delay in investment if you have already started earning. Also, the goals you set should be achievable and measurable. I believe in saving. Live in present but don’t forget to think about future. Believe me amount doesn’t matter but time does.

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