How To Create Rs 10 Crore Retirement Fund With Rs 25,000 Salary Using 70:15:15 Formula?
One should adhere to financial discipline and divide one’s monthly income into three parts- 70% for living expenses like rent and bills; 15% for emergency fund and 15% for investment in an SIP
Everyone aspires to retire with enough money to live comfortably for the rest of their lives. With rising inflation, saving for retirement has become challenging for many, especially those who don’t earn much.
However, accumulating a substantial retirement fund is not impossible. With proper financial management and a sound investment strategy, even individuals with modest salaries can build a retirement corpus worth crores of rupees.
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One such effective investment strategy is the 70:15:15 formula, which ensures financial stability and future planning without compromising on one’s current lifestyle.
This investment strategy offers a simple and effective solution. It involves dividing one’s monthly income into three parts: 70% for living expenses such as rent, groceries, and bills; 15% for an emergency fund; and 15% for investment in a Systematic Investment Plan (SIP). By adhering to discipline and adopting a step-up SIP model, one can accumulate a retirement fund exceeding Rs 10 crore, even with a monthly income of Rs 25,000.
Step-up SIP is a game-changer
This model allows one to increase their investment amount annually, aligning with their salary increments. By increasing one’s SIP contribution by 10% every year for 25 years, the results can be remarkable. The power of compounding forms the foundation of this strategy’s success, enabling the investment value to grow exponentially over time. Starting early amplifies the compounding effect.
Here’s how one can create a fund of Rs 10 crore
One should begin their SIP with Rs 3,750 per month. If one increases this investment by 10% annually and invest consistently for 25 years, adhering to this formula, and achieve an average annual return of 12%, one will accumulate Rs 10.68 crore. Their total investment will be Rs 2.95 crores, generating a return of Rs 7.73 crore. A return exceeding 12% will further increase their fund size.
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