If you are earning Rs 20000/- per month without any ancestral wealth, can you become a crorepati by savings? Appears to be a very silly question and everyone of us will laugh on this thought. But before doing that please go through few facts below
The wonder of compounding (in investing terms) is to make your money work, to transform it into a state-of-the-art, highly powerful income-generating tool. Compounding is the process of generating earnings on your asset's reinvested earnings. Compounding works on two basic premises: re-investment of earnings and time.
Simply put, the longer time you leave your money to compound, the higher is the wealth you generate.
Savings of Rs 2500/- per month with 14% return will be worth Rs. 12202110/-after 30 years. Yes, this is not typing error. It will be worth Really 1.22 Crores.
Here’s more Savings of Rs 2500/- per month with 14% return will be worth Rs. 23720186/- after 35 years.
Please find the table below which shows returns on Rs 1000/- monthly savings will be worth after 25 years, 30 years and 35 years at different rate of returns.
Rate of Return | 25 Years | 30 Years | 35 Years |
8% | 947453 | 1468150 | 2233226 |
9% | 1107888 | 1782903 | 2821497 |
10% | 1298181 | 2171321 | 3577522 |
11% | 1523985 | 2650958 | 4549973 |
12% | 1792007 | 3243511 | 5801557 |
13% | 2110201 | 3975781 | 7412992 |
14% | 2487993 | 4880844 | 9488075 |
15% | 2936544 | 5999483 | 12160148 |
16% | 3469059 | 7381939 | 15600324 |
17% | 4101152 | 9090045 | 20027934 |
18% | 4851265 | 11199824 | 25723787 |
Remember, in the example above I have not increased the savings amount per annum. Considering you start increasing the monthly savings by Rs 500per month at every anniversary, i.e. Rs 2500/- per month for frst year, Rs 3000/- per month for second year and so on.
Sooner we start, more will be the returns and yield. If you invest later in life you will not be able to make use of the great “power of compounding”
Numbers do look good when tabulated; however, it is indeed a Herculean task to translate them into reality! We often get tempted to break our savings to attain a lifestyle or meet exigencies. You may observe now that it is not just time and money that commands the direction in which your corpus grows; there is one more important parameter which determines the same: rate of returns.
To achieve the best risk-adjusted returns, it becomes absolutely necessary not to put all your money in the same basket. Having a judicious mix of debt and equity is equally important whilst you embark on your journey to become a millionaire.
Compounding only works if you allow your investments to grow over a longer period of time.
Please use Make a million calculator below to calculate your future worth with constant rate of savings.
Instructions
1. Clicking the link above will open the file in Google spreadsheet.
2. Please enter your details in sheet 2 along with expected returns.
3. When done check sheet 1 for complete illustration.
4. If you want to change any field i.e. amount, expected returns per annum etc, you can do so by going to sheet 2.
5. There are 2 coloumns. Coloumn G gives results on expected returns as entered by you, Coloumn H gives results @ 7% return.
