Planning For It!

How to become a Crorepati on a normal income?

Becoming a CROREPATI on a normal income is possible, but it is dependent upon 3 things:

  1. The Amount Invested Every Month/Year
  2. Rate Of Return
  3. Time Period The Amount Stays Invested

A disciplined approach towards saving and sensible investing choices will take you to your first crore as long as you allow COMPOUNDING to do its magic.

If you were to save and invest Rs 50,000 per year (which is slightly more than Rs 4,000 per month) you could become a crorepati in 25 years. The article below explains the factors which make this happen, followed by a calculator where you can put your own numbers to see how many years you need to reach your target. After the calculator is an Action Plan for you to use.

1. Amount invested every month / year

It's intuitive that the more you are able to save and invest today, the larger your reward will be down the road. However, this table shows that even the smallest addition to your savings each year can make a big difference in reaching your targeted amount.

 

Amount invested per year
(assumed rate of return 12%)

Total investment

Value after 25 years

Rs. 10,000 Rs. 3,00,000 Rs. 29,41,000
Rs. 11,000 Rs. 3,30,000 Rs. 32,35,000
Rs. 15,000 Rs. 4,50,000 Rs. 44,12,000
Rs. 25,000 Rs. 7,50,000 Rs. 73,53,000
Rs. 50,000 Rs. 15,00,000 Rs. 1,47,00,000
Rs. 1,00,000 Rs. 30,00,000 Rs. 2,94,00,000

 

2. Rate of return

The rate of return (the amount you earn on your savings) has a huge impact on the amount of money you'll end up with. Different investment vehicles have different expected returns. For example, Indian stocks have historically returned more than 15% per year. Cash, in contrast, has a current return of 8-9% per year.

Your goal is to find a rate of return that offers the highest potential for growth, but at the lowest possible potential for risk of loss. Over time, we have found that the most prudent solution is a diversified combination of investment assets (stocks, bonds, cash, real estate, and alternative investments).

Assuming that you could invest Rs 100 at 11% per year, you would have Rs 1,359 at the end of 25 years. However, if you were able to invest Rs 100 at 15% per year, you would have Rs 3,292 at the end of 25 years.

Year

5%

11%

15%

0

Rs. 100

Rs. 100

Rs. 100

5

128

169

201

10

163

284

405

15

208

478

814

20

265

806

1637

25

339

1359

3292

30

432

2289

6621

35

552

3857

13318

40

704

6500

26786

45

899

10953

53877

50

1147

18456

108366

 

3. Time period that money stays invested

To illustrate the power of compounding over time, please refer to the tables below. In the first example, Rs 2,000 were saved and invested each year from age 19 to 26 (for a total of 8 contributions). In the second example, Rs 2,000 were saved and invested each year from age 27 to 65 (for a total of 39 contributions). At age 65, the first example ended up with Rs 1,019,161 (vs. Rs 805,185 in the second example), even though the total amount contributed over the 8 year period was only Rs 16,000. The reason? The first example had 8 more critical years to invest at the same rate of return at the beginning of the investment period. That's the power of compounding!

  Example 1:   Example 2:  

Age

Annual
Investment

Year-End Value

Annual Investment

Year-End Value

19

Rs. 2,000 Rs.2,200 Rs. 0 Rs. 0

20

Rs. 2,000 Rs.4,620 Rs. 0 Rs. 0

21

Rs. 2,000 Rs.7,282 Rs. 0 Rs. 0

22

Rs. 2,000 Rs.10,210 Rs. 0 Rs. 0

23

Rs. 2,000 Rs.13,431 Rs. 0 Rs. 0

24

Rs. 2,000 Rs.16,974 Rs. 0 Rs. 0

25

Rs. 2,000 Rs.20,872 Rs. 0 Rs. 0

26

Rs. 2,000 Rs.25,159 Rs. 0 Rs. 0

27

Rs. 0 Rs.27,675 Rs. 2,000 Rs.2,200

28

Rs. 0 Rs.30,442 Rs. 2,000 Rs.4,620

29

Rs. 0 Rs.33,487 Rs. 2,000 Rs.7,282

30

Rs. 0 Rs.36,835 Rs. 2,000 Rs.10,210

35

Rs. 0 Rs.59,324 Rs. 2,000 Rs.29,875

40

Rs. 0 Rs.95,541 Rs. 2,000 Rs.61,545

45

Rs. 0 Rs.153,870 Rs. 2,000 Rs.112,550

50

Rs. 0 Rs.247,809 Rs. 2,000 Rs.194,694

55

Rs. 0 Rs.399,100 Rs. 2,000 Rs.326,988

60

Rs. 0 Rs.642,754 Rs. 2,000 Rs.540,049

65

Rs. 0 Rs.1,035,161 Rs. 2,000 Rs.883,185

Less Rs. invested

  (Rs. 16,000)   (Rs. 78,000)
    Rs.1,019,161   Rs.805,185

Money increased

64 fold 10 fold

The idea is very simple. The earlier you start saving and investing, the more money you'll end up with. By saving smaller, regular amounts over longer periods of time, you'll end up with more than if you had saved larger amounts over a shorter period of time.

Calculator and Action Plan

Here is a calculator where you can put your own numbers to see how many years you need to reach your target. After the calculator is an Action Plan for you to use to reach your target.

Published Mar 13 2011




Comments

Comments

 

yes said:

yes

March 22, 2011 5:48 PM
 

investment said:

if we invest Rs. 10,000 per year than total amount is 2,50000 not   Rs. 3,00,000 please check this

March 28, 2011 9:07 AM
 

investment said:

please check in 1st case as return rate is 12% and we are saving 1000 per month than at the end of 25 years we get 1978846.626192439 according to my calculation

please correct me if i am wrong or  tell how to calculate i used formula for annuity.

March 29, 2011 3:26 AM
 

prateekgupta2006 said:

bvvvbvbvb

April 21, 2011 1:43 AM
 

Shirish said:

example : Think IF u have the job till the age 45 and after that if you are not able to invest any amount, so what is the investment amount from the age 36 to 45 to become a crorepati.

April 26, 2011 6:26 AM
 

honey said:

if i want to invest rs. 4,000 p.m. where should i invest? with an option to draw out the fund when reqd.? advise the best option

May 28, 2011 12:44 PM
 

honey said:

if i want to invest rs. 4,000 p.m. where should i invest? with an option to draw out the fund when reqd.? advise the best option

May 28, 2011 12:46 PM
 

parampal said:

please tell me i have monthly income only 8000 so please and 4000 is my expenses please tell me how can i become carorpati

August 4, 2011 3:51 AM

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