Secret to wealth creation and retiring rich

Five crores is a lot of money and for a lot of folks, its equivalent to the sum of many years of annual income.

If you can save Rs 50,000 per month, it will take you ~1000 months or 83 years to reach a crore.

However, if you invest it in assets with @15% returns per annum, it will only take 17 years.

Now if you increase your investments by 5% every year, you will reach five crores in 15 years.

As you can see, the power of compounding and investing in growth assets reduces your timeline for reaching five crores.

If you are a 35 year old who has surplus cash of Rs 50,000 per month, you can become have 5 crores by the time you turn 50.

Here are 3 different scenarios, which can help you to create a savings corpus of a crore.

However, its not as easy as it sounds else everyone would have been a crorepati. The good news is that with a bit of planning, it is achievable.

So what are some key challenges that you might face?

Saving 20% of your salary per month year on year.

Investing those savings and increasing it by 5% every year as your income grows

Achieving an average annual growth of 15% per annum (Possible since the Stock market has grown at the rate of ~17% year on year over the last 25 years).

It maybe difficult but it’s not impossible.

However, there is a bigger question that you need to think about – Will Rs 5 crore be enough to meet your goal, especially if you are close to retirement? Probably not.

That’s why I recommend starting early and breaking up your savings into different goal chunks, with retirement as a priority.

What will it take to reach a goal of Rs 100 crores by the time you retire?

Not many think of retiring with a corpus of Rs 100 crore. But why not ?

Here is a rough ballpark of how much you will need to invest to retire with a corpus of Rs 100 crores in the bank.

Age 30 – Starting with Rs 75,000 per month.

Age 35 – Starting with Rs 3,08,000 per month.

Age 40 – Starting with Rs 6,68,000 per month.

Do you want to join 100+ crore club?
Don’t obsess over a crore or 100 crores for that matter. Life is now and you should not sacrifice everything for tomorrow. That’s why if you plan your expenses and savings, you can have the best of both worlds.

Taking control of finances to achieve your goals is the first step towards securing your financial freedom. A robust planning process ensures a sustainable and secured financial life. The following tips can ensure that you reap maximum benefits from the entire planning process.

1. Stop leakage first: Correct your past financial mistakes

Each one of us makes some mistakes in our financial decisions. Mistakes like buying the wrong insurance products, or a home we cannot afford, credit card abuse, taking loans at higher lending rates or a bad investment are few common financial mistakes. It is important that one is aware of the past financial mistakes and commit to correcting them in the future.

2. Know that goal setting is a tradeoff: Prioritize realistically

Though financial planning would help to set your financial life in order, it cannot cast a magic spell to turn all your dreams into reality. It is important that you prioritize the goals you want to achieve.

You will probably have to let go or defer some of your dreams which maybe less important than others. Once you prioritize the goals, you have to be realistic while translating your goals into monetary terms. It is not advisable to expect unrealistic returns on your investments.

3. Go for a credible expert

Most folks usually rely on neighborhood agents, friends or family for financial advice. The Internet has also emerged as a huge source for free financial information. It is important that you always assess the credibility of the source before taking financial advice.

Financial mistakes can have a major influence on your future well-being. Choose your advisor wisely to make sure that you always make well-informed financial decisions.

4. Don’t sit on your plan, implement immediately: Costs of delay are huge

Getting a plan and recommendations on financial products through expert advice is a job half done until put into action. The success of a well-planned financial road map depends on how soon you start walking on it. The early starters always have a huge advantage of power of compounding and a flexibility of saving lesser amounts.

5. Managing and monitoring

The financial situation of every individual is dynamic in nature.

Your goals and priorities change from time to time. You must review your financial plan periodically in order to ensure that it is in tune with the current situation in your life and on course to meet your long-term goals.