Dreaming of saving Rs 7 crore for retirement while earning a starting salary of Rs 20,000 might sound impossible. But with proper planning and regular investing, this goal is more realistic than you think. The secret lies in understanding the power of compounding.
What is Power of Compounding?
Power of Compounding is when your investments earn returns, and those returns start earning more returns over time. This creates a snowball effect, helping your wealth grow faster the longer you stay invested. Even small investments can turn into a huge amount if you stay consistent and give it time.
Think of it like planting a tree. Initially, it grows slowly, but over time, it becomes a massive tree that bears fruits year after year.
What is a Small or Big Investment?
What feels like a small or big investment depends on your income. For someone earning Rs 1 lakh a month, saving Rs 5,000 may feel small. But for someone earning Rs 20,000, it might feel like a lot. The key is to align your investments with your financial goals and start early. No amount is too small when you’re just starting—what matters is the habit of investing.
How Can Rs 1,000 Monthly Investments Grow?
Even a small investment can grow into a large amount over time. For example:
- Investing Rs 1,000 Every Month for 40 Years
- Total Investment: Rs 4,80,000
- Annual Return: 12%
- Final Amount: Rs 1,18,82,420
- Investing Rs 1,000 Monthly with a 5% Annual Increase for 40 Years
- Total Investment: Rs 14,49,597
- Annual Return: 12%
- Final Amount: Rs 1,86,08,780
These examples show how starting early and staying invested can lead to massive growth over time. The longer you stay invested, the greater the impact of compounding.
How Can Someone Earning Rs 20,000 Build Rs 5 Crore, Rs 6 Crore, or Rs 7 Crore?
Let’s assume you earn Rs 20,000 a month and invest 20% of your salary (Rs 4,000) in a mutual fund SIP. You also increase your investment by 5% every year. If you get an annual return of 12%, here’s what your savings can look like:
- For Rs 5 Crore
- Time: 37 Years
- Total Investment: Rs 48,78,151
- Capital Gains: Rs 4,63,72,112
- Final Amount: Rs 5,12,50,263
- For Rs 6 Crore
- Time: 39 Years
- Total Investment: Rs 54,76,561
- Capital Gains: Rs 6,02,75,961
- Final Amount: Rs 6,57,52,522
- For Rs 7 Crore
- Time: 40 Years
- Total Investment: Rs 57,98,389
- Capital Gains: Rs 6,86,36,732
- Final Amount: Rs 7,44,35,121
These figures highlight how consistency and time can transform modest investments into a significant retirement corpus.
Key Takeaways
- Longer Time Means Bigger Growth Look at how your savings grow from Rs 5.12 crore in 37 years to Rs 7.44 crore in 40 years with just a slightly higher investment. Compounding works better the longer you invest.
- Start Early and Stay Regular Even if you can only invest a small amount, start as early as possible. Over time, increase your investments as your income grows. Consistency is the key to building wealth.
- Patience is the Secret Weapon Compounding takes time to show its true potential. Stay invested and avoid withdrawing your money unnecessarily.
Where Should You Invest?
To get a 12% annual return, you can consider mutual fund SIPs. They are designed for long-term wealth creation and provide market-linked returns. If you’re unsure where to start, consult a financial advisor who can guide you based on your goals and risk tolerance.
Conclusion
Saving Rs 5 crore, Rs 6 crore, or even Rs 7 crore is not just a dream. It’s achievable with discipline, smart planning, and a long-term view. Start small, increase your investment over time, and let the power of compounding do the rest. Remember, the earlier you begin, the better your chances of creating substantial wealth.
Compounding is truly a gift for those who believe in it and stay patient. So, take the first step today and watch your wealth grow over time.
If you need expert guidance on where to invest to achieve your financial goals, contact Ashwini Wealth Advisory today.
Call us at: 98459 61990
Email: ashwini@ashwiniwealthadvisory.com
Disclaimer: Past performance is not an indicator of future results. Always consult with a financial advisor before making any investment decisions