70:15:15 Investment Strategy: Can you build Rs 2.41 cr corpus by 55 years of age with starting salary of Rs 25,000? Know how
70:15:15 Investment Strategy: Many individuals with modest salaries often feel that high inflation prevents them from saving, believing that their entire income goes toward essential expenses. However, with a proper investment strategy, anyone can save and invest effectively.
Manage Expenses Within Your Income Level
It's important to manage expenses within your income level. If you're struggling to balance your expenses and savings, consider the 70:15:15 Investment Strategy, especially if you're 25 and aiming to accumulate over Rs 2 crore for retirement, even after covering your expenses.
Earning Rs 25,000 per Month: A Saving Strategy
Let’s assume you earn Rs 25,000 per month. It's crucial to save a portion of this income, and the 70:15:15 rule can guide you in doing so.
What is the 70:15:15 Investment Strategy?
According to this strategy, allocate your salary as follows: use 70 per cent for essential day-to-day expenses, set aside 15 per cent to build an emergency fund, and invest the remaining 15 per cent in a Systematic Investment Plan (SIP) each month.
Managing Your Living Costs
This approach allows you to manage your living costs while preparing for unexpected expenses and growing your wealth over time.
How Does the 70:15:15 Investment Strategy Work?
If you earn Rs 25,000 per month, here’s how the allocation breaks down:
- 70% for Living Expenses: Rs 17,500 for essential expenses.
- 15% for Emergency Fund: Rs 3,750 each month to build an emergency fund, ensuring you don’t have to dip into your investments during tough times.
- 15% for SIP Investments: The remaining Rs 3,750 will be invested in an SIP each month.
70:15:15 Investment Strategy: Building a Corpus of Rs 2.41 Crore
Assuming your salary increases by 5 per cent each year, using the step-up SIP formula, you could build a corpus of Rs 2.41 crore at an annualized return of 13 per cent.
70:15:15 Investment Strategy: Total Investment Contribution
If you start investing Rs 3,750 every month for 30 years, increasing your SIP contribution by 5 per cent annually and assuming a 13 per cent annualised return, you will contribute a total of Rs 29,89,748.
70:15:15 Investment Strategy: Long-Term Capital Gain Calculation
With a 13 per cent return, your long-term capital gain would be approximately Rs 2,11,80,645.
70:15:15 Investment Strategy: Total Amount Received After 30 Years
After 30 years, your investment could grow to approximately Rs 2,41,70,394.
SIP offers growth potential
SIPs offer substantial growth, outperforming many other investment schemes. Additionally, the rupee cost averaging feature ensures that expenses remain stable, even during market fluctuations.
Provides flexibility
SIPs offer flexible investment options, allowing you to choose the investment amount and period that suits your needs, whether monthly, quarterly, or semi-annually.
Freedom to pause, withdraw, or increase investments
As per your financial requirements, you have the freedom to pause, withdraw, or increase SIP investments.