How to become a crorepati?

The setting objectives plays an important part in any individual's quest to achieve various goals in life. Objectives help channelise the thought process and thereby initiate appropriate action, which is in line with the goal that the individual has set out to achieve.

With respect to financial planning and youth, financial objectives play an important part in helping individuals achieve their dreams and goals in life. Financial objectives act as the first step towards determining the course of action needed to achieve various goals.

For example, youth can aspire to become Crorepatis (millionaires) one day. And through erfectly legal means! We are not trying to advocate any kind of illegal activity like going to a casino and gambling with your money or betting on horse races (which is legal by the way!). This goal is very much achievable in our view provided individuals plan their finances wisely. This article outlines a strategy for the youth of today to become a Crorepati.

Suppose an individual aged 25 years wants to become a Crorepati by the age of 40. This means he has 15 years to achieve the goal. He wants to know how much he will need to save per month/annum to achieve the target.

Assuming a rate of return of 15% per annum (p.a.) and an investment tenure of 15 years, the individual will need to save Rs 210,171 every year to become a Crorepati (refer Table 1 at end of article. Effectively, the individual would need to invest Rs 16,414 every month.

Of course, the above figures would vary with a change in the 'given' set of variables. For example, assuming that the individual had 20 years to become a Crorepati; he would need to invest a sum of Rs 97,615 per annum (or Rs 7,624 per month), other variables remaining the same. If we were to reduce the rate of return to 12% p.a. and the tenure were 20 years, then it would need an investment of Rs 138,788 p.a. (or Rs 10,974 per month).

Individuals could also be faced with another kind of dilemma; they know how much they can invest but would like to know the time it would take for them to become a Crorepati. An illustration would make things easier to understand. six months to achieve the magic figure of Rs 1 crore (refer Table 2). Conversely, if his investments were to increase to Rs 100,000 p.a. and his expected rate of return were to fall to 12%, it would take him 22 years and six months to achieve his target.

However, the numbers given above assume certain factors to be 'given'. For example, it is assumed that the individual Let us suppose an individual can invest Rs 50,000 p.a. and his expected rate of return is 15% p.a. on his investments. It will take him approximately 24 years and will be a disciplined investor and he will continue to invest the specified amount(s) diligently every month/year and that he will not deviate from his investment plan. If viewed differently, it
takes patience, discipline and belief on part of the investor to stay on course of the journey the entire distance.

Individuals therefore need to bear the minute details in mind before embarking on their journey to becoming a Crorepati. As we have shown, becoming a Crorepati is not 'mission impossible'- in our view, it is 'mission achievable'!

* Rs 1 crore = Rs 10 million

Source: personalfn.com. To download full article click here.