70:15:15 Investment Strategy: Can you build over Rs 1 cr retirement corpus with just Rs 20,000 salary? Know how

SIP Calculator: What does monthly income mean for majority of Indians? Not many of them earn salary packages into lakhs, not the average businessman is a millionaire. A majority of them have meagre incomes, and so their monthly savings and chances of investing it is rare. So, anyone who earns Rs 15,000 or Rs 20,000 a month, saving and investment look like a dream. Their major concern is that how can I save in such a meagre income, and even if I save, what is point of investment which is so small that it would hardly help me build a significant corpus at the time of retirement? 

But people think such for sheer lack of financial literacy and inability to financially discipline themselves.

Saving is discipline, a habit that is inculcated irrespective of one's monthly income.

A person earning Rs 200,000 a month can have the same excuse for not saving as the one with a Rs 20,000 monthly salary. 

In modern times, there are many investment options available in India, which provides compound interest/growth.

If you investment in such options, your money is likely to grow faster as your investment grows older.

Now, the thing is what should be ideal savings a month?

What strategy one should follow to meet their monthly expenses and saving money?

In this write-up, know about one such strategy, which, if implemented in the right way, may help one fulfil the dream of achieving over Rs 1 crore corpus with a monthly salary of just Rs 20,000.  

Adopt 70:15:15 formula for saving and investing

The formula that can be used for savings and investment is 70:15:15.

As per the formula, you keep 70 per cent of your earnings to meet your needs, create an emergency fund with 15 per cent, and invest the reaming 15 per cent in some investment scheme.

Seventy per cent of Rs 20,000 is Rs 14,000, which means, you will have to meet all your expenses with Rs 14,000 a month.

You have to keep 15 per cent, i.e. Rs 3000, for the emergency fund, and invest the rest 15 per cent in a market-linked scheme that also provides your compound growth.

Where to invest to create Rs 1 crore corpus

Now the question is where to invest to build a Rs 1 crore copus?

There can be many market-linked programmes which provides compound growth and where one can invest.

Mutual fund investment through systematic investment plan (SIP) is one of those options.

SIP provides compound growth and one can expect a 12 per cent annual return in the long run.

So, if you invest Rs 3,000 every month continuously for 30 years through SIP, you will invest a total of Rs 10,80,000 in that period.

At the rate of 12 per cent annual return, you will get Rs 95,09,741 as long-term capital gains. In this way, in 30 years, you will get a total of Rs 1,05,89,741.

(Disclaimer: Investments in mutual funds are subject to market risks. Do your own research or consult your advisor before investing.)