By- Anushka Rawat
From your stress-free Retirement life to achieving your biggest financial goal, a wise investment can make everything possible. Before moving to investment, it is important to make sure you have enough in your nest egg for a rainy day. But how much? Well you cannot say about the future, but you can surely make a learned decision by following few general rules of thumb and laying out a proper plan of action for the goals.
TODAY NOT TOMORROW
Everything takes time to multiply and so does money. If you invest now, you will receive more, if you wait, you will lose a day. COMPOUNDING is the main element of investment; it makes money grow with time. What return your investment will get depends on the duration for which it is invested. Pilling up money in bank accounts will do no good, remember investment does not come with a limit you can even add a minimal amount of your wish. Don’t waste time in thinking and make the most out of your every penny.
SET YOUR GOALS
While investing we all have some expectation and dreams that we want to live in future. Everyone looks at their future differently and makes financial decisions accordingly. First and the foremost thing before investing is to know what you want out of your money. This WANT is the GOAL of your investment which will guide your entire investment plan. Your goals can be short term or long term depending on when you want to fulfil them. From big objects like Retirement support, education, marriage to much simpler like travelling, purchasing a car, different goals have different time period as well as different amount they require to be invested regularly.
DECIDE THE AMOUNT OF EVERY INSTALLMENT
Once you know your motive behind the investment it will become easier to decide how much you should invest, so that you can receive the desired amount on the due date. As we know, investment need not to be done at a single point of time or in a bulk. You can invest money as per your needs. But the amount of each instalment should be aligned with the duration to get the required growth at the end.
RULE OF THUMB TO HELP YOU DECIDE BEST AMOUNT OF INVESTMENT.
As we known, there is no perfect answer or approach as to how much a person should invest, but they can definitely estimate how much they should sow now to reap the desired return. Let’s understand a few rules of thumb to make a educated decision for the retirement planning.
- ENDING SALARY: Here, one can multiply their yearly salary by 8. Like if your work earns you around Rs. 6,00,000 in a year, following this rule, you should have Rs. 64,00,000 saved for your retirement. The amount can be influenced by many factors as duration, your spending etc. But for a lavish retirement life you would want to save more.
- THE 25-RULE: One of the simplest methods, where based on your expenses you can calculate the nearest value of the retirement fund. Multiply the approximate annual expense by 25. Say your annual expense is Rs. 5,00,000 then your account should have Rs.1,25,00,000 at the time of retirement.
- THE RULE OF 4%: This rule assist in determining how much you can withdraw yearly at retirement time. For Example, if you retire with Rs10,00,000 in your portfolio scheme, as per this rule, you should not withdraw more than 4% of Rs10,00,000 that is Rs 4,00,000 annually. This will give stability and regular income to you after retirement.
- PERCENTAGE INVESTMENT: Mostly, one’s investment revolves around their income, it is better to go for the percentage of earning method. No need to stress too much upon numbers. If you are a beginner in your twenties, aim to save 10%-20% of the yearly salary irrespective of the digits. With the rise in pay and age, gradually increase the saving percentage as well.
