Do you want to retire early? The answer of course is yes. But, for that you have to save and invest on a monthly basis. 1 crore for retirement may be good for some, i won’t say for all.
For every middle class person, it is difficult to save a good amount to get the dream amount for retirement. Question arises, How much you should required to get retired? This amount varies individual to individual. In this post, I will give you solution of one problem that is How much need to invest every month to get your dream amount for retirement.
First, you have to do one work, think or set how much money you are looking to get in future so that you can retire rich. Let’s say, 1 crore is required for you to achieve financial freedom and retire peacefully.
Now, write down how much you earn per month and in this post, I will tell you a simple calculator trick using which you can find out how much you need to save monthly.
I assume that you know how much interest you can get every year, and for how many years you can invest, then using the formula given by me, you will be able to calculate how much you will have to invest every month.
Calculator to find out Monthly investment for 1 crore
So the excel formula is – “=PMT(rate, nper, 0, future_value,1)”
PMT: This stands for Payment
Rate: This is the interest rate for each period. If your interest rate is 25%, you would enter 0.25. For per month, 0.25/12, you have to do.
Nper: This is the total number of payment periods. If you’re making monthly payments for a loan term of 10 years, you would enter 10*12=120.
0: This is the present value or the total amount of the loan or investment. In this case, it’s set to ‘0’ because you’re assuming no initial amount is invested or borrowed. If you have an initial amount, you would include it here as a negative value.
Future_value: This is an optional parameter and is usually omitted (set to 0) for loan calculations. If you’re calculating the future value of an investment, you would include it here as a positive value.
1: This indicates whether the payment is due at the beginning or end of the period. If payments are due at the end of the period, you would use 0. If payments are due at the beginning of the period, you would use 1.
In simple terms, this formula helps you calculate the periodic payment you need to make or receive for a loan or investment based on the interest rate, the number of payment periods, and other relevant factors.
Our target is – 1 crore and that too for 10 years and at 25 percent annual interest. I put these values in the above formula,
“=PMT((25%/12), 10*12, 0, -10000000,1)” = then the answer will be – ₹ 18,768.60/-
In this, the rate is divided by 12, as we have to calculate monthly investment and time is also multiplied with 12. This formula you can copy-paste in excel and use it whenever you want it.
I have placed “negative value” before future value i.e., 1,00,00,000 in order to get a positive value in result. If you use “positive value” before future value i.e., Rs.1,00,00,000, you will get a negative result which means how much you need to spend every month.
I assume, you must have got that you need to invest Rs.18,770/- per month to get 1 crore within 10 years, with the condition of getting 25% every year.
Further, it is very difficult for many to save Rs.18000-19000/- every month. So, plan as per your appetite to achieve your dream amount. Change the time period for investment to reduce the monthly investment required to invest.
Disclaimer: In this post, return is just assumption and depends on market risk and your fund investments. No one can guarantee you the amount of interest every year. All these things depend on the type of investment you make. Mutual funds investment and stock market investment yield the best return compared to conventional investments in India.
Also note that – interest rate of 25% is from mutual funds investment plan offered by Nippon, Quant like companies, where in the last three years 2021-2023, many investors have got 25% or more yield. But, the nifty50 yield in the last 10 years ranges between 12-15%. Therefore, In this post, I have evaluated an example on an assumption basis only and keep it in mind that interest may vary based on market situations.
Conclusion
For these types of returns and to achieve high goals, you will have to risk as per your risk appetite. Simple terms, you need to invest in equity or business as per your capacity to digest the loss (risk appetite).
You can calculate your monthly savings required for investment by simply changing the rate, time and future value (i.e. your target to be achieved) in this formula.
You can also download my excel with pre-built formula – DOWNLOAD HERE or you can also use this calculator – click here
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