In the initial years of career, it can be difficult to organise investments and savings if the income is modest. With lifestyle expenses, bills and rent, one may feel that they are unable to set money aside for long-term wealth creation.
But remember in the investment journey, consistency typically matters more than money alone. If one can manage to set aside even 15% to 20% of their monthly income regularly, it can trigger the power of compounding, helping wealth grow steadily over time.
Assuming someone is earning a modest income of Rs 40,000. Still, by cutting unnecessary costs and making efforts to save 20% of this income, they can end up being a lakhpati at the end of the first year alone.
An individual earning Rs 40,000 per month earns around Rs 4.8 lakh annually before deductions. To accumulate Rs 1 lakh in savings within 12 months, one would need to set aside at least Rs 7,850 every month. Mutual fund SIPs are considered one of the most effective ways to build wealth over the long term.
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How SIP Investments Can Help
Assuming an annual return of 12%, here's how monthly investments can grow over one year:
Scenario 1
- SIP amount: Rs 7,850
- Investment duration: 1 year
- Expected rate of return: 12%
- Invested amount: Rs 94,200
- Estimated returns: Rs 6,353
- Total value: Rs 1,00,553
Scenario 2:
- Monthly investment: Rs 9,000
- Expected returns: 12%
- Total investment: Rs 1.08 lakh
- Estimated returns: Rs 7,284
- Maturity corpus: Rs 1.15 lakh
In a nutshell, it is very much possible to build a corpus of over Rs 1 lakh in just 12 months with a salary of Rs 40,000 per month. By consistently saving around Rs 8,000-9,000 every month of your income and putting it to work through SIPs, you can create a corpus ranging from Rs 1.02 lakh to Rs 1.15 lakh in a year.
In the early years, the power of compounding does not get a chance to work due to limited time, but the journey still builds a consistent savings habit.
The best way to invest is to follow the “pay yourself first” principle, which involves earmarking a fixed portion of income for savings as soon as the salary is credited. This amount can be invested through recurring deposits, systematic investment plans (SIPs), or dedicated savings accounts.
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