Rahul is a diligent professional who earns ₹50,000 per month, which amounts to ₹600,000 annually. He is committed to growing his wealth through strategic investments. Every month, Rahul invests 20% of his salary into equity-driven investments, which means he invests ₹10,000 each month, or ₹120,000 annually.
Rahul’s investment has an estimated annual interest rate of 15% ± 5%. To simplify, we’ll use an average rate of 15%. The investments also generate a 4% annual income (fixed withdrawal).
Balance Sheet Calculation
To project the balance sheet, we’ll use the following approach:
1. Monthly Investment: ₹10,000
2. Annual Investment: ₹120,000
3. Annual Interest Rate: 15%
4. Annual Income: 4% of the investment
We need to calculate the future value of Rahul’s investments each year and include the annual income generated from the investments.
Calculation
We’ll create a table to show the balance each year:
| Year | Annual Invesment (₹10,000 / month) | Investment Balance (D – C) | Annual Income at 15% CAGR (C) | Overall Balance 15% P.A CAGR (D) |
|---|---|---|---|---|
| 1 | ₹1,20,000 | ₹1,38,000 | ₹5,520 | ₹1,43,520 |
| 2 | ₹1,20,000 | ₹3,06,900 | ₹12,276 | ₹3,19,176 |
| 3 | ₹1,20,000 | ₹5,01,834 | ₹20,073 | ₹5,21,907 |
| 4 | ₹1,20,000 | ₹7,22,695 | ₹29,085 | ₹7,51,780 |
| 5 | ₹1,20,000 | ₹9,70,395 | ₹39,376 | ₹10,09,771 |
| 6 | ₹1,20,000 | ₹12,44,848 | ₹51,019 | ₹12,95,868 |
| 7 | ₹1,20,000 | ₹15,47,021 | ₹64,090 | ₹16,11,111 |
| 8 | ₹1,20,000 | ₹18,77,951 | ₹78,668 | ₹19,56,619 |
| 9 | ₹1,20,000 | ₹22,38,741 | ₹94,843 | ₹23,33,584 |
| 10 | ₹1,20,000 | ₹26,30,540 | ₹1,12,692 | ₹27,43,232 |
| 11 | ₹1,20,000 | ₹30,54,548 | ₹1,32,327 | ₹31,86,208 |
| 12 | ₹1,20,000 | ₹35,12,023 | ₹1,53,926 | ₹36,65,949 |
| 13 | ₹1,20,000 | ₹40,04,258 | ₹1,77,629 | ₹41,81,887 |
| 14 | ₹120,000 | ₹45,32,598 | ₹2,03,537 | ₹47,36,135 |
| 15 | ₹1,20,000 | ₹50,98,448 | ₹2,31,787 | ₹53,30,235 |
| 16 | ₹1,20,000 | ₹57,03,290 | ₹2,62,510 | ₹59,65,800 |
| 17 | ₹1,20,000 | ₹63,48,665 | ₹2,95,862 | ₹66,44,527 |
| 18 | ₹1,20,000 | ₹70,36,189 | ₹3,31,911 | ₹73,68,100 |
| 19 | ₹1,20,000 | ₹77,67,531 | ₹3,70,737 | ₹81,38,268 |
| 20 | ₹1,20,000 | ₹85,44,579 | ₹4,12,431 | ₹89,56,925 |
| 21 | ₹1,20,000 | ₹93,69,373 | ₹4,57,078 | ₹98,26,450 |
| 22 | ₹1,20,000 | ₹1,02,44,234 | ₹5,04,762 | ₹1,07,49,996 |
| 23 | ₹1,20,000 | ₹1,11,71,730 | ₹5,55,568 | ₹1,17,27,298 |
| 24 | ₹1,20,000 | ₹1,21,54,719 | ₹6,09,583 | ₹1,27,64,303 |
| 25 | ₹1,20,000 | ₹1,31,95,348 | ₹7,30,622 | ₹1,38,63,249 |
| 26 | ₹1,20,000 | ₹1,42,96,186 | ₹7,30,622 | ₹1,50,26,808 |
| 27 | ₹1,20,000 | ₹1,54,60,194 | ₹7,97,841 | ₹1,62,58,035 |
| 28 | ₹1,20,000 | ₹1,66,90,726 | ₹8,69,646 | ₹1,75,60,372 |
| 29 | ₹1,20,000 | ₹1,79,91,540 | ₹9,46,161 | ₹1,89,37,701 |
| 30 | ₹1,20,000 | ₹1,93,66,878 | ₹1,027,480 | ₹2,03,94,358 |
| 31 + | Retire Now | ₹2 Crore + and above Investments | ₹11 lakhs and above Annual Pension | ₹2 Crore + 11 Lakhs Overall Balance on the 31st year |
Goals and Targets
- 10 year goal target of ₹1,00,000 Annual Income
- 16 year goal target of ₹2,50,000 Annual Income and ₹50,00,000 in Investments
- 22 year goal target of ₹5,00,000 Annual Income and ₹1,00,00,000 in Investments
- 26 year goal target of ₹7,00,000 Annual Income and ₹1,50,00,000 in Investments
- 30 year goal target of ₹10,00,000 Annual Income and ₹2,00,00,000 in Investments
- 30+ years Successfully Retired with ₹11,00,000 plus in Annual Income and
₹2 crore plus in Returns Driven Equity Investments
Notes:
– Annual Investment: ₹120,000 (₹10,000/month)
– Ending Balance is calculated using the formula for the future value of a series of monthly investments.
– Annual Income is 4% of the Ending Balance.
– Total Balance is the sum of the Ending Balance and Annual Income.
– The rate of interest is assumed to be 15% Compounding Annual Growth Rate CAGR for 30 years in Return-Driven Equity Investment
– This illustrates the power of compounding investment over period of 30 years of the avg Investor and target of ₹2 crore goal at 15% CAGR