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Can you take the 50 before 40 challenge?

108 months, Rs 20,000 to save a month to begin with. Can you reach 50 Lakhs before 40? Here’s a 5-step approach

From the day we start school, for the vast majority of us life is a series of challenges. Getting good grades, then getting into good colleges after school. Then, it’s about the challenge of getting a god job. It doesn’t end there though. We then compete for better salaries and better roles. Next, we move on to the challenge of generating enough wealth to meet the needs, present and future, of both ourselves and our families.

What milestones we achieve can often decide the success, or the lack of it, when it comes to meeting the challenge of generating “enough” wealth. One such milestone for many, especially those working in metros with its related high cost of living, is achieving their first crore.

Unless,your income grows at a very high rate, saving big amounts is difficult to say the least. So why not start with a significant but slightly smaller goal? While you are at it, why not also make it a challenge?

The challenge is to save up at least Rs 50 Lakhs before you turn 40. You don’t have to be terribly young to reach this milestone. Even if you start from scratch, all you need is just 108 months or about 9 years.

Here’s how you can go about it.

Step 1: Save at least Rs 20,000 a month to begin with.

Step 2: Select a few but good equity mutual funds, preferably large cap and diversified ones which invest in good and reliable companies. What you are doing is creating a portfolio. Don’t just go with a single fund but spread your investment across 2-3 funds. Pro-tip: Talk to a qualified financial adviser, to get a non-biased yet good recommendation.

Step 3: Start a SIP in the selected set of funds for 108 months.

Step 4: Increase your SIP amount by 10% annually. Increase it more if you can afford to.

Step 5: Stay strong and exercise conviction through these 108 months, irrespective of market ups and downs. If a fund isn’t doing well for too long you might need to reconsider that fund, but stay invested in the asset class (equity).

The challenge is to save up at least Rs 50 Lakhs before you turn 40. You don’t have to be terribly young to reach this milestone. Even if you start from scratch, all you need is just 108 months or about 9 years.

What you get at the end?

If your portfolio grows at the expected rate of growth (about 12% annualised for equity, based on current estimates), you should reach the target goal and arrive at a final figure of over Rs 50 Lakhs.

Here’s how your wealth will grow. 

So, what are you waiting for? Get, set, and go!

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