I’m a 35-year-old middle-class earner with a salary of Rs 90,000. How much do I save to become a crorepati in 5 years?

I am 35 years old and live in Agra. My family consists of my spouse, parents and two kids. My monthly expenses are around Rs 60,000. I am a middle-class earner with a salary income of Rs 90,000. How much do I need to save to become a crorepati in five years? I have no liability. However, I have to be ready with around Rs 50 lakh for my two daughter’s marriage after 25 years.  

Name withheld  

Reply by Rajiv Bajaj, Chairman & MD, Bajaj Capital  

To become a crorepati (having Rs 1 crore) in five years, you will need to save and invest wisely. Here’s a simplified financial plan: 

Calculate your target amount: To become a crorepati in five years, you would need to accumulate Rs 1 crore. 

Determine your current savings: Assess how much you currently have saved and invested. Let us assume it is zero for this calculation. 

Annual savings required: You have five years to reach your goal. So, Rs 1 crore divided by 5 equals Rs 20 lakh per year. 

Monthly savings goal: Rs 20 lakh per year divided by 12 months equals approximately Rs 1.67 lakh per month. 

Assess your current monthly savings: You mentioned a salary income of Rs 90,000 and monthly expenses of Rs 60,000. This leaves you with Rs 30,000 per month, that could potentially be saved and invested. 

Shortfall: You have a shortfall of Rs 1.67 lakh - Rs 30,000, which equals Rs 1.37 lakh per month. 

Investment options: Consider investing in a combination of equity mutual funds, fixed deposits, and other investment instruments to achieve your goal. Equity investments tend to offer higher returns over the long term but come with higher risk.

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The other way to understand your query is that roughly you are left with Rs 30,000 after meeting all your monthly expenses. Let’s assume you decide to invest this amount in mutual funds through SIP (Systematic Investment Plan). Considering a moderate return on investment of 12% annually, you would have accumulated around Rs 24 lakh at the end of 5 years. 

Clearly, simply saving and investing Rs 30,000 monthly will not make you a crorepati in just 5 years. Even if you double the time horizon, 10 years, you can generate approximately Rs 70 lakh. Thus, to reach the Rs 1 crore mark in such a short time span, you will need to drastically increase your monthly investments or find alternative ways to boost your income. 

Being aware of these calculations helps direct your financial planning and brings more clarity to your financial future. Becoming a crorepati in five years requires a high level of financial discipline, high income and more savings. However, saving for your daughters’ weddings is completely feasible at the current savings pace. Consistent saving coupled with smart investment decisions will lead to the creation of wealth in the long run. Don’t forget to allocate a portion of your savings towards the Rs 50 lakh needed for your daughters’ marriages in 25 years. This can be invested separately. You can achieve your daughters’ wedding planning goal by investing Rs 3000 monthly for 25 years (assuming 12% return). 

Besides, ensure you have an emergency fund in place, equivalent to at least 3-6 months of your living expenses, to handle unexpected expenses.

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(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)