Core of investment is to cover the monthly cost of living: Assume that current expenses monthly are: 60,000 INR (This includes following items at current cost: house maintenance, food, phone+internet, house-help, fuel, electricity+gas, personal expenses, OTT subscriptions, medical expenses if any), therefore annual expenses are 7.2L and tax included at 10%, it comes out to 8L INR annually. If this was supposed to come from a fixed deposit (safest bet, at 6%), the total corpus should have been 84L INR (please see the note below to see what is not included in this expense).
Assume that currently, one has 40L in corpus, and at a saving rate of 125K per month, it will take him/her 69 months of investment to reach the corpus and once this corpus is formed, it should not be touched and it will cover the basic necessities as outlined if an untoward event were to happen. The modest (10%) rate of growth of this corpus will also take care of inflation (6%) over a period of time, meaning the returns from this corpus will be in line to the expenses at given point of time.
Once this corpus is created (you can play around with values in spreadsheet), then the next set of savings can be channelled to other expenses (e.g. buying a house, setting up funds for children, car, travel, etc.). If the saving rate is higher than 125K, the additional amount can be routed to the other goals.
What do you folks think? Feel free to poke hole(s) in this approach.
Link to spreadsheet here.
What is not included? (Create separate goals for them, and channel money over and above annuity saving rate)
Edit 2: made changes to google sheet formula and updated the write up accordingly.
Assume that currently, one has 40L in corpus, and at a saving rate of 125K per month, it will take him/her 69 months of investment to reach the corpus and once this corpus is formed, it should not be touched and it will cover the basic necessities as outlined if an untoward event were to happen. The modest (10%) rate of growth of this corpus will also take care of inflation (6%) over a period of time, meaning the returns from this corpus will be in line to the expenses at given point of time.
Once this corpus is created (you can play around with values in spreadsheet), then the next set of savings can be channelled to other expenses (e.g. buying a house, setting up funds for children, car, travel, etc.). If the saving rate is higher than 125K, the additional amount can be routed to the other goals.
What do you folks think? Feel free to poke hole(s) in this approach.
Link to spreadsheet here.
What is not included? (Create separate goals for them, and channel money over and above annuity saving rate)
- Home is paid for and no rent expenses (only maintenance is accounted for)
- No outstanding liabilities (e.g. car loan, education loan, personal loan, property loan etc.)
- Kid's education is paid for, their expenses are from their own funds (to be created as a separate goal)
- No extraordinary expenses (e.g. health complications, family spending in marriage etc.)
Edit 2: made changes to google sheet formula and updated the write up accordingly.