How to become a crorepati with a normal income

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How to become a crorepati with a normal income? A very big question indeed.

A crore is attributed a great value and some even think that only some lucky men can become a crorepati. However, you can become a crorepati with a normal income with planned & consistent efforts. In this article we present to you the three areas which if followed diligently on a regular basis would make you a crorepati. The first area is about the amount invested every month/year.

Amount invested every month/yearHow to become a crorepati with a normal income

It’s a rational idea that the more you save & invest; you will receive greater returns in future. When you undertake a disciplined approach & save & invest in good options, you will reach you first crore due to the magic of compounding. For example, if you invest Rs. 50,000 ever year or slightly more than Rs.4000 every month, you could earn your first crore in 25 years.

The table below shows that even the smallest investment amount can give you significant returns in the future.

Amount invested per year (Rs.)
(assumed rate of returns at 12%)
Total investment
(Rs.)
Value after 25 years
(Rs.)
10,000 3,00,000 29,41,000
11,000 3,30,00 32,35,000
15,000 4,50,000 44,12,000
25,000 7,50,000 73,53,000
50,000 15,00,000 1,47,00,000
100,000 30,00,000 2,94,00,000

 

Rate of return

Rate of return is an important factor which would impact the total corpus you will gain after a period of time. For instance, in the past, stocks in Indian market have showed a return of more than 15%. On the other hand, cash, shows a return of 8% to 9% every year. You should invest in schemes which offer sizeable rate of return yet with the lowest possible risk of loss. Hence, it’s advisable to invest in a diversified portfolio of assets such as bonds, stocks, real estate, cash & other alternative investment options.

Consider in the first case, you invest Rs. 100 every year which gives you returns at 11% every year. After 25 years you would have a total amount of Rs. 1,359. In the second case, you invest Rs. 100 every year which gives you returns at 15% every year. In this case, after 25 years, you would have a total amount of Rs. 3,292. The table below shows various such combinations.

Year 5% (in Rs.) 11% (in Rs.) 15% (in Rs.)
0 100 100 100
5 128 169 201
10 163 284 405
15 208 478 814
20 265 806 1,637
25 339 1,359 3,292
30 432 2,289 6,621
35 552 3,857 13,318
40 704 6,500 26,786
45 899 10,953 53,877
50 1147 18,456 1,08,366

 

Time period the amount stays invested

This particular aspect along with table mentioned below clearly illustrates the power of compounding over a period of time. Consider example 1 in the table below. A person invested Rs. 2,000 each year from the age 19 to 26 years. This means he did eight contributions. (Rs.2000 invested eight times from 19 years to 25 years of age). The person ended up with a total amount of Rs.1, 019,161 at the age of 65. Now consider example 2. Another person invested Rs. 2,000 each year from the age 27 to 65 years. This means he made 39 contributions from 27 to 65 years of his age. This person ended with a total amount of Rs.805, 185 which is less than the example 1. The reason for this is the power of compounding! In the first example, the person had eight more important years to invest at the same return in the beginning of the investment period.

 

Example 1 Example 2
Age Annual investment
(in Rs.)
Year-end value
(in Rs.)
Annual investment
(in Rs.)
Year-end value
(in Rs.)
19 2,000 2,200 0 0
20 2,000 4,620 0 0
21 2,000 7,282 0 0
22 2,000 10,210 0 0
23 2,000 13,431 0 0
24 2,000 16,974 0 0
25 2,000 20,872 0 0
26 2,000 25,159 0 0
27 0 27,675 2,000 2,200
28 0 30,442 2,000 4,620
29 0 33,487 2,000 7,282
30 0 36,835 2,000 10,210
35 0 59,324 2,000 29,875
40 0 95,541 2,000 61,545
45 0 153,870 2,000 112,550
50 0 247,809 2,000 194,694
55 0 399,100 2,000 326,988
60 0 642,754 2,000 540,049
65 0 1,035,161 2,000 883,185
Minus amount invested 16,000 78,000
Total 1,019,161 805,185
How much the amount has increased by 64 times 10 times

 

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