Now that you have a few Goals to think about, let us work through a goal visualization illustration. You can use a similar approach to plan for your other Goals as well.
Let’s say you want to buy a house. Think about the kind of house you want to buy (your space requirements, 2BHK or 3 BHK, Complex or Standalone building, City Centre or Suburbs etc). Look up a property listing portal to figure out the approximate cost of a house that meets your criteria. Let’s say this number is Rs 1 Crore.
Now, you have to figure out whether you would like to buy the house with your own money or take a loan for it. In India, financial institutions normally provide for a housing loan to cover 75% of your cost. This means you need to pay 25% from your savings or Rs 25 Lakhs. This is the value of the House goal. Note that for the remaining Rs 75 Lakhs you will need to take a home loan.
Pro tip: Taking a housing loan is very simple and most people buy their house by taking one. Rates are fairly competitive and home loans comes with various tax benefits.
Next, think about when you would like to buy the house. Let’s say in 5 years. One of the factors that are relevant to this timeline will be that apart from the down payment, your income should be adequate to pay an EMI of about 1,000 per lakh(roughly) of loan or about Rs 75,000 per month. To be eligible for the loan your monthly income should be roughly twice of the EMI or about Rs 1,50,000/- per month. If you are buying the property jointly with your spouse, then you can include his or her income also for this calculation. Let’s say you estimate that in 5 years you will reach this income level and hence your goal horizon can be 5 years.
Pro tip: EMI and Monthly Income calculations are based on simple thumb rules. The actual numbers will vary but not by a lot.
So there you have it, your House Goal is Rs 25 lakhs in 5 years and reaching this goal will enable you to buy a house worth Rs 1 Crore.
To keep things simple, we have not incorporated inflation into the calculations. Read about it in The Inflation Monster. If you estimate inflation to be 5%, you can increase the purchase price of your house by 5% for every year and adjust the other numbers accordingly.
This is Number 2 of a 4 part series on Goal Visualization and Planning.
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