Over this and the next post, we will explore some simple methods to achieve the House Goal set in the previous post ie saving Rs 25 lakh in 5 years.
Method 1: Monthly Saving Required Rs 41,667/-
If you were to just put aside INR 41,667 every month for the next 60 months, you will reach this goal. Easy right? Except there are smarter ways that will require less money every month and still get you there!
Method 2: Monthly Saving Required Rs 35,358/-
Let’s say every month for the next 59 month you place a fixed deposit on the 1st day of each month such that each FD will earn you 6.5% till maturity. So FD 1 of Rs 35,358 will mature into Rs 48,893 in 60 months, FD 2 of Rs 35,358 will mature into Rs 48,630 in 59 months and so on. Effectively at the end of 60 months, you will have 60 FDs that will mature and together will amount to Rs 25 Lakhs in your account. Apart from the hassle of placing 60 FDs, finding one that gives you 6.5% throughout the 5 year period and managing the taxes you need to pay on the interest earned, this is another simple method to reach your goal. And every month the amount that need to put aside will be Rs 6,309 less or a saving of Rs 3.78 lakhs over 5 years as compared to Method 1. Cool, right?
The above two methods are fairly commonly used by most as the risk is minimal in both. But given that you have 5 years to go, you could consider taking higher risk.
Note inflation and taxes are not factored in for simplification.
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