How to make your first million before 30

Systematic planning, discipline, and the stock market can help one reach this target. Of course, a single-minded financial target is necessary, and one cannot compensate on this goal.

Apr 14, 2018 11:04 IST India Infoline News Service

A million rupees would be Rs10 lakh. For most of us with middle-class upbringing and background, Rs10 lakh is a big amount. Though in today’s scenario, most people speak of crores, having a bank balance of Rs10 lakh is not a joke. If you further add a time factor, having a million by the age of 30 becomes a challenge. Unless one comes from a business family or has been lucky to inherit wealth, achieving this goal is a daunting task. However, it is not impossible.

Systematic planning, discipline, and the stock market can help one reach this target. Of course, a single-minded financial target is necessary, and one cannot compensate on this goal. It would be wise to invest all the financial planning towards achieving this aim.
 
By using an example, we can get an idea of how one can invest to achieve a sum of Rs10 lakh at the age of 30.


 
Let us assume you are 24 right now. If you need to achieve Rs10 lakh by the age of 30, you need to start investing Rs10,000 per month into an asset class that gives you a return of 12% per year. To achieve this, you will have to invest all of your investments into equity. Equity has the potential to deliver higher returns over a long period. The following table shows the yearly accumulation if you follow this strategy.

Year

Monthly Investments (Rs)

Value of Investment (in Rs lakh)

1

10,000

1.28

2

10,000

2.72

3

10,000

4.35

4

10,000

6.18

5

10,000

8.25

6

10,000

10.58

 
If you cannot invest Rs10,000 per month, you can start by investing Rs5000 in the first year. However, you will have to increase this amount by 10% every year. Assuming the rate of return to be at 12 %, you will need to invest for two more years to achieve your target. The following table shows the accumulation for the second scenario:
 

Year

Monthly Investments (Rs)

Value of Investment (in Rs lakh)

1

5,000

0.64

2

5,500

1.43

3

6,050

2.38

4

6,655

3.54

5

7,321

4.92

6

8,053

6.58

7

8,858

8.55

8

9,744

10.88

 
One has to exercise a lot of discipline if the goal is to be achieved. Some important points to bear in mind are:
  • Expenditure v/s saving: It is important to have a disciplined system so that you do not spend your investment amount. The perfect way to do this is by availing the electronic clearing service (ECS) from your bank. The moment your salary is credited into your account, the investment amount would get directly debited.
  • Increasing investment year on year: Almost everyone gets an increment every year. It would be ideal to increase your investment quotient with every increment you get to reach your goal.
  • Skill-building and competence: For working individuals, it is important to keep updating their skills to add value to your profession. An employer will always prefer a skilled employee and this will directly impact your income.
  • Power of equity: The younger you are, the greater the capacity to take risks; the greater the risk, the higher the returns. You can easily invest in equity, which, as an asset class, gives double-digit returns that can mark a victory over even inflation. 
To sum it up, make a plan, gather your corpus, and be disciplined, and that Rs10 lakh should not elude you for long.

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