Listen to this articleYou may have come across the mythical ‘Akshaya Patra’ in literature, a vessel that never ran out of food. Similarly, wouldn’t you want a bottomless source of wealth, where money keeps growing without depleting?
No one would ever say no to this. But how do you identify the “Akshaya Patra” that generates wealth?
It’s simple: the money you save by controlling expenses, invested wisely, creates your very own wonderful “Akshaya Patra.” This isn’t some hidden treasure; it’s the wealth you build for yourself.
By investing this savings into a suitable mutual fund using the Systematic Withdrawal Plan (SWP), you can withdraw a fixed amount every month to cover your expenses.
A Systematic Withdrawal Plan (SWP) is an investment strategy where you invest a lump sum amount in a mutual fund and withdraw a fixed amount regularly to meet your financial goals, ensuring a steady income while the remaining funds continue to grow.
SWP allows you to withdraw funds periodically while keeping the remaining corpus invested, which means your money continues to grow even as you use it for regular expenses. This ensures wealth creation over the long term.
Even as you withdraw, the remaining amount stays invested, continuously growing, ensuring a source of wealth that never diminishes.
So, how do you create such an “Akshaya Patra” with your own investment fund? Let’s dive deeper into how controlling expenses, increasing investments, and building your fund can provide a steady stream of wealth for the future.
Table of Contents:
Proper financial management
Many people today find themselves struggling with debt due to overspending. They don’t even think about saving or investing. Without considering unnecessary expenses, they end up with no money for essential needs like food, education, and healthcare.
So, isn’t it essential to understand how to manage your finances correctly?
Recent data shows a rise in international travel among people. In the 2023-24 financial year alone, Indians spent ₹1.21 trillion on international tourism, which is 24.5% more than the previous year.
During the COVID-19 pandemic, many of us started saving more, but now, the situation has shifted, and spending has increased significantly.
Indians’ use of credit cards for purchases, services, and borrowing has risen sharply. The total outstanding credit card balance in India is over ₹2.7 trillion. What’s driving this? The lack of proper financial management.
If you divide your salary into 50% for essential expenses, 20% for discretionary spending, and 30% for savings, there’s little chance of falling into debt. In personal finance management, there are three key areas to consider.
With careful financial management and choosing the right investment vehicle like equity mutual funds, SWP can provide a reliable source of income, allowing you to spend without depleting your corpus.
By fully understanding these, we can practice proper financial management. So, what are these areas, and how can we apply them for better financial control? Let’s explore.
The Earning Phase
Many of us tend to spend our salary as quickly as possible, often without thinking about the future.
But isn’t the money we earn meant for more than just immediate expenses? Many forget that earnings are also meant for future needs, like children’s higher education, weddings, and retirement costs.
Shouldn’t we focus on spending only when necessary? It’s crucial to avoid unnecessary expenses until you’ve saved your first crore. Saving consistently for future needs from your salary is essential.
Ideally, at least 30% of your salary should be saved. If you increase your savings without increasing your spending as your salary grows, you’ll be well on your way to accumulating that first crore faster than you think.
Shouldn’t we adopt a frugal approach like the Japanese? They are known for their extreme frugality until they improve their quality of life. On average, they save around 50% of their income.
Only after building significant wealth do they start spending on their desires.
If we follow this approach, wouldn’t our financial lives also flourish quickly?
The Spending Phase
In the first phase, we discussed avoiding unnecessary expenses until you accumulate your first crore. But what about the second phase?
Don’t you think it’s important to allocate some time and money for personal enjoyment? After all, the happiest moments in life often come when we’re mentally at peace.
Some individuals might accumulate several crores but never travel beyond India or experience life outside their comfort zone. Isn’t the purpose of earning money to live a happy life?
Yet, many people focus only on making money, thinking that’s the essence of life.
But if you keep working solely for money, won’t you find that, in your later years, you may not be able to do many of the things you’ve always wanted to do?
In this second phase, why not balance your earnings by allocating a portion for happiness and enjoyment, while still saving for the future?
During this phase, it’s essential to set a goal for your wealth accumulation ideally, aiming for a fund of ₹1 to ₹3 crore.
The Experience Phase
The experience phase is crucial in everyone’s life. This is when the wealth accumulated in the first two phases continues to grow without diminishing.
For instance, let’s assume you have a corpus of ₹3 crore. If it generates an average annual return of 15%, the annual income would be ₹45 lakh, which translates to ₹3.75 lakh per month.
Even if you spend this amount monthly, the next month’s income will be the same. This means you can continue to spend while your corpus remains intact.
What if the corpus is ₹1 crore instead of ₹3 crore? In that case, you would receive ₹1.25 lakh per month. Even with ₹1 crore, you can still live comfortably and enjoy life.
But how do you build this corpus? From the first earning phase, you need to consistently invest a portion of your salary, whether ₹25,000, ₹50,000, or ₹75,000—into equity mutual funds through a Systematic Investment Plan (SIP).
These funds, with an average annual return of 15% over the long term, would have created a substantial corpus for you.
If the return is even just 10% per year, the monthly income generated will still be substantial.
So, isn’t it clear that by avoiding unnecessary expenses and consistently increasing your savings and investments, you can easily achieve a large corpus and secure your financial future?
Investment Plan
For someone starting work at the age of 22, with an initial salary of ₹25,000 to ₹30,000, their salary will likely increase to ₹40,000 at the age of 25 and around ₹50,000 to ₹60,000 by the age of 30.
Let’s say this person starts investing ₹25,000 per month through an SIP (Systematic Investment Plan) and increases the investment by 5% annually.
Assuming an average annual return of 15% from equity funds, in 12 years, this person would have accumulated ₹1.18 crore. Over these 12 years, the total investment made would be ₹47.75 lakh.
Now, if the monthly investment is increased to ₹40,000, the same ₹1 crore can be accumulated in just 8 years.
What if the person starts with ₹25,000 per month in SIP, with an annual increase of 5%, and invests for 18 years at an average return of 15% from equity funds? In this case, they would accumulate ₹3.3 crore.
Over 18 years, the total amount invested would be ₹84.4 lakh.
The question is, how much can you accumulate based on your ability to invest? Whatever amount you can afford to invest, the more you invest, the higher the returns.
For example, if someone invests ₹10,000 per month in equity funds, increasing it by 3% annually, they could accumulate ₹1.17 crore in 18 years.
Isn’t it clear that the more consistently and wisely you invest, the greater your financial future will be?
How to Spend Wisely?
The accumulated corpus can be used wisely to truly enjoy life. The returns from the corpus will depend on the level of risk you are willing to take with your investments. Based on this, the income generated from the corpus will vary.
Depending on an investor’s risk appetite, one could invest in hybrid mutual funds (expected annual return of 10%), debt funds (9% return), or fixed deposits/bonds (8%).
So, why not diversify your investment across these options, or choose the one that aligns with your financial goals and risk tolerance? This way, you can ensure that your money works harder for you while enjoying a secure financial future.
What Amount Of Investment Is Required To Accumulate Crores?
| Monthly Investment (INR) | Annual Step-up | Value After 12 Years (INR) | Value After 18 Years (INR) | Value After 25 Years (INR) | Value After 30 Years (INR) |
| 10,000 | 3% | 42.93 Lakh | 1.17 Crore | 3.37 Crore | 6.98 Crore |
| 10,000 | 5% | 47.06 Lakh | 1.32 Crore | 3.91 Crore | 8.19 Crore |
| 25,000 | 3% | 1.07 Crore | 2.92 Crore | 8.43 Crore | 17.44 Crore |
| 25,000 | 5% | 1.18 Crore | 3.3 Crore | 9.77 Crore | 20.48 Crore |
We have assumed a 15% return form equity funds for the above calculation.
If you’re ready to take some risk, you can invest your corpus in equity funds.
Let’s say you have a corpus of ₹1 crore and decide to invest it in a balanced advantage fund, expecting around 10% annual returns. This would give you ₹10 lakhs in one year, or ₹83,333 per month.
If you choose to spend this amount monthly, your corpus will remain ₹1 crore year after year. However, if you decide to spend a smaller amount, say ₹50,000, instead of ₹83,333, your corpus will grow over time, surpassing ₹1 crore in the following years.
After three years, accounting for inflation, you can comfortably start spending ₹60,000 per month, while your corpus continues to grow.
So, why wait? Start your investment today and let your wealth grow to secure your future.
Final Takeaway
Building wealth through smart investment strategies like SWP in mutual funds is not just about accumulating a corpus, but ensuring it grows steadily over time.
By managing your expenses, increasing your savings, and investing wisely, you can create a reliable source of income that lasts for decades. So, why wait?
Take control of your financial future today, invest consistently, and watch your wealth grow, giving you the freedom to live life on your terms, now and in the years to come.
