Let us look at the Balance sheet of a 35 year old Rahul, earning Rs. 15Lacs a year and married to a woman aged 30 years. Staying in a house for which they are paying an EMI. Their take home salary is Rs. 85k per month, their home loan EMI is Rs. 40,000 which takes away a chunk of their salary.
They have 2 children – one is a 7 month old toddler and the elder child is 4 years of age and about to join a well established school.
If we consider retirement and children higher education and marriage are their long term goals:
- For Retirement, Rahul needs to accumulate 6 cores considering his current monthly expenses are 25k per month.
- For Children Education and Marriage he needs to accumulate around 2 crores.
Now, you have to decide whether you want to spend now and take loans in later part of lives and pay EMIs for loans OR start saving slowly and take SIP route to achieve your goals.
If you don’t like above figures of 6 crores and 2 crores., you will have to reduce ur current expenses OR change the power of compounding formula.
Some people tend to ignore this as the values appear to be way high. It is a mental tendency.
Consider a situation.., A person who is a thief, killer, murderer is arrested and shown on televisions. His mother or father never believes and say that their son is softspoken person and never indulge in such kind of activities.., because they can’t bare the truth.They will continue to ignore the reality until they can bear. So same applies to above mathematical values.
This is a psychological phenomenon observed in every household