Building a Rs 1 crore corpus with a Rs 25,000 salary requires discipline and time

How to save Rs 1 crore with a monthly salary of Rs 25,000 Experts recommend consistent investment in equity mutual funds via SIPs for long-term wealth creation. Starting early and increasing SIP contributions can accelerate wealth creation significantly if you know the right tools. Further, you must consider factors like risk tolerance and investment tenure as well. ET Wealth Online explains how you can become a crorepati even with a salary of Rs 25,000 per month

Is it possible to save up Rs 1 crore when the monthly salary is just Rs 25,000? Well, it's not easy. But if you can invest regularly over a long period, it is possible to accumulate Rs 1 crore . Here's what you need to do.
Experts often say that it is important to set a monetary target when it comes to personal finance . Here the goal is clear: you need to save Rs 1 crore. The next thing you need to do is to find the right product to invest in to achieve this target.

Returns from equity investment are usually higher than those from debt instruments. Though equities are known to be more risky, in the long run they are known to be rewarding and capable of generating higher returns.

When you want to accumulate a lump sum such as Rs 1 crore, it is better to go for an equity mutual fund systematic investment plan (SIP). In a mutual fund SIP, you invest an amount regularly, say every month. Even if the initial investment amount is small, it helps you to save a lump sum amount in the long run, thanks to the power of compounding and rupee-cost averaging.

How much should you save in a month to achieve Rs 1 crore goal?

As your salary is Rs 25,000 per month, it is not practical to invest a major portion of it in an SIP. But, set aside 15-20% of your salary every month for long-term goals. As you are investing a relatively small amount, it will take a longer time to achieve your goal.

Let's assume you invest Rs 4,000 per month in an equity mutual fund scheme that offers an annual return of 12%. It will take you a little more than 28 years (339 months) to save Rs 1 crore, provided you invest without a break.

If you can invest Rs 5,000 per month, you can save Rs 1 crore in a little more than 26 years (317 months) at 12% interest rate.

At the same annual interest rate, you can reach Rs 1 crore in 23 years if you invest Rs 7,500 every month, that is 30% of your salary.

If you invest Rs 10,000 every month — 40% of your monthly salary — you can accumulate Rs 1 crore in a little more than 20 years or 248 months.

As you can see, the more you can invest, the faster you can achieve your goal.

Here comes step-up SIP: Increase your SIP investment every year

Is there a way to save up Rs 1 crore a little more quickly? Yes, assuming that your salary will increase as you grow old.

What you need to do is increase your monthly SIP instalment every year as your salary increases. It's called a step-up SIP, where you increase your SIP amount every year to accelerate your wealth creation journey. Not only does it help you to bear the adverse effect of inflation on your savings, but it also helps you to pace your savings as and when your income rises.

If you can afford to increase your monthly SIP investment of Rs 4000 by just 5% every year, you can accumulate Rs 1 crore in around 25 years (301 months to be specific).

How does this step-up SIP work? Let us say you start an SIP with an initial investment of Rs 4,000 per month. After a year, you raise your investment amount by 5% to Rs 4,200 per month. You have to continue investing Rs 4,200 per month for the entire second year. In the third year, you increase the SIP amount to Rs 4,410 every month for the year. This way, you increase your SIP investment by a small portion every year to achieve your dream early.

Use this table to see how you can save up Rs 1 crore with Rs 25,000 salary per month

SIP mutual fund at 12% return every year

SIP amount every month

Annual increase (%)

Number of months it will take to save Rs 1 crore

Rs 4,000

No increase


Rs 4,000



Rs 4,000



Rs 5,000

No increase


Rs 5,000



Rs 5,000



Based on this calculation, you will reach your goal of becoming a crorepati in a little less than 22 years (264 months) if you increase your SIP instalment by 10% every year.

Similarly, if you start with a SIP of Rs 5,000 a month and you increase the SIP amount by 5% every year, you can save Rs 1 crore in a little more than 23 years (281 months). If you increase it by 10% every year, you will become a crorepati in 20.5 years (246 months).

Don't fret if you can’t invest a hefty amount in the beginning. Also, increase the SIP amount only if you manage to increase your salary. Remember, small and steady steps can help you achieve your goal.

Want to become a crorepati? Go slow and steady

SIPs are typically suitable for your long-term investments as they follow the principle of compounding. So when you are investing in a mutual fund SIP, be prepared to invest for the long haul. Have the patience to continue your investment for years. If you can keep investing without pausing or cancelling your SIP or withdrawing it during a lull period, you are likely to achieve your goal.

This story originally appeared on: India Times - Author:Faqs of Insurances