Sunday, April 29, 2012

Can you become rich with your present income?

No, you would say. Well, go through the facts and decide yourself.  
Some years back , I was reading about a clothe-washer in the US who donated a million dollars for charity at the age of seventy.. And her wealth was largely left intact. She was a multi-millionaire. She had started saving and investing a dollar a day from the age of 16.  In one year her saving would be 360 dollars. She continued doing so until 65 years and beyond. Her savings became two dollars and three dollars as her income increased but let us take the base figure and calculate how much her savings would amount to after say, 45 years. During those days money doubled in almost five years or less. (Good investment does so even now. I am not speaking about speculative market but  investment in solid companies or financial institutions).  $360 became $720 in five years, $1440 in 10 years, $2880 in 15 years, $5760 in 20 years, $11520 in 25 years, $23040 in 30 years, $46080 in 35 years, $92160 in 40 years, $184320 in 45 years and $368640 in 50 years. Her second year saving amounted to something around this figure too. The third year’s would be little less and so on. The 45 years’ savings would be several millions. Giving away a million was peanuts for her!
 When I was teaching in TKM engineering college in 1975, State Bank of Travancore had a scheme: invest Rs1000 and get rupees one hundred thousand after 40 years. I was just 25 and if I had deposited 50,000 rupees over a few years in two- three years time I could get 5 millions now! If the investment was one lakh (hundred thousand) my returns would be one crore-10 millions -(hundred times)
Let us say you are an employee earning about Rs.20,000/-a month. If you curtail your unnecessary expenditures you can easily save Rs5000/- a month. In one year, your savings becomes Rs 60,000/- If you do not withdraw from it, this amount would become 76.8 lakhs (7.68 millions) in 40 years, (assuming a doubling in 5 years- there are good corporations where you will be able to get this rate. If the interest rate is lower, calculate doubling period by dividing 72 by the interest rate). You do not stop with the first year. The second year’s savings becomes say 70 lakhs and add each year’s accumulated figure for 25 years. Your 5 year saving would alone become more than 3 crores (30 millions). Compute for yourself your total worth for 25 years of saving.
The secret to wealth is continuous savings and good investment for long periods and availing the power of doubling. Your present income is immaterial as long as you save a certain percentage of it. Anyone (even with a meager earning) can become rich beyond his wildest imagination! Save regularly and increase your savings by finding additional sources of income if you would like to be bracketed with the super rich.  Well, there is a long gestation period. Remember, there is no principal called something for nothing.