POSTED BY September 24, 2012 COMMENTS (75)ON
If you have Rs 50 lacs with you and you want to generate some consistent income for next many years, how many years you can generate income? Think about it! Put some very high level calculations in your mind and try to come up with some numbers! . Will it be able to generate a lac of monthly income for next 10 years or not? Will it be able to generate Rs 30,000 of inflation adjusted income every year for next 30 years or not? Will it be able to generate Rs 30,000 of income increasing at 5% each year for next 100 years or not?
Still wondering ?
Lets discuss a very basic problem which many people face in financial life. A lot of people at times have a big lump sum amount like 20 lacs, 50 lacs or say a crore! Now they want to know how much income can be generated using that big amount which can be used by their family. This can happen in many situations like following
1. When a person wants to make sure that he wants some kind of passive income out of a big chunk of money
2. A person might have got retired and now he wants to create a pension for himself using the big amount of money he/she has saved
3. A person wants to leave his job and because of uncertain future , he wants to utilize a big sum to generate a certain cash flow in future
4. You might want to find out how much of life insurance you should take so that your family can start getting monthly income by making a fixed deposit out of the money.
Coming back to our example – Let’s talk about Rs 50 lacs. How much monthly income can it generate? And for how many years? This will depend on three things.
Here are some of the permutations and combinations assuming different values for Inflation , Return on investment and monthly expenses needed and a corpus of Rs 50 lacs in hand.
You can calculate this in many ways , but one of the ways you can do is by calculating it in excel sheet. We have this calculator on our upcoming Jagoinvestor Wealth Club product (our paid product) . You can download this calculator and play with different numbers and plan out for yourself. The calculator shows the answer along with the graph of the wealth and how it grows or shrinks over the years.
Was the calculator helpful for you? What other kind of tools you would like to have and to what level ? You can start using this calculator and see what is your net worth and how much monthly income can you generate at this moment if you leave your job and in case you are not able to bring money to home due to some issue.