Through a disciplined approach, millenials can save that money within three to four years

If you are a millenial and just starting to invest, saving the first Rs 10 lakh does not sound that big (considering this generation draws a bigger pay cheque than the last). However, after paying the bills, the same cannot be stated with confidence.

33-year-old corporate professional Maitrayee Dutta, however, differs to agree. “If you stick to the basic principle of Income – Savings = Expenses, you can save a good amount of money in a few years, even with meager pay,” she said.

Dutta started a full-fledged career in 2010, two years after the global meltdown happened. “So even though I had an MBA, the salary which I was offered was very low,” she said. Moreover, the markets were bearish. “Initially, my money wasn’t growing very fast because I was investing all of it in conservative assets,” she adds. Even at that rate, she managed to save Rs 12 lakh in eight years.

During the good market cycle, Sandeep Bisht, Financial Advisor and Founder, FilingSamadhan, opines, a first-time investor can save his first Rs 10 lakh within three to four years. Considering that everyone should save 20 per cent of their income, he says, “Suppose someone is drawing a salary of Rs 50,000 per month, he should invest Rs 5,000 through a SIP and another Rs 5,000 in fixed assets to bifurcate the risks. And every year, it should be increased by 10 per cent.”

To make the math easier, he breaks it down further. If someone is investing Rs 5,000 per month in an SIP, the principal amount at the end of 12 months becomes Rs 60,000. And with 12 to 13 per cent rate of interest, which SIPs are currently providing, the returns would be another Rs 10,000. Also, considering fixed assets like fixed deposits and recurring deposits provide an interest rate of 5 per cent, the returns from Rs 60000 invested in conservative assets will be Rs 4,000. “So in the first year itself, the investor can save around Rs 1 lakh 34 thousand. And if he keeps adding 10 per cent every year and let the money grow, Rs 10 lakh can be saved in no time,” he adds.

Elaborating on this, Ankur Kapur, Financial Advisor and Founder, Ankurkapur.in, opines people in their 20s should be more proactive towards saving. “At this stage, they don’t have too many responsibilities. Their income is high in comparison to their expenses. And often, people associate that high income with more discretionary expenses,” Kapur says. However, he feels, one should try to save up to 30 to 40 per cent at this stage. Moreover, in the first week of the month itself, the money goes into investments. The format of investments could be different. It can be a combination of mutual funds and recurring deposits.

“Even if someone is earning Rs 25,000, his expenses are around 10,000. Rest is all available but people in this age bracket are not in the habit of saving. Hence, the money does not grow,” he adds.

Providing a concrete investment plan for the youngsters, Kapur said, 50 per cent of it should be put in equity and 50 per cent into short-term debt fund. In terms of equity, one can invest in index fund and one or two mid to large cap. Overall an investor should have four to five funds, two funds in debt and two or three in equity.

Crossing the first milestone is always difficult. But, once you can complete that, the rest becomes easy. The same goes for investments also.