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Unlocking Wealth: How to Become a Millionaire on a Modest Income

Becoming a millionaire on a salary of just ₹20,000-₹25,000 may seem daunting, but with disciplined, long-term investing, it is achievable. Here’s a formula to help you accumulate a crore:

Harness the Power of Compounding

In personal finance, setting a clear goal is crucial. If your target is to accumulate ₹1 crore, selecting the right investment product is the next step. One effective method is through a Systematic Investment Plan (SIP) in an equity mutual fund. SIPs allow you to invest a fixed amount monthly, leveraging the power of compounding and rupee-cost averaging to build substantial wealth over time.

Achieving ₹1 Crore with a ₹6,000 SIP

With a salary of ₹20,000, dedicating 20-25% (around ₹4,000-₹5,000) to SIPs is feasible. A smaller investment means a longer timeline to reach your goal. For instance, investing ₹5,000 per month in an equity mutual fund with an annual return of 12% will take approximately 26 years to reach ₹1 crore. Increasing the SIP to ₹6,000 per month shortens this period to about 24 years.

Accelerating Your Journey with Step-Up SIPs

The more you invest, the quicker you can reach millionaire status. If a large one-time investment is impractical, consider a Step-Up SIP. This approach increases your SIP amount annually in line with salary increments, expediting your goal.

Becoming a Millionaire in 16 Years

Using a Step-Up SIP calculator, starting with ₹5,000 and increasing the SIP by 10% annually can help you accumulate ₹1 crore in 20 years with an estimated 12% return. If you increase the SIP by 20% annually, you can achieve your goal in just 16 years.

By systematically investing and adjusting your contributions over time, even a modest salary can lead to significant wealth.

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