How to save for purchasing your dream car of Rs 10 lakh in three years?

Personal financial planning is the process of assessing and improving a person’s financial well-being with the study of economic factors, financial factors and personal decisions.

Every individual has different types of goals like purchasing a car, bike, house, property, etc. There should be a proper financial plan for the same so that, you won’t get any financial pressure when you purchase an asset. If there isn’t a lot of time for achieving the goal of purchasing a car, one shouldn’t consider investing in equity markets as they are very much volatile in nature, which might not deliver returns as expected. One should invest in equity for longer-term in order to receive optimum benefits for long-term goals such as retirement, children’s education or marriage, etc.

For fulfilling this particular goal, one should invest in debt mutual funds, which will deliver consistent returns with minimal risk. If anyone is willing to take additional risk, then they can invest in equity too. One might have to dedicate a larger amount towards investment for fulfilling your goal if it is in the near term. On average, debt mutual funds offer 8%-12% annually.

So, let’s know what amount you must invest every month in order to fulfil your goal:

If you decide to invest in Sundaram Short-Term Debt Fund for fulfilling your goal of buying a car then how much you will have to invest monthly:

Investment goal: Rs 10 lakh

Rate of return: 11.74% p.a. (this is last 3 year return on SIP) 

Term (period): 3 years

Monthly investment amount - Rs 23,076.76

As we can see in the above picture, in order to fulfil the goal of purchasing a car, one will have to invest Rs 23,076.76 every month in a debt mutual fund scheme named short duration fund. In this way, saving and investing in the right instrument can help you achieve your financial goals easily and smoothly.

The above calculation is just for the sake of analysis purposes.