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Originally Posted by ece2k2 I think with a 12 crore corpus, one should limit his/her monthly expenses to 1.25 to 1.5 lakhs to be on the safer side. This is hoping that the average inflation remains at about 6-7% over the next few decades. But if someone manages to build that sort of corpus and also have a secondary source of income (say rental income) that takes care of his/her regular expenses, that would be awesome. This would ensure that the corpus can enjoy the full power of compounding for the years to come. |
I dont understand the suggestion here to limit the monthly expenses to 1.5 or 2 lacs if one is in the fortunate situation of actually having such a vast corpus of 12 Cr.
I also dont understand the suggestion, for this secondary source of income which takes care of “regular” expenses.
If one is actually able to achieve such a vast 12 Cr Corpus which is placed nicely in various Mutual Funds etc, and which is able to generate a nice fat monthly income, then this kind of corpus should potentially yield perhaps around 9% interest. So let’s say approx 9-10 lac per month.
Also assuming that the main tax hit on this earning will only be by way of Long Term Capital Gains Tax and may be just a bit of Short Term Capital Gains Tax.
Allowing for lets say, around 8.5% y-o-y by way of inflation, then one should be a just a little bit ahead of the game, even if one is indeed able to spend such a vast amount of money each month (which I personally think is terribly difficult/ highly unlikely in India, unless one has a supremely extravagant “Kardashian” kind of lifestyle or if one is trying to fund an election or career in politics or is an inveterate gambler or similar!
![Smile](https://www.team-bhp.com/forum/images/smilies/smile.png)
).
So in point of fact, it might actually come to pass, that from the projected income of 9-10 Lac per month, even if the person ends up spending the significantly large of say 4-5 lacs, he/ she will still be ploughing back the remainder 4-5 lacs, which will go right back into the Corpus and further add its might towards the “Compounding Effect”.
I would think therefore, even if one actually has a highly extravagant and lavish, almost “prodigal” lifestyle, if I may be permitted to use such a word, that such a large Corpus as being discussed here, ought to be more than enough to manage with for the next 25-30 years of life.
Unless as I said, one is a real wicked prodigal and is addicted to all sorts of evil vices, including, but not limited to, high stakes gambling and the like.
Even more so I would say, that such a vast corpus ought to be way more than sufficient, considering a situation where if one does NOT have any responsibilities unto the proverbial “next gen” or anyone else, and therefore does not have to plan on leaving anything behind for anyone after one shuffles off the mortal coil.
Keeping this in mind, it might actually be true that if one is able to achieve a solid Corpus of Rs 7.5 - 8 Cr (at today’s rates and frame of reference), this kind of amount should be able to easily enable a very high quality of lifestyle with all the trimmings and icing on the cake as well, for the next approx 25-30 years of life.
A very interesting insight from one of our friendly members here (Srini) - and which I appreciate very much - is the simple true fact, that it makes good sense to segregate one’s different types of “Expense Types” and “Likely Frequency” of such Expenses and then calculate these over the projected time frame of retired life.
Because each different Expense Header, carries with it, a different Rate of Inflation and it is only by estimating this as best one can in a scientific manner, that one can derive some idea of the actual “Weighted Inflation” that one will experience, over the projected time frame of retired life. This in turn can be set off against the projected rate of interest being earned on the corpus and the effect of LTCG etc, so as to actually figure out if one is able to get ahead of the game or at least go neck and neck and break even, as it were.
This will help plan a bit better.