Goal Planning using a Step-Up SIP Calculator

Here’s a common scenario – you undergo online investment planning using a DIY app or website, and it turns out that you need to save Rs. 25,000 per month to meet your financial goal. However, your monthly surplus is just Rs. 5,000. Disheartened, you put off your decision to invest altogether “for a better time”. Unfortunately, that better time never ends up coming about.

This is precisely where a goal-based SIP calculator that incorporates an annual “step up” in its calculations can be extremely useful. By helping you envisage how regular, disciplined increases in your SIP amount can impact your future goal, it can greatly increase your chances of success from the online investment planning exercise.

In order for the step-up plan to actually work, the key is to have a plan and stick to it. If you intend to ‘increase your investments as and when its comfortable for you’, that isn’t going to work. As the years roll by, your liabilities and financial pressures will increase simultaneously, and you’ll be up against the never-ending race to keep increasing your savings. For best results, have a very clearly defined step-up plan in place (which can be a percentage increase over the previous year or a fixed rupee amount every year) and stick to it with discipline.

Revisiting the initial example, your goal-based SIP calculator may have indicated that you need to save Rs. 25,000 per month for 25 years to retire with a corpus of Rs. 4.7 Crores. But guess what, you can also achieve this target if you start with Rs. 5,000 per month and step it up by an affordable sum of Rs. 3,000 every year. Since this is a lot more realistic, it is less likely that you’ll put it off for later – drastically increasing the chances of your online investment planning exercise succeeding!

A step-up plan doesn’t just come in handy at the beginning of the goal planning exercise. The journey to meeting one’s financial goals is a long one, and a number of contingencies could potentially throw you off track even after years of saving. In such an event, it makes sense to revisit your goal based SIP calculator and come up with a realistic and actionable plan that can gradually but surely bring you back on track through disciplined step ups, even if you need to redeem funds or stop your SIP’s for a while.

A good online financial planning platform will not just show you the numbers, but will also enable you to put the step-up plan on autopilot at the end of the online investment planning session. That way, you won’t need to go back and do it manually every year. So, the next time you use a goal-based SIP calculator, make sure that it incorporates the impact of annual step ups for best results!