Arthgyaan

Supporting everyone's personal finance journey

How do you get from goal to SIP amount: Part 2

Walk-through: Get SIP amount for a goal with multiple payments

How do you get from goal to SIP amount: Part 2


Posted on 05 Jun 2021
Author: Sayan Sircar
3 mins read
๐Ÿ“ขJoin 3300+ readers on WhatsApp and get new post notifications!

Walk-through: Get SIP amount for a goal with multiple payments

Calculation of SIP amount

๐Ÿ“š Topics covered:

Asset allocation and target return for a goal with several payments

We have already covered

This post will deal with a goal like college education that has multiple payments using the framework built in the three posts linked above.

Assume the target goal is a 4-year college education due to start 10 years from now. The current costs are 5 lakhs per year for course fees and hostel, 3 lakhs for admission and 2 lakhs for industrial training at the beginning of the 4th year (i.e. total 25 lakhs) all expected to increase by 7% a year. Assume 4 lakhs is available today which is allocated to all 4 goals equally.

These are essentially 4 single payment goals:

  • Goal 1: Admission + Year 1: 8 lakhs in 10 years
  • Goal 2: Year 1: 5 lakhs in 11 years
  • Goal 3: Year 1: 5 lakhs in 12 years
  • Goal 4: Year 4 + training: 7 lakhs in 13 years

Using the single goal model the following SIP amounts are determined and the totals are added up as shown:

Calculation of SIP amount for multiple goals

The 25 lakhs initial cost of the goal is expected to be around 54 lakhs 10 years from now. The initial lump sum amount and SIP amounts are allocated to the four goals. A single set of SIPs are created: equity 6,000 and debt 10,000 along with lump sum investments in equity and debt of 1.5 lakhs and 2.5 lakhs respectively as per asset allocation. Refer to these posts for investing in equity and debt funds.

These calculations are explained in this Google Sheets workbook.

After one year of running the SIP

The following needs to be done in this order:

  • find the new corpus (C) which is the sum of the current value equity and debt fund values
  • review the goal parameters (new horizon is 1 year less, review the current cost of the goals to adjust for actual market inflation etc.)
  • re-balance between the equity and debt fund values
  • Increase the SIP figure by 10% (or more, the model will tell you)

See this detailed post for the process for reviewing.

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.

Also read
Investor behaviour: control what is possible

A note on having the pre-requisites in place

At all times ensure that you have the following in place

  • an emergency fund with 6-12 months of expenses
  • a term insurance policy (unless you are retired with no income)
  • a health insurance policy (separate from the company provided one if any) for 10-15 lakhs as base policy with a 50-100 lakhs super-top up
  • no high-interest debt like credit card or personal loans

All posts in this series

Please see below:

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

For resident Indians ๐Ÿ‡ฎ๐Ÿ‡ณ:


For NRIs ๐Ÿ‡บ๐Ÿ‡ธ๐Ÿ‡ฌ๐Ÿ‡ง๐Ÿ‡ช๐Ÿ‡บ๐Ÿ‡ฆ๐Ÿ‡บ๐Ÿ‡ฆ๐Ÿ‡ช๐Ÿ‡ธ๐Ÿ‡ฌ:


Share on WhatsApp:

To understand how this article can help you:

If you have a comment or question about this article

The following button will open a form with the link of this page populated for context:

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Previous and next articles:



Latest articles:



Topics you will like:



Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.

More posts...

Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.

This post titled How do you get from goal to SIP amount: Part 2 first appeared on 05 Jun 2021 at https://arthgyaan.com


We are currently at 481 posts and growing fast. Search this site:
Copyright ยฉ 2021-2024 Arthgyaan.com. All rights reserved.