Question

Create a 10 year savings plan for yourself, the source where the money will come from and calculate the interest you expect to receive year over year. Also share where/how you will invest the money (stocks, bonds, 401K). If you plan to have multiple sources, share that as well.

Answer 1

I plan to start earning $50,000 from year 1 (this is the year after my graduation). My salary is expected to increase by 5% per year and I will be saving 20% of my earnings each year after meeting my expenses and my loan payments.

All my savings will be invested in the following manner:

20% in bank account, 50% in equity mutual funds and the balance 30% in fixed deposits.

Year	Earnings (in $)	Expenses = 80% of earnings	Savings = Earnings - expenses
1	50,000.00	40,000.00	10,000.00
2	52,500.00	42,000.00	10,500.00
3	55,125.00	44,100.00	11,025.00
4	57,881.25	46,305.00	11,576.25
5	60,775.31	48,620.25	12,155.06
6	63,814.08	51,051.26	12,762.82
7	67,004.78	53,603.83	13,400.96
8	70,355.02	56,284.02	14,071.00
9	73,872.77	59,098.22	14,774.55
10	77,566.41	62,053.13	15,513.28

The savings will be divided into the following:

Year	Bank (20% of savings)	Equity (50% of savings)	Fixed deposits (30% of savings)
1	2,000.00	5,000.00	3,000.00
2	2,100.00	5,250.00	3,150.00
3	2,205.00	5,512.50	3,307.50
4	2,315.25	5,788.13	3,472.88
5	2,431.01	6,077.53	3,646.52
6	2,552.56	6,381.41	3,828.84
7	2,680.19	6,700.48	4,020.29
8	2,814.20	7,035.50	4,221.30
9	2,954.91	7,387.28	4,432.37
10	3,102.66	7,756.64	4,653.98

My savings in bank account will earn 4% annual interest and in fixed deposit will earn 8% annual interest. The fixed deposit will pay the interest on maturity. Assuming no withdrawals are made from my savings account my interest earnings from savings account and fixed deposit are shown in the table below. Also the mutual fund that I am investing in is expected to provide a CAGR growth of 7% over the period of investment:

Year	Bank (20% of savings)	Interest (4%)	Accumulated amount at the end of the year
1	2,000.00	80.00	2,080.00
2	2,100.00	167.20	4,347.20
3	2,205.00	262.09	6,814.29
4	2,315.25	365.18	9,494.72
5	2,431.01	477.03	12,402.76
6	2,552.56	598.21	15,553.54
7	2,680.19	729.35	18,963.08
8	2,814.20	871.09	22,648.37
9	2,954.91	1,024.13	26,627.41
10	3,102.66	1,189.20	30,919.27
	Total interest	5,763.49

Interest from fixed deposits:

Year	Fixed deposits (30% of savings)	Interest (8% on maturity)
1	3,000.00	2,400.00
2	3,150.00	2,268.00
3	3,307.50	2,116.80
4	3,472.88	1,944.81
5	3,646.52	1,750.33
6	3,828.84	1,531.54
7	4,020.29	1,286.49
8	4,221.30	1,013.11
9	4,432.37	709.18
10	4,653.98	372.32
	Total interest	15,392.58

Earnings from equity mutual funds:

Year	Equity (50% of savings)	Value on maturity at end of 10 years	Gain
1	5,000.00	9,835.76	4,835.76
2	5,250.00	9,651.91	4,401.91
3	5,512.50	9,471.50	3,959.00
4	5,788.13	9,294.46	3,506.34
5	6,077.53	9,120.74	3,043.20
6	6,381.41	8,950.25	2,568.85
7	6,700.48	8,782.96	2,082.48
8	7,035.50	8,618.79	1,583.29
9	7,387.28	8,457.69	1,070.42
10	7,756.64	8,299.61	542.96
		Total gain	27,594.21