Achieve your financial goals with the help of a lumpsum calculator

Receiving a lump sum can provide a foundation for securing your financial future. However, haphazard investing of such an amount can also lead to wealth depletion. Identifying key financial goals and allocating funds optimally between different investment vehicles is important to make the most of a lump sum. A lumpsum calculator can be useful for determining an ideal allocation based on your objectives, risks, and tax implications. Ultimately, though, regular monitoring and course corrections will be needed to ensure your investments continue to be on track for funding your important life milestones.

Everything you must know about a lumpsum calculator | Bajaj Asset Management Limited

Plan your investments wisely.

Receiving a large lump sum amount through inheritance, bonus, or settlement can be a life-changing financial event. However, many spend most of the lumpsum without thinking much about their future needs or financial goals. A lumpsum calculator can help you allocate the money optimally between various investment options based on your risk appetite and key life goals.

Understand your key financial goals.

The first step is identifying your important financial milestones and the amount required to fund them. Your goals could be buying a house, children’s education, retirement, vacation, etc. Assign each plan a priority level based on time horizon and importance. Short-term goals would need conservative investments, while long-term goals can be achieved by investing in equities to generate higher inflation-adjusted returns.

Use a free online lumpsum calculator.

The lump sum calculator takes your key financial goals and determines an optimal allocation of your money across investment avenues like mutual funds, real estate, gold, etc. You must provide details like your financial goals, timeframes, amounts required, existing investments, and risk tolerance. Based on your inputs, the calculator suggests an allocation between high-risk, high-return options like equity versus stable but low-return instruments like fixed deposits.

For example, suppose your financial goals are children’s education (₹20 lahks in 5 years), house (₹50 lahks in 15 years), and retirement (₹5 crores in 25 years). In that case, the calculator may suggest equity allocation of 30-40% for long-term goals, fixed income investment of 30-40% for medium-term needs, gold for 10-15%, and keeping 10-15% in a savings account for emergencies. You can then invest the lumpsum amount according to this tailored allocation and review/rebalance periodically.

Consider taxes and inflation.

Two key factors to remember when planning your investments are taxes and inflation. Interest from fixed deposits and bonds and capital gains from investments are taxable. So, factor in the post-tax returns while determining if a particular asset can achieve your financial goal. Also, account for inflation, which can reduce the purchasing power of your money over time. Equity and real estate should form a reasonable portion of your portfolio to generate positive returns, especially for long-term needs.

A lumpsum calculator helps put your money to work efficiently for key life milestones. However, you must monitor your investment performance periodically and rebalance as needed to ensure your money grows at the desired pace to fund your short– and long-term financial goals. Prudent management of windfall money can go a long way in securing your financial future.