How to Use a Lumpsum Calculator for Financial Planning
Budgeting is useful for creating a vision for one’s future, such as purchasing a house, financing one’s education or having enough money for retirement. Experience shows that it is equally important that potential returns should be known by investors for planning to happen. That is why some specific investments are made in a lump sum. A lumpsum calculator is an elementary and effective tool that allows for determining the yields from a one-time infusion of cash.
This article explains how to use a lumpsum calculator and briefly touches on another helpful tool: it also contains the SWP (Systematic Withdrawal Plan) calculator.
What Is a Lumpsum Calculator?
A lumpsum calculator enables you to find out how much your one-time investment is worth in the future. They enter the invested amount, expected annual return rate and investment duration to arrive at the maturity amount. It is most useful for those investors who are willing and able to buy a sizable amount of shares in mutual funds, fixed deposits, or any other financial asset.
The Use of Lumpsum Calculator
Using a lump sum calculator is quite easy:
- Enter the Investment Amount: Enter the number of units you would like to buy by entering an amount for the one-off setup fee.
- Set the Expected Return Rate: This is the average annual return that you anticipate from your investment most of the time.
- Choose the Investment Duration: Detail your time horizon. That is, the number of years you intend to hold the investment.
- Get the Results: The calculator will appear on the screen to provide the projected maturity amount and the total returns.
For instance, if you deposit ₹1,00,000 for 10 years at an annual interest of 10%, the tool will tell you on maturity value of ₹2,59,374.
What About SWP Calculators?
While a lumpsum calculator deals with investments, a SWP calculator is actually used to plan withdrawals. An SWP is when you can take out a certain amount of money on a regular basis from your investment.
The ideal user of this tool is a retiree or any person who needs to receive a steady income from his investments. While the SWP calculator only requires your withdrawal amount, current investment balance, and expected rate of return, it’ll show you how much time the money would last. Let’s know about the advantages of using those calculators
- Clarity: Get acquainted with the possible expansion as well as the exhaustion of your funds.
- Ease of Planning: This is usually an approximation of the amount to spend or take out for a certain financial purpose.
- Time-Saving: Solve problems without calculations that may be difficult to do.
Conclusion
A lump sum calculator is critical when it comes to making one-time purchases since it helps in the right budgeting. It makes you understand how you are financially and where you are heading. Likewise, an SWP calculator helps you manage withdrawals more wisely for consistent income.
Here, the author explains how, with the help of these tools, investments can be directed into achieving the goal and, thus, constructing a strong economic base for the future.
