Introduction to Corpus or Nest Egg Amount

Introduction

As promised in my yesterday's post, today we will talk about the Corpus Amount. This is also referred to as Nest Egg Amount by many financial advisers.

What is Corpus / Nest Egg Amount?

The Corpus or the Nest Egg is a collection of money that, by itself, is self sufficient to take care of the following two parameters for the rest of your life span:

1. Your average monthly expenses (and any other planned / unplanned expenses that you factored in) - extrapolated by inflation

2. Average annual Inflation

Remember that the key here is that the Corpus is self-sufficient, which means that once you have accumulated the Corpus, then you are financially free since you do not need to trade your time for money.

Why do we need to know our Corpus Amount?

Each one of us are running after money in our day to day lives. Not only this, many of us compromise frequently on our health, family, relations and other important things in life because we need to earn money. So, the key question is : "How much money is enough?". Should we madly keep running after money just to compete with each other or we must have a target amount of money, which would then make us and our family secure. 

Corpus Amount gives you that target money that can not only make you feel secure but can bring you of the race of making money, so that you can spend your time to more fruitful things in life.

Running your life without knowing your corpus amount is like driving a car at a very high speed but not knowing which city you are headed.

Is Corpus Amount unique for me?

Corpus Amount calculation is very individual based, and is unlikely to be the same for any two individuals. It is always better to calculate your own Corpus amount rather than assuming it to be similar to someone else's.

What are the inputs needed for Corpus Amount Calculation?

At a high level, you need the following inputs to do a corpus amount calculation:

1) Your current corpus - in case you have some investments that you have kept separately. IT can be amount starting from Zero

2) Average Annual Inflation in your country - This is the average annual inflation over the last 10 years.

3) Your balance life span - If you are 35 years today, you need to assume your balance life span - lets say another 65 years, if you assume a safe age of 100 years

4) Annualized Return on Investments - Frequently abbreviated as ROI, you need to be handy with what rate of returns are you able to get on your current corpus amount

The book "Rat Race to Financial Freedom" will give you a detailed view of each of these inputs and also will provide a link to our website from where you can download the Corpus Calculator. The downloaded Corpus Calculator will allow you to provide the above inputs and will provide you with an year on year balance of the Corpus amount and the total Corpus you need today so that it is self sustainable till the end of your life.

If you have any questions regarding any of the inputs, or how to calculate the Corpus Amount or if you want any help in calculating the Corpus amount for you, please feel free to leave a comment on my blog and i will try and respond.

Cheers

Manoj Arora


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