Step Up SIP Calculator

Introduction to Step Up SIP Calculator

Any goal can be fulfilled, but the ingredients required in the way are consistent investments and stepping up the amount every single month.

Reckon the case of actual SIP and you’re just incrementing the amount of investment every month as per your salary increment or risk capita increment. In that case, the compound effect would show a giant impact on the final results factoring steady investments with steady rises.

The Step Up SIP Calculator also works on the same factors as the actual SIP Calculator, while keeping a new add-on adjustment tool called Annual Step Up. There, you can fill up the percentage you’re incrementing in investments every newer year to find expected results.

When you’re planning financially, it’ll benefit you with an extended look on the investments and how they can get more weighted just with a steady rise in your investments. The raise in investments would maximize the corpus more intensively and faster approach to your goals.

How Does the Step Up SIP Calculator Work?

You must have gone through the SIP plans, what we called Systematic Investment Plan, and the only difference there between the actual SIP or Step-Up SIP is the annual raise in investments. If you want to get to your goals faster or dream early retirement, Step up SIP is for you.  You must have heard your father saying “little drops of water make a mighty ocean.”

That’s the truest idiom I ever heard in the case of finance, and Step Up SIP works the exact way. Afterward, the Calculator works to assess the future value of your investment based on the SIP reserves and annual increment percentage. It uses three important factors and calculates the results authentically.  

How To Use Step-Up SIP Calculator?

There is first a mathematical formula for the working style of each financial calculator, including the Step Up SIP Calculator. It works on the basis of below listed formulae:

FV = PV (1 + r/n)^nt, where

FV is the Final Value,

PV is the monthly SIP Amount,

r is the expected rate of interest/annum,

n is the raise compound in SIP investments,

And t is the Total Investment Duration

Keeping all the above factors together, Step Up SIP Calculator takes the exact feeds from you and assesses them altogether. Once all these details are assessed, you get the Final Value of your portfolio after the simple or drastic raises as you are fed. In terms of working steps, they are all as follows:

Step 1: Fill in the monthly SIP payments you’re going to make.

Step 2: Inscribe the expected rate of interest you assessed per annum.

Step 3: Finalize the tenure period of investing

Step 4: Clearly put in the percentage increase you’re going to make in SIP Amount annually.

Step 5: The calculations would be shown downside the Calculator tool.

Once you have the detailed final value, you can adjust the numbers you filled up in the tool as if you want to see the comparisons between multiple increment percentages in SIP amount.

Benefits of Using Step-Up SIP Calculator

Step-Up SIP is majorly beneficial for ones who want to harness the fruits of increased monthly SIP investments, and eat the fruits of advanced compounding. Moreover, the calculator will assure you with all the below listed benefits:

Achieving Higher Savings over Time

Yielding higher savings after monthly investment and spending that money on buying unwanted things. That won’t sound like any new thing to you as we all are going the same way. If you want to acquire your goals faster, you should use Step-Up SIP Calculator and invest higher savings over time.

Adapting to Changing Financial Goals

No financial goals are constant as they get evolved over time, getting evolved to the newer goals. The better part of Step-Up SIP Calculator is that you can make customizations in aligning the higher or lower investments to reach your goals on time.  

Maximizing Returns with Gradual Investments

Normal compounding would sound even less effective than maximizing returns with the SIP investments and gradually increasing them. This will affect your investments with normal compounding and simultaneously enlarges the effect of incremental investments.

Step-Up SIP vs. Traditional Investment Approaches

Step-Up SIP can take better sides while being discerned from all unique traditional investment protocols, even when you include the SIPs or Lump Sum investments. After a deep research, we found three important approaches to differentiate them well:

Step-Up SIP vs. Lump-Sum Investment

Any kind of systematic investment includes reserving the money in the same equities or other asset units when their prices are variable. In the case of Step-Up SIP, it’s even more beneficial as you’re putting more in the recurring years to average the money with a max approach.

That was about the benefit with Step-Up SIP, and in the next case, when we take a look at the risk capital, Step-Up SIPs are still safer. It’s because the lump sum investments can face an extended risk if the time of your investment is unfortunate.

Step-Up SIP vs. Fixed SIP

At most of the times, people make mistakes in differentiating the normal fixed SIP and Step-Up SIP. Although they sound the same, when we find differences between the procedures, it’s drastic. Basically, Fixed SIP consists of the constant installment amounts for a tenure period, whereas Step-Up SIP includes the incrementally increasing installment amounts for a period.

When you’ll see results, Step-Up SIP would have better compounding effects for investing higher sums on income increments and that’s when you can achieve your goals faster.

Step-Up SIP vs. Recurring Deposit

There is a difference between Recurring Deposit and Step-Up SIP too, and it will look quite the same as we differentiated it with Fixed SIP in the above section. In case of recurring deposits, they offer you fixed returns, whereas the Step-Up SIP’s case is better linked with markets, and that’s where you can expect higher returns than what’s guaranteed by Mutual Funds.

Now if we reckon the risk appetite in the precise game, Recurring Deposit would have an upvote for keeping risks lower while being fixed with returns. As Step-Up SIPs can provide you with the better returns, they can also throw out risk if the market disappoints on the major investment times. So if you’re risk averse, you better go with the Recurring Deposits.  

Real-Life Scenarios and Case Studies

Most financial books contain a lot of stories on the basis of tremendous approaches, and that’s a really helpful way to understand things deeply. So let’s have two different real-life approaches related to Step-Up SIP –

Case Study: Education Fund Planning

Rohan’s wife gave birth to his baby boy, and while being happy about the birth, Rohan thought about using the Step-Up SIP Calculator on the go to start investing for his kid’s university educational purpose. He planned well while thinking about his current salary, expenses and keeping a place vacant for filling it later with annual installment increments.

As per the calculations, he came to the point where he’s going to admit his kid in a foreign university and so he needs 80 Lac INR approximately. After a few adjustments, he came to know the strategy where he was going to invest 7,000.00 INR every month while stepping up 10% annually at 10% estimated ROI for the next 18 years. These calculations showed a final corpus value of nearly 80 Lac INR, which means Goal conquered!

Retirement Planning with Step Up SIP

It’s not that hard to create a wealth in crores, and that’s the thinking of an investor like Mukesh. He always wanted to live a post-retirement life with having at least 10 crores in his investment portfolio, so that the afterlife of retirement would go happily with zero problems related to money.

Taking that as a resolution, he started using the Step-Up SIP Calculator and altered a worthwhile plan where he just had to start investing 25,000 INR every month. Not just that, he added a step up 8% annually where the expected rate of interest after averaging inflation and taxation was 9%. At the age of 30, he created a goal for the next 30 years, which will assess the final value up to 10.16 crores to retire with a blossom of fortune.  

Conclusion

Simple and static investments when go steadily with the benefits, they get enlarged gigantically. In such a case, you can understand the vastness of an investment stepping up a few percent every single year, making the compounded returns and a sharp discipline.

In summary, this calculator tool will help you with assessing how a simple annual enhancement in monthly SIP investments can make giant changes. It’ll also keep all the doors open for customization in the numerals of annual increment percentage, initial monthly installments, and the tenure period for comparing different strategies and use an effective one as per your goal.

Still, after having a huge support of this calculator, we’ll suggest you to initialize investing as fast as you can. It’s just because an early age initialization can simplify your investment strategy efficiently. Time for a push start!

Frequently Asked Questions (FAQs)