Goal-based corpus maths

Educational only. Not investment advice, not SEBI-registered research. Every figure here is illustrative. Do not use this to make a decision without checking the arithmetic and the assumptions.

This is the most useful article in the box, and it is the one most people skip.

Almost everyone plans their money backwards. They start with "I can invest ₹10,000 a month," work out what it might become, and then compare that to their goal. This is the wrong direction. It tells you what your current habit produces, which is a fact — not whether the goal is achievable.

The right direction is:

1. What does the goal cost, in FUTURE money?
2. What must I earn to get there?
3. How much per month does that require?
4. Can I do that? If not, which of the three can I change?

Step 4 is the important one, because the answer is almost never "invest more." It is nearly always "change the goal, or the time, or the risk." And you cannot have that conversation until you have run the numbers.

Step 1 — get the goal into one rupee number, in today's money

Everything else depends on this step, and there are two different starting points that get mixed up constantly.

RULE A — You know what the goal will actually COST in the future
         (specific fees, a specific invoice, a quoted price).
         → Discount each payment back to today.

RULE B — You have a lump-sum goal already stated in TODAY's rupees
         (a target, a benchmark, "I need ₹35 lakh of purchasing power").
         → Use it as-is. No inflation adjustment.

Rule B needs no inflation adjustment because it is already inflation-adjusted. If a planner hands you a number in today's rupees, adding inflation to it again is a double-count, and it is the single most common error in goal spreadsheets.

Rule A needs discounting, and each payment must be discounted by its own number of years — not by the years to the end of the whole series. A fee paid in year 6 is worth more today than a fee paid in year 14.

Worked example — a child's private school fee (Rule A)

Today's annual fee:                    ₹8,00,000
Child starts school in 6 years, at age 10.
Schooling runs to age 18 → 9 years of fees, ending 14 years from now.
Education inflation: 9% a year (private school)
General inflation: 6% (the return on your safe assets is quoted real)

Each year's fee escalates from today's figure, and each is discounted back over its own remaining years:

Payment	Years from now	Fee (nominal)	Discounted at 6%
Year 1	6	₹13,41,680	₹9,46,000
Year 2	7	₹14,62,431	₹9,74,000
Year 3	8	₹15,94,050	₹10,01,000
Year 4	9	₹17,37,515	₹10,29,000
Year 5	10	₹18,93,891	₹10,58,000
Year 6	11	₹20,64,341	₹10,88,000
Year 7	12	₹22,50,132	₹11,20,000
Year 8	13	₹24,52,644	₹11,52,000
Year 9	14	₹26,73,382	₹11,85,000
Total		₹1,74,70,065	₹95,42,580

Nominal total (what the school actually invoices):  ₹1,74,70,065
Present value, in today's rupees:                 ₹95,42,580

Two things to notice, and they are the whole lesson:

1. Education inflation (9%) is much higher than general inflation (6%). A school-fee goal costs you more than general inflation implies. Planning a ₹8 lakh fee at 6% inflation would badly understate the total.

2. Note that the nominal total (₹1.75 crore) is over 1.8× the present value (₹95 lakh). Both are correct, for different purposes. Use today's-rupee numbers to decide how much to invest, because that is what you can act on. Use nominal only to understand the size of the cheques you eventually write.

A common error here: adding up the nine nominal fees and then dividing by (1.06)^15. That divides by fifteen years even though no payment occurs later than year 14 — and it treats the whole series as though it is paid in year 15. It produces a badly understated number. Discount each payment by its own year.

Step 2 — the required return

Now invert it: what annual return do you need to turn today's rupee into that goal amount?

Required return  =  (Goal in today's rupees / Amount invested today) ^ (1 / years) - 1

Continuing the example — ₹95,42,580 needed in today's money over 15 years:

If you invest ₹20,00,000 today:
  (95,42,580 / 20,00,000) ^ (1/15) - 1  =  11.0% a year

If you invest ₹10,00,000 today:
  (95,42,580 / 10,00,000) ^ (1/15) - 1  =  16.2% a year

Look at those two numbers again. This goal is not comfortably affordable. At ₹20 lakh already saved it needs 11% a year — achievable but demanding, with no margin. At ₹10 lakh it needs 16.2% a year, which is not something to plan on.

This is the calculation doing its job. It has told you, before you invested a rupee, that a ₹8 lakh-a-year private school for a child starting in six years is a genuinely large goal — not the comfortable one most parents assume.

If the required return comes out above about 12%, the goal as described is not reliably achievable with the money available, and the only honest responses are to change the goal, extend the time, add money, or accept a lower standard. Those are the four levers, and there is no fifth.

The reason the required return swings so violently is compounding. Starting early is worth more than starting bigger, and the maths says so more clearly than any argument about discipline.

Step 3 — the monthly amount

The future value of a monthly SIP:

FV  =  P × [ ((1 + r/12)^n - 1) / (r/12) ]  ×  (1 + r/12)

where P = monthly amount, r = annual return, n = months.

Goal ₹95,42,580 in today's money, over 15 years, at 10% a year:
  r/12 = 0.008333,  n = 180
  Factor = ((1.008333)^180 - 1) / 0.008333 × 1.008333 = 417.9

  From zero:                    P = 95,42,580 / 417.9  =  ₹22,833 a month
  With ₹20 lakh already saved:  P = 75,42,580 / 417.9  =  ₹18,048 a month

₹18,000 to ₹23,000 a month, in today's rupees, for fifteen years — and that is a flat amount. This is a real number, not a rounding error, and it is the number most parents have never actually calculated.

The amount must rise with inflation, or it is not really ₹18,048 for fifteen years. A flat SIP buys less every year. A 10% step-up starts lower and rises to roughly ₹49,000 a year by year 15.

This is why step-up SIPs exist, and why a flat SIP silently loses to inflation. See SIP as a habit.

Step 4 — the reverse calculation that finds the shortfall

The most valuable version of this is to work backwards from the goal, using your actual current situation, and see what breaks.

Step 1  Goal, in today's rupees:            ₹95,42,580
Step 2  Years available:                     15
Step 3  Expected return, after tax and cost:  10%
Step 4  Corpus needed today:  95,42,580 ÷ 1.1^15
                                  (1.1^15 = 4.177)
                                       =  ₹22,84,418
Step 5  How much do you have now?           ₹ 6,00,000
Step 6  Gap you must grow:                  ₹16,84,418
Step 7  Monthly SIP for that gap, at 10%
        (417.9 factor over 180 months):      ₹ 4,030 a month
Step 8  What you can actually invest:        ₹ 2,000 a month
Step 9  Shortfall:                           ₹ 2,030 a month

Check step 9 independently: ₹2,000 × 417.9 = ₹8,35,849, against a required ₹16,84,418. You are roughly half of what the plan needs.

Step 9 is the finding. And the failure mode is to stop here, decide the goal is impossible, and do nothing — which makes the shortfall permanent.

Step 10 is the real work: which lever do you pull?

Lever	What it means	The trade
Save more	Increase the SIP by ₹2,030	Needs income. Slowest to arrange.
Earn more	Side income, better job	Usually the highest-leverage answer, and slow
Take more risk	Move to small caps or leverage	The worst option. Higher return is not reliably available.
Change the goal	Government school, not private	Directly and immediately solves it
Change the time	Start earlier, or accept a later start	Only available if the child is young
Start now	₹0 invested today	Free, and available immediately

The critical point: "take more risk" is not on the list as a real option. Chasing a higher expected return to close a gap is how people convert a financial shortfall into a permanent loss. A −50% year while "waiting for the returns to come in" is a worse outcome than a smaller goal that is actually funded.

The goal is negotiable. The risk tolerance is not a tool for the negotiation. This is the single most important idea in goal planning.

The goal should be split by horizon, not treated as one number

A ₹95 lakh education goal does not need to be funded entirely by equity for 15 years. It needs to become safe as the date approaches.

Years remaining   Bucket              What it should be in
─────────────────────────────────────────────────────────────
15 → 10 years     Growth              Equity funds, monthly SIP
10 → 5 years      Transition          Shift to 50% equity / 50% debt
5 → 3 years       Preservation        Mostly debt, some equity
3 → 0 years       Safety              Short debt / FD ladder / cash

The final three years should not be in equity. A goal with a hard date and 30% equity exposure three years out is a coin-flip, and a coin-flip is a poor way to pay a school bill.

Shift the allocation as the date approaches, not when it is convenient. See Asset allocation and the bucket framework.

Worked example — the full exercise (Rule B)

A 34-year-old wants to fund a child's engineering degree, starting in 12 years. Target: ₹35,00,000 in today's money, for a 4-year degree plus living costs in India.

This goal is already stated in today's rupees, so Rule B applies and no inflation adjustment is made:

1. Goal in today's rupees:               ₹35,00,000
2. Expected return, after tax and cost:    10% a year
3. Years to invest:                       12
4. Corpus needed today:  35,00,000 ÷ 1.1^12
                              (1.1^12 = 3.1384)
                                      =  ₹11,15,208
5. Current corpus:                        ₹ 4,00,000
6. Gap to grow:                           ₹ 7,15,208
7. Required return from today's position:
   (35,00,000 / 4,00,000) ^ (1/12) - 1  =  19.8% a year
8. Monthly SIP for the gap, at 10%:
   (12y factor = 278.7)                  ₹ 2,566 a month
9. What is actually investable:           ₹ 2,000 a month
10. Shortfall:                            ₹   566 a month

Step 7 is the finding, and it is the same finding as the school example. From ₹4 lakh saved, this goal needs 19.8% a year for twelve years. That is not achievable, and no spreadsheet argument will make it so.

Step 10 is also smaller than it looks — ₹566 a month is roughly ₹81,000 of extra savings over twelve years. A cheaper college, a later start, or a parent contribution in the child's twenties would each close it. All three are reasonable. None of them requires gambling on the market.

Two traps to note in this example:

• The trap in the numbers: a planner who hands you "₹35 lakh in today's money" has already done the inflation work. Multiplying by 1.09^12 and then dividing by 1.06^12 — which is a tempting way to look thorough — applies inflation a second time and overstates the target. See Rule A versus Rule B in Step 1.
• The trap in the arithmetic: ₹2,000 × 278.7 = ₹5,57,483 against a required ₹7,15,208. Confirming the shortfall from step 8 by hand takes thirty seconds and catches most spreadsheet errors.

Note also how the position changes the picture. At ₹4 lakh saved this goal needs 19.8% and looks impossible. Save ₹11.15 lakh today and it needs exactly 10% — the assumed return — and becomes a plan. The goal did not change; the corpus did.

The four numbers every goal needs

Before you can compare two goals, each one needs these four:

1. Amount, in today's rupees. Inflation-adjusted, and using the right inflation for that goal.
2. The date. A hard date and a soft date are different problems.
3. The flexibility. Can the amount move, or the date, or both?
4. The priority. What happens to the other goals if this one is short?

Most goal-planning failures are not arithmetic failures. They are a goal with no date, no flexibility, and no priority — a vague number that cannot be tested against anything.

Failure modes

Applying inflation to a goal that is already in today's rupees. The most common error, and the most avoidable. If the target is stated in today's money, it is already real. Adding education inflation on top, and then discounting at general inflation, double-counts and inflates the target.

Discounting a multi-year cash-flow goal by the wrong number of years. Summing nine school fees and dividing the total by (1.06)^15 understates the present value badly. Each payment is discounted by its own remaining years.

Using general inflation for education or medical goals. Both typically inflate at 8-12%, not 6%. Using 6% materially understates them.

Ignoring that the SIP amount must rise. A flat SIP loses to inflation. The goal looks covered and the shortfall appears at the worst moment.

Treating a required return above 12% as achievable. It is not reliably achievable after tax. A required return above ~12% means the goal needs changing — and the calculation that tells you this is the reason to do the calculation at all.

Taking more risk to close a shortfall. The worst response. A guaranteed smaller goal beats a probable larger one backed by a −50% year.

Leaving it to the last few years. The compounding years are worth more than the contribution years. Every year of delay meaningfully increases the required monthly amount.

Forgetting the last-mile problem. This one is about risk, not arithmetic, and it is easy to get wrong twice. Two separate facts:

Arithmetic:  ₹95 lakh growing at 10% for 5 years becomes
             about ₹1.54 crore — it does NOT stay at ₹95 lakh.

The risk:     but you cannot withdraw ₹30 lakh a year for five
             years and assume you get ₹95 lakh. Sequence of
             returns does the damage. A 30% fall in year one,
             followed by ordinary 10% gains, leaves you short.

The two facts together are why a dated goal needs a defined exit: a lump sum at a fixed date, or a scheduled series of withdrawals, both sized in advance. Assuming you will simply "let it grow and take what I need" is the single most common way a funded goal fails. See Retirement for the same problem at larger scale.

Ignoring taxes in the return. A 12% pre-tax return in equity is roughly 10% after the 12.5% LTCG and 0.25% friction. Every calculation here uses a post-tax number. See Taxes on investments.

Planning one goal and forgetting the others. Retirement, education, and a parent's medical care all compete for the same surplus. Only one of them is in this spreadsheet. Run this for every goal before deciding any of them is affordable.

Not defining the date. "Someday" cannot be calculated. Give it a year.

Failing the test with no plan for what to do. The most common outcome. The calculation is supposed to produce a decision, and the decision is supposed to be one of the six levers.

Trusting a spreadsheet you cannot reproduce by hand. Every number in this article was checked by multiplying out. Pick one line, recompute it on paper, and if it does not match, the rest is not worth using.

Exercise

Do this properly for one real goal. Take 30 minutes and do it in one sitting.

1. Write the goal and the date. One sentence, with a year.
2. Is the target in today's rupees or a future amount? This determines which rule you use, and getting it wrong poisons every number downstream.
3. If it is a future amount: list the payments or the single figure, and discount each one by its own number of years. If it is already today's rupees, skip this.
4. How many years do you have? From today to the date.
5. Required return: (goal in today's rupees ÷ amount you will have) ^ (1/years) - 1.
6. If that is above 12%, the goal needs changing. Which of the six levers?
7. Monthly amount needed for a SIP over the full period. Confirm it by hand: monthly × factor = goal.
8. Add the step-up. At 10% a year, what does the first and last year's payment look like?
9. What can you actually invest today? The honest number.
10. The gap. In rupees a month.
11. The lever: save more, earn more, change the goal, change the date, start now — or accept lower risk-free returns.
12. Stress test: assume returns are 20% lower than planned. Which goals break first?
13. Define the exit. Lump sum at a fixed date, or a scheduled withdrawal — sized now, not later.
14. Shift the allocation as the date approaches. When does this goal move from equity to debt? Put the date in your calendar.

Step 14 is the one people skip, and it is the one that makes the plan survive contact with reality.

Checklist

1. Does every goal have a specific year?
2. Do I know whether the target is in today's rupees or a future amount?
3. For a multi-payment goal, have I discounted each payment by its own year?
4. Am I using the right inflation rate for that goal?
5. Have I avoided applying inflation to a target that is already in today's rupees?
6. Have I calculated the required return, and is it below 12%?
7. Have I verified the SIP figure by multiplying it back out by hand?
8. Have I used an after-tax return?
9. Does my monthly amount rise with inflation?
10. Have I stress-tested at −20% on returns?
11. Do I know when this goal must shift from equity to debt?
12. Is the exit defined — a lump sum or a scheduled withdrawal, sized now?
13. If the goal is short, have I chosen a lever other than "take more risk"?

Educational only. Not investment, tax, or legal advice. Not SEBI-registered research. All calculations are illustrative and use assumed returns and inflation rates that may not occur. Returns are not guaranteed, and the required-return figure is a mathematical requirement, not a forecast. Goals can be changed and the arithmetic should be verified independently. Consult a SEBI-registered investment adviser and a qualified financial planner before making any decision based on this.