How Recurring Deposit Can Make You A Millionaire?

Recurring deposits has potential to make us really rich. We all want to become rich quick, and recurring deposits can help us achieve this target. I have personally gone past a rough patch in my life because of scarcity of money. Since that day I continuously try to improve my finances. Recurring deposit alone cannot make us rich.

But combination of recurring deposits and other high yielding assets can prove very profitable. Unfortunately money cannot be earned via a short-cut path. It can happen if one gets lucky and wins a lottery, but that happens only one is a billion. A simple tool like recurring deposits has power to make us a millionaire. How? We will see how to use recurring deposits to our benefit.

Recurring deposits can lift our standard of living 10-folds

Don’t worry this is not a publicity stunt. A simply savings scheme like recurring deposits can do a world of good to our finances. But if becoming rich is so simple then why not everybody become rich. The reason being that, majority people does not know how to use recurring deposits. The best thing about recurring deposit is that it accessible to all. Recurring deposits allow us to save money automatically. If we decide to save $100 each month, then this will happen automatically without us being aware of it. By the time one year is completed we will have $1,200 in your kitty. But problem is, this is where the charm of recurring deposits ends for majority of people. We must learn to take the savings of recurring deposits to next level. 

How pro investors use Recurring Deposits

Investors treat recurring deposits very differently than common men. When an investor saves $100 in recurring deposit, he uses the accumulated funds to buy assets. A pro investor will never buy liabilities from his investment linked savings. This statement is perhaps the most important statement a common man can learn to become rich. Never spend your investment linked savings to buy liabilities. Always buy assets from your recurring deposit savings. Liabilities like a car, house, etc increases your expenditure while assets adds money to our pockets. In order to become a millionaire, the faster we accumulate assets the quicker we become rich. 

Imagine an Asset as a Huge Piggy Bank

Our savings in recurring deposits shall be used to buy assets. This is why I said that recurring deposits along cannot make us rich. But if our recurring deposit savings can be used to buy assets, RD savings can make us a millionaire. Every $1 coin we add in the piggy bank corresponds to assets. A piggy bank full of one million $1 coins corresponds to a huge asset. If this piggy bank worth $1 million starts generating interest income, it will really make us financially independent. 

Recurring deposit is a very liquid asset. It is very easy to redeem recurring deposits. So it is essential to lock our savings generated from recurring deposits. Suppose we are saving Rs 20,000 each month for next 5 years. At rate of 8% per annum, our accumulate savings from recurring deposit will be Rs 14, 50,000. The ease with which these Rs 14 lakh got generated, if we do not lock this money, it will get spent with same ease. My suggestion is to buy an asset with dual purpose of locking funds and income generation. Similarly, real estate property also generates regular source of income in form of rental income. 

What can be done from Recurring Deposits Accumulated Savings?

Buying real estate property or value stocks from recurring deposit savings is a good idea. Value investors can use recurring deposit type savings to great benefits. Value investors are those categories of investors who buy stocks only when dooms day is announced in the market. When everyone is pessimistic about market, value investors go on accumulating value stocks. And when common men are buying heavily stocks, value investors stay away from market. When everyone else is buying stocks, value investor’s use only recurring deposits type savings scheme. Value stocks are great source of fixed income generation in form of dividends. 

The bottom line is: 

1. Decide how much you can save per month Rs 15,000
2. Save this money each month in a recurring deposit (RD) type scheme. It can give return @7-8% p.a.
3. After twenty years your savings will amount to Rs 14,00,000
4. Use the savings generated from (RD) to buy a asset that locks your funds and generates income.
5. If a person has several such income generating assets, for sure he/she will become a millionaire soon.

Source: http://recurringdeposit.blog.com/2015/12/05/how-recurring-deposit-can-make-you-a-millionaire/