Principal vs Interest
Principal is the actual money you contribute from your income (the "hard work"). Interest is the money your money earns (the "smart work"). Over long periods, interest can make up over 50% of your final goal amount due to compounding.
Inflation-Adjusted Goal
The Inflation-Adjusted Goal is the future cost of your objective. A car that costs ₹10 Lakhs today might cost ₹12 Lakhs in 3 years due to inflation. You should always plan for the future price, not the current sticker price.
Sinking Fund
A Sinking Fund is a strategic way to save for a known future expense (like annual insurance premiums, car repairs, or holiday gifts) by setting aside a small amount every month, rather than paying a painful lump sum later.
Step-Up SIP
A Step-Up SIP is a strategy where you increase your monthly contribution every year (e.g., by 10%) as your salary grows. This allows you to reach your goals much faster or build a larger corpus than a fixed monthly saving.
Liquid Funds
Liquid Funds are a type of debt mutual fund that invests in very short-term instruments. They offer better returns than a savings account (6-7%) with high safety and instant redemption, making them ideal for Emergency Funds.
Exit Load
Exit Load is a fee charged by mutual funds if you withdraw your money before a certain period (usually 1 year). Always check the exit load when planning for short-term goals to avoid unnecessary penalties.