Investment Shastra
Know what you need and want in your life and plan for it

Know what you need and want in your life and plan for it

Most people don’t know what they want in their life, want to own, to achieve, to do, to become before they die, kick the bucket. In short they don’t have a Bucket List. I just love the movie with this title and  how my two favourite actors Jack Nicholson and Morgan Freeman bring out the insights about what one values in life. But both were old men in the movie and meet in a hospital before they decide to have a Bucket List for the rest of their life. My question is why do we wait for so long and for a harsh reminder to focus on what’s important in our lives.

There are many reasons for this, the essence of which is that we don’t know what we really want, it’s hard work to find this out and most important reason is it does not give you instant gratification. The rest are all excuses, check it out. Don’t have the time-excuse. It’s no use because I can’t possibly achieve this-how do you know this when you don’t even know what you want- excuse. It keeps changing so what’s the use- so that means you don’t know what you really want?

And the best excuse, “it’s all maya; I don’t want to get trapped in all this want/desire, western world thinking, it’s only going to make me unhappy”. Maya-who? Oh, maya-OMG. So you are already experiencing bliss? WTF-weren’t you just complaining a few hours ago about your lousy job, nagging wife/parents, lousy pay….Stop kidding yourself. You may have good excuses/reasons for not doing this, but guess what you still don’t know what’s going to make you really happy, feel fulfilled and alive.

Actually, I find answering the question-what do I want in my life is a start of an amazing adventure into finding out more about us, dis-covering our-selves and enjoying life to the fullest possible. The pay-offs are huge while it cost virtually nothing. It’s the best f…… investment you can ever make.

Before we start it’s important to accept that some of what we want will probably change and that’s fine because that’s part of growing up. We need to start with what we know today and look at it a little closely so that we are sure of it.

Make a list of ‘What all you need and want in your life, and roughly by what age.’ Don’t sweat too much over whether the list is right, or seems impossible to achieve. What you need to know is that you really want it. How do you find this out?

Things in a Bucket List fall into two compartments:

  1. Not doing this will cause me great pain and dissatisfaction with myself. This contains all the things that we hold ourselves accountable for-the stuff we accept comes with the role we play in our lives. Living with dignity in our old age- Good Retirement Corpus. Providing a life of dignity to our old parents, marrying, having a family, educating our children and maybe getting them married are some things (not all applicable to everyone) if you don’t do we will feel inadequate. These things are essential to keep the core of who we are and the role we play intact and secure. This is our Security Bucket. Once we feel we have provided for this we feel free to think about other things.
  2. Doing these things will give me the greatest joys. What are the things you want to do that you think will make you say, I have lived my life and done the things I wanted to do most. This usually includes foreign vacations, owning a particular vehicle, starting your own business, taking a sabbatical etc. These goals help us expand ourselves, try new things, maybe self-actualize or atleast grow. This is our Growth Bucket. Filing this bucket requires a deeper understanding of what we value and the things we include today may no longer be relevant after a few years. It’s better to have a plan to achieve something based on your current understanding because that will make you invest for it and you can always reallocate this money to the revised goal later on.

Now get down to planning-we have made this easier for you!

This is the next biggest stumbling block for most people. We didn’t find a simple tool that really gets the planning done so we built one that we are happy to use. You can use the MoneyWorks4me Financial Planning Tool to get useful and quick answers. All you will need to do is enter a few bits of information to know what you need to do to achieve these goals individually and collectively. You will know how much to invest in Debt and Equity for both your current Lumpsum savings & investments as well as for your monthly saving through SIP.

We have pre-programmed some of the Security Bucket goals viz children higher education, marriage and your retirement goals to help you get do these with ease. You can alter the expense estimates here and bring them more in line with your plans. You can add goals with ease. Once you have done this it will tell you the monthly SIP you need to do to meet all your goals.

Now you will probably have some savings and investments currently. Some like PPF, EPF will be towards your retirement planning and this will help reduce the SIP required to fund your retirement. You may also have other savings and investments currently – Lumpsum Savings/Investments that you need to include in your plans. All this can be done with ease. You can also chose different ways of allocating your current lumpsum savings and recalculate the SIP required to figure out what will minimise the total SIP you need to do. All this with a couple of clicks!

The MoneyWorks4me FPT helps you make a realistic plan

In all financial planning there are some assumptions of expenses and returns. How do you handle these? You can get a good estimate of what something costs today by just googling it. Using this, the future costs will also be fairly accurate. When it comes to returns, the Planning Tool allocates investment to Debt and Equity depending on how long you have to invest before you need to withdraw the money and then computes the probable returns. It uses the following good practice:

  1. Less than 5 years away: Invest only in safe FD/Liquid/Debt Funds
  2. 5 to 10 years away: Invest 50-50 in Equity and Debt
  3. 10+ years away: Invest 80-20 in Equity and Debt

This allocation to Debt and Equity is crucial to a good plan. It ensures the asset class mix is matched to the time line when the goals need to be funded. It also provides you with flexibility to actually fund a goal through an appropriate mix of Debt and Equity investments depending on the level of the markets. If the stock market is seriously down in the year that you need the money you can lean on your investments in Debt and not sell your equity cheap. Alternately, if the markets are up and irrationally high, you can fund the goal by selling more equity.

In the final summary, the MoneyWorks4me FPT tells you the how much you need to put in debt and equity for both your monthly saving through SIP and your current Lumpsum savings to meet all you goals.

Read the next article to understand: ‘Using the Magic of Compounding to meet your goals’.

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Raymond Moses - Founder, MoneyWorks4me

Founder- Moneyworks4me, has over 36 years of experience. After graduating from IIT Kanpur in 1983, he worked with Hindustan Unilever and Castrol. He is the Founding Director of The Alchemist's Ark-a business consulting, training and e-learning company with many market-leading companies as clients. Since starting Moneyworks4me in 2008, he has worked to make investing advice effective, transparent, simple and accessible to Retail Investors.