Investing for Karachiites: Motivation aka Why Should I Invest?

The first difficult decision faced while investing is the simple question of “Why should I invest? Shouldn’t I save this money now rather than hope I can enjoy it later?”

The simple answer is that there should be a balance. You should not try to spend all your money, and neither should you try to invest all your money. Now, the next question is that it is more enjoyable to spend money rather than saving it, so how can we make it more enjoyable and palatable for the common man to take out some money regularly from his meager salary and invest it?

To solve this issue, we need to have a visual reminder of what we want to achieve. The nirvana of investing is being able to live entirely off of the income produced by investments, in essence, what is called the “crossover point”. I have made a spreadsheet which I will attach at the end of this post so that you can play with different scenarios according to your own situation.

The basic columns in the spreadsheet are as follows:
Year: Indicates the year
Save/Mnth: Indicates how much you are saving per month
Save/Yr: Indicates how much you are saving per year
Total Saved: Indicates the total of how much you saved
Profit: Shows you how much profit you earned on the total amount
Balance: Indicates the balance of your investments after profit is calculated
Profit/Mnth: Indicates how much profit your investment is generating monthly
Spend/Mnth: Shows you how much you are spending per month (excluding investments)
Scaled Salary: Shows your initial salary after inflation. Each year represents the starting salary adjusted for inflation.

Then on the rightmost side we come to the editable columns:
Profit %: Enter the profit you expect to earn during the time you are growing your investments (I have kept it at 20%)
Initial Amount: If you have already have some investments, put that amount here
Salary: Your salary
Inflation %: This is the inflation that you expect (I have kept it at 8%)
Save %: This is the percentage of your salary that you will save every month (I have kept it 30% in this example)
Spend %: This is the percentage of your salary that you expect to be spending after you leave your job. e.g. if you were earning 100,000 and saving 30% (70,000) and then you quit your job, then you might not be spending all of 70,000, but rather find that you can get by on 50,000. That means you would enter 50% in this column. I have kept it 70%, which means you will spend the same amount of money as when you were working.
Salary increase: This is the percentage increase in your salary that you can expect to get every year (I have kept it at 10%)
Conserve %: When you start living off your investments, you will plan to move it to a portfolio which has less risk, conversely meaning that it would have less return. Enter this percentage here. (I have kept it at 12%)

Further, for this sheet I have kept the investment horizon to 20 years. You can adjust as you want by dragging the spend/mnth column up or down as needed.

If you cannot see the sheet below, you can download it from here.

Play to your heart’s content! Hopefully this will motivate you to save and invest more, once you realize that you can easily break the 9-to-5 rut with a little planning!

14 Comments so far

  1. Imran (unregistered) on November 16th, 2007 @ 2:05 pm

    Downladed the file! The 70 year saving plan is interesting to say the least.

    I’ll definitely look into this seriously bcz i spend ALL my money! I know that’s stupid but welcome to GEN-Y :)

    But thank god for your idea. I need to start saving some money now!

  2. Mansoor Ali Khan (unregistered) on November 16th, 2007 @ 2:26 pm

    Brilliant post i will be looking forward to the next episode. thanks

  3. ALIVEPAKISTAN.COM (unregistered) on November 16th, 2007 @ 2:39 pm

    Khurram, Its a great post. Thank you for sharing this sheet with us.

  4. aegis (unregistered) on November 16th, 2007 @ 3:12 pm

    I’ll be kidnapping you somewhere around 2020. hehehe.

    just kidding bro. its a great post. share some ideas about safe investments, by safe i mean scam proof.

  5. king_faisal (unregistered) on November 16th, 2007 @ 3:27 pm

    good topic. investment returns depend on future performance of underlying assets. so all investments are risky including investments in government bonds because no one can identify the future. therefore the first thing average investor needs to do is to identify his or her risk tolerance i.e. how much money can you afford to lose in the short run? investors who are in the early stages of their career usually should take higher risks with their investments because they have alternate source of income i.e. their jobs should their investments perform poorly in the short run. investors who have retired usually have a very low risk tolerance because not having a job, income from investments is their primary means for survival.

    one of the most important principles of investment is that higher the returns higher the risk. in pakistan, the safest investment instruments would be govt savings bonds while the riskiest investments for average investors would be stocks. recently national commodity exchange has started functioning in karachi that can give investors an exposure to potentially profitable but highly volatile commodity sector.

    to diversify risk, most investors should hold a variety of instruments ranging from govt bonds to stocks in their portfolio. those with higher risk tolerance should have a higher proportion of their assets in stocks. those who have little knowledge of stock investing and underlying fundamentals of different industry should get exposure to stocks through mutual funds run by reputable institutions.

    as far as investing in karachi is concerned, karachi is one of the cheapest cities in the world when you look at metrics such as real estate values. also kse still is one of the cheapest stock markets in the world. before we get bullish on karachi though, question we should ask is how safe will our investments be in karachi be it real estate or stocks? i think if we have political stability over the next few years, then our investments should yield handsome returns – higher than those that can be achieved from most outside markets. otoh if we see political tamasha of the sorts seen in the 90’s, then i am afraid we will lose our shirts.

    if i had a crystal ball and could forecast political stability, i would be buying real estate in karachi especially in non-fashionable locations such as n.nazimabad. given the cheap valuation, population pressure and very attractive location of karachi in regional terms, real estate prices are only headed one way. if only we can have political stability.

  6. Dee (unregistered) on November 16th, 2007 @ 7:20 pm

    Khurram that spreadsheet looks really complicated. I suggest For starters, talk to your bank first.Most of the banks have very well defined statements and they will be happy to provide you with free financial software for budgeting and investing.If not web has tons of great free software.
    King_Faisal””> very well said.Personally i have diversified portfolio.Where i have some long term invsetments with moderate to low risk investments as well as few with high risks.The rule of investment is simple, the sooner you will start the better off you will be in the future.That said you are never too old to start investments.Please do note i am mentioning the term investment Not Saving.If you keep piling up the money under your mattress , you will have savings but less money due to depreciation of money overtime.
    Most of all enjoy the life and try to balance your finances.I see my financial portfolio aS a pie and its divided into many sections some for my present(house, car , education etc) , some for my future(pension plan, travelling, cottage in the country etc), some for my family and friends(if they my help) , and some for my community(charity, advocacy etc).
    Again investment seems daunting at first but trust me its not that hard.You dont have to do by yourself and there are always professionals if you want to make informed decision.
    All the best.

  7. Obi Wan Kenobi (unregistered) on November 16th, 2007 @ 8:17 pm

    I guess I am a high risk taker. My 100% savings is in stocks and options but then I don’t worry too much about money. In fact I take loans from banks and put into my portfolio :-) The worst case would be I will lose all money and have to pay the loans from my salary and have to delay my marriage for a year.

  8. Dee (unregistered) on November 16th, 2007 @ 10:09 pm

    Obiwan…..> Risk translates differently for you than what it is for me or to other folks.If you feel comforable puting 100% savings on stocks then its fine and even if you loose everything you have other means(your salary) to compensate for the loss.Even if i put 100% of my savings and i loose every single penny i will be okay as i also have safety coushion to fall onto.
    But there lies a problem for those who do not have a safety net such as source of income and if they loose 100% then this would be a devastating for them.Risk is a double edged sword it can swing in favor or against for you.

  9. Obi Wan Kenobi (unregistered) on November 16th, 2007 @ 10:28 pm

    Dee, the point is “greed” for the lack of better word is good :-)

    By the way if you put your money in stock market then never forget that the market can be wrong for longer than you can be solvent.

  10. fahmed (unregistered) on November 17th, 2007 @ 12:49 am


    Today lastday of GEO!!!!!!!!!!!!!!!!!!!!

    Simply can believe it!!!

  11. fahmed (unregistered) on November 17th, 2007 @ 12:57 am

    geo will end transmission in UAE in 4 minutes!!!

  12. fahmed (unregistered) on November 17th, 2007 @ 1:07 am

    the deadline has passed but GEO is still on but not giving any news….sports programmee…etc

  13. wakeup (unregistered) on November 17th, 2007 @ 5:18 am

    But the most important is the WILL , THAT also legal.

    If you dont have LEGAL WILL, in western world you loose all your money in bank and other properry to govenrnment. you children and immediate family get zero.

    And alos in Islam you have to have a wasehat legal will, to have every thing in order.

    as far as investments are concern.

    Life is too short for a 20 years bond or stock dividends.

    I say buy real estate and have a legal will. put the property on rent. here you are the safest investment.

    Or if you want fool proof buy GOLD COINS BARS OR BISCUITS. YOU are all set for life.

  14. Wasim Abbas (unregistered) on November 22nd, 2007 @ 7:00 pm



    Wasim Abbas naam hai mera, karachi main rehne ka ittefaq to nahi hua ab tak, taaham kuch din ruka zaroor hoon wahaan, urdu zabaan se,urdu bolne walo se aur karachi se behad mohabat hai k yeh teeno pakistan ki jaan hain.

    brother here you have provided us with the excel sheet, thanks a lot for that, but it would be very very appreciable if you could advise on some prospective investment fields for people like me who would be able to save a mere 200,000/- a year. would you mind helping in this regard as to where investment with this much amount can be made to make a profit as depicted by your excel sheet.

    khush rahiye aap sab. sada qayim rahe hamare shehr ki roshniyan aur sada qayim rahe hamara Pakistan.


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