Friday, September 07, 2007

A pack a day

It's budget day. Will the smokers get it again? I don't smoke, I pity those that smoke, I feel angry when they smoke in front of their kids. All efforts to discourage smoking does work.

Well, let's view smoking from the point of financial gain.

Assumption: You pick up smoking when you leave school, so let's say 18 years old. If you smoke later than that, most probably you don't get so hooked on. Anyway, due to your smoking, you die at 50 years all after having a pack a day for the last 32 years. Well, let's assume that a pack of cigarette cost 5.00 and it stays constant throughout your life (tough luck!).

Do you know how much you will have if if you didn't smoke and instead invest the money? Well, I use the compound interest calculator to calculate the amount:
Current principal: 0.00
Annual addition: 5 x 365 = 1825
Years to grow: 32

If the interest rate is 3%, the amount you would have obtain (at the end of the period) 98,692.06!
If you are lucky and found a unit trust that gives you 6% return annually, then it will be 175,826.28.
If you are a heavy smoker that smokes 2 packs a day, you would have 351,652.55 (for 6% return).

Mama mia. Imagine what you could have done with that kind of money when you retire. Unfortunately, it's all gone up in smoke.

1 comment:

value-investor said...

For unit trust, i suggest people to invest in a low risk bond-fund. As I know, Public Mutual's bond-funds can generate about 8% per annum in long-term (and with almost zero risk).

for an 8% p.a., RM5 a day will give you 250k after a 32-years-investment.

For non-smokers, save RM10 per day (RM300 a month, shouldn't be a difficult job for most people); and you'll have at least half-million when you retire.