Recently one of my colleagues mentioned that he smokes around 12 cigarettes a day and spends around Rs. 180 on them. I was surprised by the sheer amount of money wasted daily on something which deteriorates your health. But then I thought to myself that he must be an anomaly; a chainsmoker.
But the thought stuck with me. I couldn’t make peace with the fact that someone is spending Rs. 180 a day on cigarettes. So I decided to ask other colleagues (who smoke) and found out that 12 cigarettes a day is not an aberration. In-fact many of them do double that number on a daily basis.
Still puzzled a bit I thought to myself what if this money is saved (by smokers) partially and put to good use. Not only this will help slow down the deterioration rate of the health but also build wealth over a period of time. So I made a small mathematical model in excel which shows that you will become a crorepati if you cut down just 5 cigarettes a day and invest that amount in any equity mutual fund.
Here is the snapshot of the excel model.
As is visible from the snapshot, if you cut down just 5 cigarettes a day, you will save Rs. 75 daily (assuming per cigarette costs you Rs. 15). On monthly basis this amounts to Rs. 2250.
Therefore if Rs. 2250 is invested every month through SIP (Systematic Investment Plan) in any good equity mutual fund, the savings will grow to around Rs. 1,00,00,000 at the time of your retirement i.e. 60 years. That’s fucking 1 Crore rupees!!!
Here it is assumed that your current age is 30. If you are younger than 30, then you would save even more. Another assumption taken here is that equity mutual funds do give annualised return of 13%. But this assumption will be considered safe over such a long period of time.
To tweak the model to your liking,
When I showed this to my colleague, though he was astonished to see the power of compounding and saving, he remarked – “All this is fine, But how do i actually do it? How do I put this in practice?”
Here are the steps to practically do it
- Don’t think of cutting down smoking at one go. This would be hard (if not impossible). And since you would think of it as a sacrifice, you wouldn’t be too disciplined about it. Therefore don’t put a hard stop.
- Assuming you have thought of cutting down cigarettes from 12 to 7 on daily basis, it leaves you with extra Rs. 2250 monthly. Don’t think of investing that amount at the end of the month. Invest that amount TODAY. Start a SIP Today and let it take care of the extra money. This way you will also develop the good habit of investing first and spending later.
- Make sure you keep the SIP period for at-least an year. This will provide longevity to your habit.
- Since you would still be smoking (albeit less), you will not feel like you have made a sacrifice. Hence you will not feel demotivated and remain disciplined.
I am not trying to do moral policing here but smoking is really a dangerous habit and if you do smoke then you should quit now. If health hazards are not big enough reasons to quit then let money be. Quit (or cut down) Now and Become a Crorepati by the time you retire.