Is your Retirement going up in Smoke?

If I offered you R1 Million, or more, would you give up smoking?

Read on if you want to learn how you can guarantee yourself One Million Bucks!!

Smokers have far less chance of a successful Retirement than Non Smokers and dependant upon how long you plan to smoke, it could cost you Millions of Rands.

Let’s take a look at a case study, based upon 30 year old Pieter Kameel, who smokes 20 cigarettes daily. We assume that one packet of twenty costs him R25/day equating to R750 per month.

Pieter is married with one child and an indirect cost of smoking is the Death and Disability Cover he has in place, to protect his family should he snuff it. Pieter will pay R250 pm in additional premium over and above what a non smoker would pay for the same benefits, so all in all his smoking habit is costing him R1,000pm.

If he quit smoking his saving would be R1,000pm and we assume he invests this for his Retirement. As the cost of cigarettes and his cover is expected to increase at 10% per annum, we factor in a 10% increase in his investment. While we cannot be sure what his return will be, it is a reasonable assumption to expect a 12% return net of costs for an investment over a long time period. (Inflation assumed to be 6% pa)

At age 55, a period of 25 years, Pieter as a smoker would have spent a small fortune on funding his nasty habit, but as an investor he could have accumulated R4,2 Million for his Retirement. Allowing for inflation and bringing that value back to todays value of money, he would have an additional R1 Million, which could mean the difference between a very successful Retirement and a very drab Retirement.

What does that mean to Pieter and his family? Well, he could purchase his dream car, he could take his family on a trip to Disney World and he could put his child through University and still have Half a Million extra for Retirement, if only he kicked the habit of smoking and spent some time doing Financial Planning.

Over time we can see the impact of compound interest working positively on Pieter’s bank balance, as opposed to the impact of smoking potentially compounding his health problems.

A few other observations:

1. Most people can only comprehend the next few years, while very few can visualise the impact that 20 or 30 years will have on their savings, or their buying power.

2. That is the magic of compounding for investors and the detriment of compounding for spenders and those in debt.

3. Extraordinary things all started with a single step and were achieved one step at a time, so work on transforming yourself one step at a time, one day at a time and very soon the days become weeks, the months become years and before you know it you will have an extraordinary Retirement.

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