The Cost of a Habit

By Randell Tiongson on July 7th, 2009

“Good habits are as addictive as bad habits, and a lot more rewarding.” — Harvey Mackay

Ever considered computing for the economic value of your habits? Bad habits can bring about a financial drain while good habits can be financially rewarding.

Destructive habits like high stakes gambling takes a toll on one’s financial condition – everybody knows that. But what about ‘innocent’ habits that seem inexpensive, does that have drastic financial consequences as well? Let’s use an ‘innocent’ habit like smoking and let’s quantify.

Let us assume that a typical smoker spends P 50.00 per day on cigarettes which comes out to P 18,250.00 per year and that the cost of cigarettes will become expensive by an average of 7% a year due to inflation. Let us also assume an average annual investment yield of 7% p.a. to factor in cost of money. Let us see how it looks like.

Year

Annual Cost

Total Accumulated Value

1

18,250.00 18,250.00

2

19,527.50 40,421.93

3

20,894.43 65,608.49

4

22,357.03 94,123.12

5

23,922.03 126,308.30

6

25,596.57 162,538.21

7

27,388.33 203,221.40

8

29,305.51 248,803.80

9

31,356.90 299,771.94

10

33,551.88 356,656.49

11

35,900.51 420,035.99

12

38,413.55 490,541.01

13

41,102.50 568,858.55

14

43,979.67 655,736.90

15

47,058.25 751,990.81

16

50,352.33 858,507.15

17

53,876.99 976,251.03

18

57,648.38 1,106,272.37

19

61,683.76 1,249,713.06

20

66,001.63 1,407,814.71

21

70,621.74 1,581,927.01

22

75,565.26 1,773,516.73

23

80,854.83 1,984,177.57

24

86,514.67 2,215,640.70

25

92,570.70 2,469,786.19

26

99,050.65 2,748,655.42

27

105,984.19 3,054,464.38

28

113,403.08 3,389,618.19

29

121,341.30 3,756,726.65

30

129,835.19 4,158,621.17

Spending P50 bucks a day on cigarettes for 30 years will actually cost you P 4,158,621.17!

On the other hand, the same principle applies when you are investing. Even if you can only set aside P 50 a day (increasing it by 7% per year) and investing it at a modest average yield of 7% p.a., you would accumulated P 4,145,621.17.

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7 thoughts on “The Cost of a Habit”

  • Very good! I can show this to my children who are now working. Savings in Millions or Nothing..

  • if only people can realize this… dna sana naghihirap ang pilipinas! can i use this blog to make my friends realize what they are doing?THANKS GODBLESS!

  • Hi Michael.. go ahead, my pleasure. Actually, this blog also hit me, I don’t smoke but I love Diet softdrinks… same banana. I’ve been soda free for 4 days now, wonder how long I can last. I just need to read my own blog to be reminded.

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The Cost of a Habit