Smokers. You guys are a pretty unpopular bunch these days. The places you can smoke are shrinking by the day and everyone wants you to quit. Well, add me to that list. I want you to quit for the same reason everyone else does, plus one more. I want you to quite because smoking is expensive. How much does a pack cost now? I checked and depending on your state it can cost between $6-$12. That is a lot of money and I want to prove it with the following exercise.
What if you quit for a single year, let’s say you start on your birthday and go till the next. No cigarettes during that time. If you smoked half a pack a day, you would be about 4 packs a week, about 15 a month and about 180 a year. At 9 bucks a pack you would save $1620.00 for that year. That is a really nice HDTV or a dining room set or a vacation to vegas for 4 days. Think on that for a moment.
Why stop there? What if you invested that money? Not in anything too risky, something safe. How about Coca-cola stock? Coke has been in this country for decades, it’s a pretty safe bet that if will be around for many years to come. Better still it offers a dividend. For those of you who might not know a dividend is like interest certain stocks offer their investors. Coke has a good one, 3%, way better than anything you could get at a bank.
- Year 1 – You buy 52 Shares of Coke(KO) with your $1620.00 worth of cigarette money.
- Year 2- The price of the shares fall down to $22, but you get a dividend of about a $1.05 a share, you reinvest it and buy 3 more shares.
- Year 3 – Coke(KO) recovers back to $25 a share, you get another dividend of $1.07 a share, you reinvest it and buy 2 more shares.
- Year 4 – Coke(KO) climbs even more, all the way up to $33 and raises the dividend to $2.00 a share, you again reinvest and buy 3 more shares.
- Year 5 – Coke(KO)’s climb continues up to $35 a share. The dividend rises to $2.20 s share, you buy 4 more shares with it.
Today in 2013 you would have 64 shares of Coke at $39.72 a share which is now worth $2542.08. From making two decisions, quitting smoking and investing in Coke, you now have over 2500 dollars. Think about that.
Imagine if you quit smoking the entire time and invested that money each year. You would have around 300 shares worth almost $12,000.00! If you stopped adding money and simply reinvested that dividends for five more years, lets say the price of the stock stays the same and the dividend does as well, you would add 15 shares a year. After five more years you would have around 400 shares worth $1600.00!
In all of these exercises you are doing the same two things, giving up a vice, in this case cigarettes, and investing it in relatively safe stock like Coke. Would you rather have a years worth of cigarettes or an investment you could grow over the course of a lifetime. That investment could buy you a car or possibly even a house or help you retire a few years early. All it takes is two smart choices.