Addictions and bad habits tend to take a toll on us sooner or later. Habits such as chain smoking and binge drinking can lead to severe health and financial consequences.
But, we aren’t here to judge you or tell you how to live your life. Instead, we’re simply going to ascertain the long-term financial costs of bad habits, and to look at how much wealth you could create if you start making better spending choices, such as investing in Mutual Fund SIPs at the start of the month.
Quit Smoking – Save Rs. 4.5 Lakh
Smoking is a dangerous habit and the cause of millions of cases of oral cancer all over the world. While the costs of cancer treatment are obviously high, the habit of smoking, in itself, is quite an expensive habit.
Tobacco is one the most taxed commodities in India and tobacco products get increasingly more expensive with every passing year. Let’s take look at what you could save over the long term if you quit smoking.
| Particulars | Evaluation | |
| Smoking cost per month (approx.) | Rs. 1,000 | |
| Expected price rise of cigarettes per annum | 15% | |
| A | Smoking costs for 10 years, assuming 15% annual cost inflation | Rs. 243,645 |
| B | Same corpus invested in Mutual Fund SIPs* (Investing Rs. 1,000 every month, and increasing the contribution by 15% annually, with expected returns being 14% per annum) |
Rs. 454,397 |
| Wealth created (B minus A) | Rs. 210,752 |
*assumed investment instrument
If that amount managed to raise your eyebrows, then it’s probably time to quit your smoking habit and make better use of your money by investing it. You can choose the investment product as per your risk appetite and return expectation.
Reduce Eating Out – Save Rs. 5 Lakh
Eating out and ordering food is way more expensive in comparison to cooking at home. If you eat out frequently, you may be setting yourself up for massive long-term financial costs.
Let’s assume eating out once a month costs you an average of Rs. 500. But, let’s say you eat out at least three times a month on average. Here’s what it will cost you:
| Particulars | Evaluation | |
| Cost of eating out three times every month | Rs. 1,500 | |
| Expected annual cost inflation | 7% | |
| A | Expected 10-year expense assuming 7% inflation | Rs. 248,696 |
| B | Same corpus invested in Mutual Fund SIPs for 10 years (Investing Rs. 1,500 every month, and increasing this contribution by 7% every year, and earning 14% per annum) |
Rs. 503,199 |
| Wealth Created (B minus A) | Rs. 254,503 | |
| *Figures are assumed | ||
It’s quite simple. All you need to grow you wealth is reduce eating out and instead eat healthy, home-cooked meals. This will certainly have a positive impact on both your health as well as your finances.
Quit Alcohol – Save Rs. 7.5 Lakh
A glass of your favourite drink every now and then may be great for relaxation. But, an out-of-control drinking habit is a common route to financial ruin.
The cost of a drink depends on various factors. But, even by conservative margins, a person with a weekend drinking habit may be splurging an easy Rs. 2,000 a month, including assorted costs like tips to the barman, taxi fare and eating out. Also, alcohol is a highly taxed commodity, and its costs increase by around 10% annually. Considering these figures, let’s evaluate your long-term savings if you were to kick this habit.
| Particulars | Evaluation | |
| Alcohol costs per month * | Rs. 2,000 | |
| Expected annual cost inflation * | 10% | |
| A | Expected costs over 10 years, assuming 10% inflation | Rs. 382,498 |
| B | Same corpus invested in Mutual Fund SIPs (Rs. 2,000 a month increasing by 10% each year and assuming 14% annual returns) |
Rs. 749,955 |
| Wealth Created (B minus A) | Rs. 367,457 | |
| *Figures are assumed | ||
Give your liver a break. Alcohol not only comes with heavy financial costs, but also severe health consequences over the long run.
Control Shopping Habits – Save Rs. 17 Lakh
There are wants and there are needs. Do you frequently buy things you don’t need? An out-of-control shopping habit is one of the worst things that can happen to you, financially speaking.
Strangely enough, as a society, we do tend to discourage smoking and drinking, but culturally we don’t seem to discourage pointless shopping as much as we should.
Now let’s say you splurged Rs. 5,000 every month on shopping for superfluous things. Here’s what it could cost you over a span of 10 years:
| Particulars | Evaluation | |
| Assumed avoidable shopping per month * | Rs. 5,000 | |
| Average annual cost inflation * | 7% | |
| A | Expected shopping costs in 10 years considering 7% inflation | Rs. 828,987 |
| B | Same corpus invested in Mutual Fund SIPs (Rs. 5,000 invested per month in a Mutual Fund returning 14% annually, with a 7% increase on monthly contribution every year) |
Rs. 16,77,331 |
| Wealth Created (B minus A) | Rs. 848,344 | |
| *Figures are assumed | ||
If you have all these vices and you manage to reign them in, you could potentially save approximately Rs. 33 lakh over 10 years. That’s a massive sum of money by any stretch of the imagination and would be enough to help you buy or make a down payment on a property in most cities in India.
While you should find ways to enjoy your hard-earned money, you should also keep a close eye on bad spending habits or any other addictive habits that could get out of control.
Ideally, investing in SIPs could help you save and invest compulsorily. After all, a penny saved is a penny earned.
(The writer is CEO, BankBazaar.com)