Sunday, 28 April 2013

Passive Income Streams - Stop Smoking

My friend avoids egg yolk like poison.  He said yolk has high cholesterol and deliberately digs out the yolks from foods, be it high boiled eggs or from moon cakes.   However, after having done that, he still smokes one pack of cigarettes per day.

This friend of mine is also vested in the stock market and looking for other passive income streams.  While I have nothing against smokers, I feel that smoking is like burning money.  I have worked out the mathematics (cost of smoking) for him.

1. Cost of cigarettes

Like the high housing cost, Singapore is also one of the most expensive place for smokers.  One pack of cigarettes costs between $8 to $15, depending on brands.  For simplicity's sake, I use $10 for calculation: $10 a day becomes a massive $3,650 a year!

If $3,650 is the dividend payouts from stock investment, how much is the investment amount required?

Taking Starhub as an example because the company pays the same dividend ($200 per lot) every year, $3,650 dividend requires 18.25 lots of Starhub.  Starhub closed at $4.57 on 26 April, therefore investing 18 lots of Starhub will require $82,260!

Therefore, a simple act of quitting cigarettes will save him money, just like it is another passive income stream for him.

2. Higher Insurance Premium

As he is a smoker, he is paying higher premiums for his insurance policies.  This is to compensate the insurer because of the increased health risk of the insured person.  But thing done (smoking) cannot be undone, and the insurer will not reduce his premium even if he quits smoking.

3. Increased health risks - income streams for doctors

Smokers have higher health risks.  This creates income streams for doctors while reducing the wealth of the smokers.

4. Harmful to your wife and children

Second-hand smoke is harmful for your family members.  There is no risk-free level of contact with second-hand smoke; even brief exposure can be harmful to health.

In conclusion, smoking is like burning hard-earned money, while at the same time, it is harmful to the smoker and the smoker's family.

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