This months illustration will be the poison of choice for Vancouverites… marijuana. In this illustration, I’m going with the following assumptions through our subject, Mr. Puff.
Let’s assume that Mr. Puff enjoys on average, a joint a day. He uses 1 gram of weed for every joint and pays $220 for every ounce of weed he buys.
Let look at two possible scenarios. First let’s look at the number if Mr. Puff cut his consumption but 25% and used 3/4 of a gram per joint.
$55/month put into an RRSP at an average rate of return of 8% and investing the tax deduction, Mr. Puff would have built up an equity of the following:
- 10 years – $7227 contributed, $10,777 market value, $3550 gained
- 20 years – $16,036 contributed, $36,403 market value, $20,367 gained
- 30 years – $26,775 contributed, $94,605 market value, $67,830 gained
- 40 years – $39,865 contributed, $223,765 market value, $183,900 gained
Next let’s see what it would look like if Mr. Puff reduced his habit by half, smoking only 1/2 a gram every day with the same numbers.
- 10 years – $14,454 contributed, $21,553 market value, $7099 gained
- 20 years – $32,073 contributed, $72,806 market value, $40,733 gained
- 30 years – $53,550 contributed, $189,210 market value, $135,660 gained
- 40 years – $79,731 contributed, $447,531 market value, $367,800 gained
The main purpose of this is really to indulge the mind of someone who doesn’t want to give up the creature comforts of life. However as simple or complicated as it may seem, numbers and logic only appeal to the analytical mind and not the decision making mind. These changes only come when the idea of saving money becomes a bigger priority than our daily habits.
Aaron Koo is a passionate networker and entrepreneur who gets people out of that “someday” mentality about understanding their finances.