Is Your $1 Million Going Up in Smoke?

Allow me to introduce the Scott Burns Slow Million Plan. It’s a sure path to a million-dollar nest egg, no ifs, ands or butts.

Particularly butts.

Who is eligible for this plan? Every young American who smokes, particularly teenagers. For teenagers, the payoff is stunning.

If you are 18, smoke a pack a day, can swear off cigarettes for about 13 years and can save and invest the expense, you will have about $35,000 by the time you are 31. If you then stop saving and just let this little nest egg grow, it will become more than $1 million by the time you are in your mid-60s.

Not only that, you’ll increase your chances of being around to spend the money, adding at least two years to your life expectancy.

Of course, if you continue saving after age 31, you’ll have even more money. And you’ll have it sooner. You might, for instance, have as much as $1 million by age 55 and more than $4 million by age 67.

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How do I come by these numbers?

Simple. I make a basic assumption that cigarettes cost about $2 a pack and that their price will rise by about 10% a year, a modest figure given some of the cigarette taxes being considered. That means you’d be saving $2 a day when you start, but $4 a day within seven years and $8 a day in about 14 years.

Invest the same money in common stocks and earn 10.7% a year, compounded, and you’ll have $6,157 in five years, $20,336 in 10 years, and $35,603 in 13 years.

Then, if you want, you can stop saving.

But now let’s do some rough estimating and watch this money grow. If you can earn 10%, your investment will double every seven years. Watch the nest egg grow:

* age 18, fund is $0;

* age 31, fund is $35,000;

* age 38, fund is $70,000;

* age 45, fund is $140,000;

* age 52, fund is $280,000;

* age 59, fund is $560,000;

* age 66, fund is $1.12 million.

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“Sure”, you say, “but what will $1 million buy when I’m 66?”

Answer: A million dollars has never been what it used to be, but it’s still a very nice slug of money. If inflation averages 3% over the next 50 years, a cool million will still have the purchasing power of $228,000 in today’s dollars. That’s about four times the net worth of the median household in America.

Is this yet another message from an anti-smoking zealot?

Hardly. For the record, I started smoking shortly after turning 18 and was a heavy smoker until age 31. I smoked Lucky Strikes, Pall Malls and Camels in this country. I smoked Bisontes in Spain. I smoked Gauloises in France. And then, back in this country, I took up Sweet Caporals--sometimes two packs a day. All I can say about the experience is that smoking isn’t the only dumb thing I’ve ever done.

The health benefit of not smoking is now clear and obvious. You either get it or you don’t.

The amazing part is the personal-finance side of smoking. It takes remarkably little sacrifice to gain massive leverage on the financial side of our lives. We are not talking about being a brilliant investor. We are not talking about being an entrepreneur. We are not talking about incredible acts of self-denial.

It comes down to this: If you want to be in the upper reaches of wealth in America, you don’t have to do anything complicated or heroic. All you need to do is dump a dumb habit.

Is this a great country or what?