Addictions are expensive, and smoking is one of the most difficult habits to break. Because smoking is more socially acceptable than other types of addictions, it’s widely prevalent and hard to walk away from. If you can quit the smoking habit, however, you can save a substantial amount of money.
Not only is the primary cost of purchasing cigarettes high, but smoking increases other expenses such as health insurance, life insurance and medical care costs. Moreover, people are more likely to cut money from other areas of their budget to make room for cigarettes; this means that even people who cannot really afford to spend that money will still buy cigarettes. There are many reasons to quit smoking, but if preserving your health isn’t motivation enough, consider the impact that quitting smoking can have on your pocketbook.
The Annual Cost of Smoking
Right now, a pack of cigarettes costs anywhere between $4.75 and $11.90. Costs vary between brands and from one state to the next. Assuming that the average pack costs around $6, that would make a pack-a-day smoking habit cost around $180, or $2,160 per year.
If you have health insurance, you will pay more as a smoker than as a non-smoker. Most insurance companies offer a rebate to people who quit smoking, and annual rates for smokers are as high as $20 to $50 more per month. Life insurance will be even more expensive; term life insurance might cost as much as $1,500 more a year if you’re a smoker than a non-smoker.
Added together, this makes a pack-a-day smoking habit cost around $4,080 a year. To put this into perspective, here are a few other things that you could do with that money:
— Pay off Debt
Making the minimum payment on your credit card costs you a substantial amount of interest. It could take 10 years just to pay off one $2,000 credit card with a $45 minimum payment and 11.9% interest, and you’d accrue an additional $1,114 in interest during that time. If you used the money you save by not smoking, you could pay $340 a month and have the card paid off in 7 months.
By putting the money you save by not smoking into an interest-bearing account like a high-yield CD or mutual fund, you can gain compound interest and accumulate an impressive profit. Deposited into a Growth Stock Mutual fund earning 10% interest, one smoke-free year’s worth of deposits would earn more than $125,000. You could pour your smoke-free money into an employer-matched 401(k) for maximum retirement savings as well.
$4,080 can pay for four people to fly to Maui and spend a week in a luxury hotel. It would pay for a week-long Disney World vacation — twice. It could pay for at least five two-person Caribbean cruises. Depending on where you travel and what deals you find, you can easily fund a nice family vacation every year with the money you save by not smoking.
There are countless other things you can do with smoke-free money. You can fund a wedding, buy a plasma television, save for a house or start your own business. You could pay off student loans or go back to school for a new degree. The choices are endless.
What Smoking Can Teach You About Saving Money
At this point, it’s reasonable to ask: If quitting smoking can save you this much money, why aren’t non-smokers taking Caribbean cruises every year? If I quit smoking a year ago, why am I not $4,000 richer? It’s a valid question. Many people every year quit smoking as a way to save money, yet they never seem to notice the extra money that they save. Where does it all go?
The answer is fairly simple: It gets spent on other things. The $6 normally spent on cigarettes gets spent on sandwiches, movie tickets, bargain-bin DVDs, gourmet coffee drinks or paperback books instead. It gets absorbed into a person’s grocery or gas budget.
This happens for two main reasons. One, because people may try to fill the void left by an addiction with some new addiction. Instead of smoking, a person might start eating more fast food. The other reason is that addicts will find the money to pay for their addictions at the cost of everything else. Smokers dig through couch cushions looking for spare change to afford a pack of cigarettes between paydays. A smoker will spend gas or grocery money on cigarettes instead, and once the smoking goes away that money goes back to its original purpose.
In an odd way, addictions teach a valuable financial lesson: If you want to save money, you need to make sacrifices and pay yourself first. If you treat saving and investing like an addiction, forcing yourself to find room in your budget to set the money aside, you will be able to achieve your financial goals. By focusing on long-term financial goals instead of short-term instant gratification, you can begin making serious savings plans with only a small sacrifice along the way.