Habits can be helpful or harmful, but most people would like to eliminate at least one habit from their life. There are a variety of reasons for kicking a habit, but a common reason, and possibly the most costly (pun intended), is financial distress.
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Puff, Puff, Pass
Here are some tobacco stats from the Center for Disease Control:
- Tobacco use is the leading cause of preventable death in the United States and costs the nation $96 billion annually in health care costs and an additional $97 billion in lost productivity.
- Americans spend more than $50 billion annually on tobacco products.
With those national figures in mind, let’s consider financial ramifications for the average American.
Smoking (or chewing) 12 packs per month, at $5 per pack, totals $60 per month. This recurring expense, compounded at 7% interest over 10 years*, means a total cost in excess of $10,000.
On the bright side, if you continue to smoke, you may eliminate the need to save for retirement altogether.
Blame it on the Booze
I’m not going to tell you why you should or shouldn’t abstain from alcohol. That’s none of my business. What I will tell you is that alcohol can be an expensive habit:
Let’s say you go out twice per week with your friends at a cost of $15 per night. In addition, you like to have a few beers or a bottle of wine during the week for $20 more. So you are at $50 per week, which we’ll round down to $200 per month.
$200 per month on alcohol, compounded over 10 years at 7% interest, leaves you a tab totaling nearly $35,000.
What if instead, you learn how to brew wine or beer at home? Or, you choose to drink a decent bottle of red wine that you obtained in a package deal on Groupon for $5?
Well, at $20 per month, your 10 year cost totals nearly $3,500. Pretty drastic change.
Daddy Needs New Shoes
The house always wins! Of course you might hit that lucky streak (often mistaken for skill) and win big, but it’s a short term fix. Statistically, you’ll give it all back to the house. The casino, or dog track, or lottery is stacked against you. Why do you think so many governments run lotteries? You guessed it, because they make a fortune on people who gamble.
Let’s say that you play the lottery or blackjack for fun on the weekend. On average, you spend $100 per week and win $60. I think that’s pretty generous, as I’ve witnessed plenty of casino action up close and personal. So you lose $40 per week, which we’ll round down to $150 per month. Compound that over 10 years, and you’ve blown nearly $26,000.
Battling the Blues
I hear that it’s pretty common for people to spend money when they feel down, or alone, or upset, or frustrated. This habit seems counter-intuitive to me, as buying more stuff often places more financial stress on a relationship, furthering the destructive cycle. But it’s a struggle for some, and I have plenty of my own issues to worry about.
Some people might shop for a new outfit or piece of jewelry. Others might prefer eating out and socializing. Whatever the coping mechanism, let’s assume a cost of $100 each month. The compounded price tag on that shopping habit weighs in at more than $17,000.
*If you’re wondering why I compound everything – It’s to account for a 7% return on that money, which has been obtainable in a good stock index fund historically.
Altogether, these common addictions could cost you nearly $90,000 over a 10 year span.
If you’re thinking “He’s crazy, I don’t have those vices!” you might want to first examine your personal situation. There are numerous other money-sucking habits that I didn’t mention.
If you are having a difficult time kicking a habit, it might help to consider the financial costs that accompany your decisions. Money can be a powerful motivator.
What do you think? Do you have any habits that you’re trying to kick?