smoking: a drag on your finances

Posted on September 1 · Comments

I read some depressing statistics about cigarette smoking that revealed the poorer you are the more likely you are to smoke. Not only that, but smokers with lower income smoke more cigarettes per day than the average. In other words, those who can least afford to smoke are the people who smoke the most.¹

Why? There are several hypotheses in a study conducted by the World Bank on Poverty and Smoking ² including the argument that poorer people tend to be less educated or that smoking is a form of self-medication against the stress of feeling deprived. However, the researchers conclude that none of the hypotheses are adequate at explaining the link between poverty and smoking.

With the link between being poor and smoking in mind, the next finding isn’t very surprising: the number one motivation for quitting is not for health reasons but for financial reasons.³ What is surprising however, is that poorer smokers are less likely to try to quit smoking that their wealthier neighbours.⁴

It’s a no-brainer that smoking is expensive. Your money literally goes up in smoke every time you light up. So how much does smoking cost the average smoker? I did some calculations based on some national averages.

How much money does the average smoker burn through?

The average number of cigarettes smoked daily per smoking adult in Australia is 15.⁵
The most popular brand is Winfield. My local Woollies sells a pack of 20 for $11.46⁶
So the average number of packets per week is 5 1/4: a total weekly cost of $60.16
The average total monthly cost is $240.66
The average total yearly cost is$3,128.32
Cost over 10 years is $31,283.20

As a non-smoker, I could think of a whole lot of things I would rather be doing with $30,000. For a low income earner, thirty odd thousand is certainly be nothing to wheeze about. But the story doesn’t end there.

What if you were to invest that money, even in a basic high interest savings account?

Currently, the best interest rate for a savings account is 6.40%,⁷ so at 6.40% interest over 10 years your savings balance will be $40,307.17. Not only will you not be wasting $31,283.20, you will also be earning just over $9,000.

Not convinced? What about the effect of putting your cigarette money towards your mortgage?

The average Australian mortgage is $300,000. At 7% interest and over 30 years, by putting the $240 a month towards your mortgage, you will shave 8 years off your mortgage and save $131,761 in interest.

$131,761 is a lot of money in anyone’s books. It is easy to see how a single unhealthy habit can keep a person in relative poverty.

You don’t Smoke?

I don’t smoke either. Not in the same league, I know, but I do have a bit of a coffee habit that could save me $7,000 in interest if the cash was channelled into our mortgage. Our takeaway habit could save us $25,000 in mortgage interest.

My point is that most of have at least one unhealthy habit that is not only doing us harm, but could be more expensive than just the cost of the habit.