Quitting smoking can have a positive effect on your financial health in addition to your physical health. While most media stories and public service announcements focus on the physical effects of smoking, not much is mentioned about how it hurts your wallet – and your ability to retire comfortably.

We won’t get into the healthcare-related costs (a whole topic unto itself), and will mainly focus only on the cost of smoking as a direct, out-of-pocket cost weekly, monthly, and yearly.  It is important to mention the “opportunity costs” of smoking. Opportunity cost is the concept that if you spend your money on one thing, you give up everything else you could have spent that money for. In other words, every time you spend $6 on a pack of cigarettes, you’re giving up the ability to spend that $6 on something else you might need or want.

The Franklin County, KY Health Department (KY is second only to NC in tobacco production and use) has put together a nifty chart showing the cost of smoking.

QuitLineNC.com has created a nifty cost calculator where you can enter how much you pay for a pack of cigarettes and how many you purchase each week, and it will show you just how much you’re spending per month, per year, and over a ten-year period. This is good information – and it may just shock you to see how much you’re spending on this habit – but it doesn’t tell the whole story.

What would happen if you not only SAVED that money, but INVESTED it, as well? That’s where Dave Ramsey‘s website comes in. There, he has built a nifty investment calculator that will tell you what you could have if you invested that money. Let’s look at a couple of scenarios to get an idea of how powerful the results could be.

Turning cigarettes into money

Let’s say you smoke a pack a day, and your brand costs $6/pack. According to the Cost Calculator, you’re paying $168/month or $2,184 per year. If you put that money under your mattress, you’ll have saved $21,840 in ten years. For this to work, every time you want to buy a pack of cigarettes, you’ll need to drop $6 into a jar and NOT spend it. Sounds simple, right? Not really. That money will inevitably call out to you from under the mattress, and you may be tempted to spend it on something else. Since we need that money for retirement, let’s try something else…

From Ramsey’s website: Historically, the 30-year return of the Standard & Poors (S&P) 500 has been roughly 12%. For our example, we’re going to be more conservative. We’ll estimate that your return will be a mere 7% (still better than you’d get by putting your money into a passbook savings account at the bank). Let’s see what happens in 10 years if you invest that $168 instead of sleeping on it.

According to the Investment Calculator, in 10 years you’ll have $29,803 – $7,963 more than if you just hid your money. Now, let’s assume the historical returns hold up for future investments, and that same $168 per month sees a 10-year return of 12%. You’ll have a nice $39,623 in your account – a difference of $17,783!

What else could you do with that money?

If you’re like a majority of Americans, you carry some amount of credit card debt. If you’re carrying a balance from month-to-month, the interest charges can become pretty burdensome – often without you even noticing. If you’re paying the minimum balance, it could take years to pay off even small balances, and the interest you pay could be many (MANY) times the cost of whatever you bought with the card.

Putting your cigarette money toward those balances may provide a greater payoff than putting it into a mutual fund or index fund. Saving interest charges in the 19%-29% range is a much better investment than a 12% stock market return.

Finally, how cool would it be to pay cash for that vacation, pool, home improvement, or new wardrobe instead of pulling out the plastic? Quitting smoking could be the key to your financial freedom – free from opportunity cost, free from debt, and free from having to work when you could be retired.

Sequoyah Fund is here to help

We can’t help you quit smoking, but we can help you make plans for the money you’ll save if you do. We can help with creating a home budget, reducing your debt, and developing the personal discipline to turn a costly habit into a productive financial opportunity.

Contact Hope Huskey at hopehuskey@sequoyahfund.org or 828-359-5005 to get started. You can also request counseling by completing this online form, or get more information on our services at our website.