Smoking Cigarettes is Hazardous to Your Financial Life

your financial healthThe New Year is a great time to look at making changes and many people include losing weight or quitting smoking as a goal.  It's no secret that the cost of a pack of cigarettes has risen dramatically over the last several years but there are other costs of smoking that you may not have been aware of.

The Cost of a Pack of Cigarettes

The cost of a pack of cigarettes now averages over $7.00 in the U.S., up from $0.35 in 1970. The average smoker smokes about 5 packs of cigarettes per week.  That works out to $140 per month or $1680 per year.   If you invested this $140 each month and earned 6% you would have $23,058 after 10 years and $65,009 after 20 years.

If you happen to live in New York City, the cost of a pack of cigarettes will now set you back $13 or roughly $260 per month and $3,120 per year.  If you invested this $260 each month and earned 6% you would have $42,822 after 10 years and $120,731 after 20 years.

Smokers Pay More for Health Insurance

Current Healthcare Law allows employers to charge employees who fail to meet certain healthcare standards up to 20%, %30 in 2014 of their healthcare costs and potentially up to 50% of the cost of the policy.  Walmart charges a $2000 surcharge to employees who smoke and the only way to avoid this surcharge is to have a Doctor attest that quitting smoking would be medically inadvisable or impossible or complete a company sponsored smoking cessation program.

Other companies are offering incentives for their employees to make healthy lifestyle choices.  Indiana University Health, a large health network, is offering a $720 discount on health insurance for employees who do not smoke and maintain a certain body mass index (BMI).  Workers who do not meet the BMI guidelines can still qualify for the discount by having a doctor attest that the employee has a medical condition that makes the BMI goal unreasonable.

True Cost of Smoking Cigarettes

Smoking lowers the life expectancy by an average of 7.13 years for a man and 4.5 years for a woman and has a “true cost” of between $40 and $222.  In The Price of Smoking, Duke University researchers estimated the individual and societal costs of smoking at $40 a pack while a study in Journal of Health Economics 27 (2008) estimated the cost per pack at $222.  According to researchers at Pennsylvania State University, found the average cost of a pack of cigarettes is $5.51 in the U.S. while lost productivity and medical costs are $18.05 per pack.  The study also found that for every dollar spent on smoking cessation programs, State Governments could save $0.86 to $2.52.

According to a 2017 study by the U.S. Department of Health and Human Services estimates that smoking related illness costs more than $300 billion each year including $170 billion in direct medical care costs and $156 billion in lost productivity.

As companies look for more ways to rein in health care spending by shifting costs to employees, the cost of smoking cigarettes will continue to rise.

Does the “true cost” of smoking influence whether you smoke or not?

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30 Responses to Smoking Cigarettes is Hazardous to Your Financial Life

  1. Lance @ Healthy Wealthy Income 08/21/2014 at 9:01 am #

    Yep. Smoking, morning coffee run, the lunch stop to the gas station each day. Those $5 purchases add up and they usually aren’t good for us…physically and financially.

  2. STEVEN J. FROMM, ATTORNEY, LL.M. (TAXATION) 03/02/2013 at 9:20 am #

    I have given up discussing this issue with my son. He cannot and will not stop. I am hoping he will see the light but he cannot help himself.

    • Paul 03/03/2013 at 9:18 am #

      I have a brother that continues to smoke and I can relate to your frustration Steven. We lost our Mother to cancer and it is difficult to understand why one smokes given the link between smoking and cancer.

  3. Michelle 04/01/2012 at 10:54 pm #

    I don’t smoke. Never have. My dad died from lung cancer, so I never will.

  4. 101 Centavos 02/11/2012 at 6:15 am #

    I quit smoking cold turkey years ago. Cost wasn’t an issue, as I was living overseas and cigarettes were cheap without taxes. I had promised Mrs. 101 I would quit if we got pregnant again, and sure enough, I negotiated one last cigarette, and that was that.
    *Any* addictive behavior though will end up costing you big, whether it’s related to smoking, food, gambling, drinking, or shopping.

  5. Melissa@PersonalFinanceJourney 01/13/2012 at 11:50 am #

    Life insurance for smokers also costs more. To not be affected financially when applying for life insurance, a smoker must be a non-smoker for 5 years. My husband was a non-smoker for 4 years when we got life insurance, so he had to pay a higher rate.

  6. Kevin @ Debteye 01/11/2012 at 11:18 pm #

    Chicago & NYC sell cigarettes around $10/pack. So that’s $200/month! Imagine someone in credit card debt that can apply an additional $200/month towards their balance…I guess this is one easy way to get out of debt…STOP SMOKING!

    • Paul 01/12/2012 at 6:32 am #

      Quitting smoking is not an easy thing to do as nicotine is an addictive chemical. It is an incredibly expensive addiction and can wreck your health and your financial wellbeing.

  7. Since I have allergies and asthma, it wouldn’t matter to me if cigarettes and health care were free. Smoking makes me miserable enough without costing a ton of money.

    However, I do know of a good way to save on cigarettes. It probably won’t save you any money on medical expenses, but you can roll your own cigarettes. Of course, you should quit smoking, but if you’re not going to do that there’s no point in punishing yourself by overpaying.

  8. Aaron Hung 01/06/2012 at 6:14 am #

    wow that is a lot of money! good thing I hate smoking. But $5730 is nice to think if you consider quitting 😀

  9. JP @ Novel Investor 01/05/2012 at 10:20 pm #

    Not a smoker and highly doubt I’ll become one any time soon. I only see the costs increasing year over year with taxes, higher prices and higher medical costs.

  10. My University Money 01/05/2012 at 9:25 am #

    I use this example to stop my high school students from smoking all of the time. Because they can’t fathom life at 50 years old, I explain to them that after 10 years of quitting smoking they could buy themselves a brand new truck. This seems to be more applicable. The numbers are also a lot higher in Canada where our Sin Taxes boost the cost to at least $12 per pack. I even have a whole lesson on compound interest and how you can easily become a millionaire by 60 just by saving “Cigarette money.”

  11. Don 01/04/2012 at 5:40 pm #

    My grandfather died from smoking. Frugal Toad readers, It was a horrible way to go, don’t do it! Pain, lots of pain… 🙁

  12. Amanda L Grossman 01/03/2012 at 3:30 pm #

    Don’t I know it! My husband used to be a smoker (for years!), and I think I calculated $80 per month in cigarettes!!! Oh my Frugal Heart!

  13. Maria@moneyprinciple 01/03/2012 at 1:54 pm #

    On the positive, if you smoke you don’t have to worry about pension. Sorry, couldn’t resist – I used to be a smoker and gave up because I was completely fed up with being exploited by the Gov’t (most of the price is tax so they explit addiction) and to be dependent on a drug. Apart from that, long distance running and smoking kill you separately; but in combination they kill so much faster. My choice was running.

    Now I lead a happier life, except for worrying about pensions and stuff.

  14. Miss T @ Prairie Eco-Thrifter 01/03/2012 at 11:29 am #

    Great post. Smoking really is just bad all around, health wise and financially. I appreciate that people are addicted but I hope for their own sake they can find a way to quit. I work in the cancer industry and it is so sad to see those who have smoked and what it does to their bodies.

  15. 89117 Sushi 01/03/2012 at 3:51 am #

    Smoking’s an expensive habit in more ways than one…

  16. PKamp3 01/02/2012 at 8:38 pm #

    Nice post… just saw something similar from Matt Allen where he argued that you need to save less in retirement due to the decreased life expectancy (well, he did partially. I read between the lines, haha!).

    In my opinion the societal costs are the issue. I’m a fan of premium increases for smokers – just allowing private companies to experiment with premium increases to see how it affects behavior. I’ve seen some companies who have similar programs where they charge more to their workers who are overweight or who smoke.

    • Matt 02/09/2012 at 9:06 pm #

      Ha! PK put the link to my post on this subject in his comment above! I thought about doing that, but didn’t think I should self-promote. Now I don’t have to! My thoughts on the topic are written between the lines in that post. Smoking is just absolutely idiotic when it comes to your financial health. Even if you can “afford,” it, can you really?

      • Paul 02/10/2012 at 3:48 pm #

        Thanks for stopping by Matt! Not sure why someone would continue to do that to their bodies and wallets after all we know about cancer! There are ways to quit today that make it so much easier.

  17. Shaun @ The Family Consumer 01/02/2012 at 8:18 pm #

    Very glad that I never started smoking. I only suspect that costs will continue to rise in the future.

  18. Little House 01/02/2012 at 7:50 pm #

    That’s for sure. Life insurance rates also increase with a smoker. Mr. LH is transitioning to an e-Cigar and so far he really likes it. He isn’t quite ready to go cold-turkey on his actual smokes, but he’s greatly reduced his purchasing real cigars. I like it!

  19. UltimateSmartMoney 01/02/2012 at 6:51 pm #

    Also, if you are a smoker, your life insurance premium will be much higher compared to non smoker. I get $50 every year for being a non smoker from my company. It’s not much but what the heck, every little helps…

  20. YFS 01/02/2012 at 5:18 pm #

    I think cigarettes are disgusting so I do not partake anyway. But, on occasion I do enjoy a cigar or two. I view my social smoking like I view my alcohol consumption. If done in moderation I will be ok

  21. 20's Finances 01/02/2012 at 11:26 am #

    Interesting post – indeed, many people fail to consider the true costs of smoking. I don’t think these type of costs are closely considered though – but that may just be me.

    • Paul 01/02/2012 at 12:25 pm #

      Agreed. I think it is just human nature to think in terms of how one’s decisions affect oneself and our immediate families. When I did research for this article I was surprised to learn of the cost to society of smoking.


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