We’ve all heard about the health benefits of quitting smoking and we’ve all read articles on how to quit smoking. This article will not be covering these topics, but instead will cover the financial benefits of quitting.
Why is tobacco so expensive?
To begin with, tobacco is a high maintenance crop. It tends to suck nutrients out of the soil requiring heavy fertilization, crop rotation, or both. A tobacco plant also usually begins its life in a small tray indoors and is replanted in a field after it has started mature a bit. After tobacco is grown, it has to go through processing. Usually this involves a slow curing/drying process. After several weeks or months of processing the dried leaves are sent off to the plants where they are made into cigarettes.
The production of cigarettes from raw tobacco is a relatively low cost process. What really increases the prices for the consumer in this stage of production are the high taxes that cigarette makers are required to pay in order to be able to produce their product. The actual rolling and packaging of cigarettes is inexpensive compared to most other goods.
The main reason that tobacco is so expensive, however, is the sales taxes that are applied to the product at the store. States and municipalities both have taxes on cigarette purchases. These can vary from location to location, but in some areas they account for well over 50% of the purchase price of the product.
How much does Smoking Cost You in Dollars?
Let’s assume that you live in a state like Louisiana which is about middle of the pack on cigarette taxes. The average cost for a pack in 2012 was $6.50 in that state. This is low compared to the state with the lowest cigarette tax (West Virginia at $4.74/pack) and exceedingly cheap when compared to the state with the highest (New York at $12.50/pack). Let’s also assume that you’re an average smoker and smoke about a pack a day. That comes to $45.50/week, $195.00/month, and $2372.50 PER YEAR!
Imagine what an extra $2300 per year would buy you? That’s a mortgage payment (or two!). That’s groceries for the average family for 5 months! Are you really spending almost half of your yearly grocery budget on smoking?
Let’s take it one step further. Say that you invested that $2372 per year in a blue-chip dividend paying stock. Let us use Altria (they produce cigarettes) just for irony. At the time of this writing, Altria is paying a 5% dividend. If they continued paying 5% for the next ten years and you kept investing the money you saved by not smoking, you’d have $30,828 at the end of the decade. That’s new a car (or two!), or a college education for your kids!
These calculations only take into account the money you save directly by quitting smoking. What we haven’t mentioned is the money you’ll save on insurance premiums (non-smokers pay far lower monthly bills), doctor’s visits, future hospital visits, gas for quick trips to the store to grab a pack, or money spent on cleaning clothes and spaces of the smell of cigarettes.
Quit Smoking Now and Start Saving Money!
Hopefully the above demonstrates how expensive smoking really is to you and your family. We haven’t even taken into account the health benefits that you’ll receive (long-term and immediate) if you quit. Quitting now you can save that money. More importantly, it could even save your life.
Amazon Price: $24.99 $8.00 Buy Now
(price as of Oct 20, 2013)