Smokers can leave up to $6 Million on the table by spending their money on Cigarettes

Have you seen the new #Squadless commercials the Anti-Smoking Groups released the past couple weeks across the U.S? If not, they are pretty funny (Commercial Here), and just one of many TV spots that have been very effective in reducing smoking over the past decade (I Think We All Remember the “Skin Tax” one). Their two main campaigns revolve around:

  1. $$ Cost of Cigarettes over the years (FOMO)
  2. Health Cost of Cigarettes over the years (Skin)

While I’m no expert in the health concerns of Cigarettes, I can certainly dive deep on analyzing the monetary cost of Cigarettes over a person’s lifetime. I was able to gather the cost of a pack of cigarettes for every state in the U.S. going back to 1955 along with the price of the S&P 500. Using this data, along with the inflation rate for the U.S. and some CDC classifications on smokers, I was able to build a model projecting a person’s spend on cigarettes as well as what that would have been worth had it been invested in the market.

Let’s start with the big number – $6 Million. Those smoking 1-2 packs a day since 1975 in New York will have spent $83,000 (not adjusted for inflation) by 2015. If they are alive in 2060 (highly unlikely given data on the life expectancy of smokers) and cigarette prices continue to grow at current rates, this number would skyrocket to $2,000,000. If this money was invested instead of spent, in 2015 it would be worth $220,000 (~300% growth). In 2060, this would be worth $5.97 million, assuming the S&P 500 averaged 5% growth annually.

Using a more realistic scenario, if our parents (1960-1970’s birthdates) started smoking in 1985, they would have spent enough by 2015 to cover 2 years of tuition at a private college, or 8 years of tuition at a public college (Source). Kids of these parents may have to take out student loans which can cause financial pain until your early 30’s.

This should tell you a couple things:

  • Smoking can kill you in more ways than one (Financially or Literally)
  • The financial impact of smoking can be the difference between being a millionaire and struggling to live
  • Smoking can financially impact your kids, and their kids.

Something else that I found fascinating, yet frightening at the same time. Each year from 1970 to 1980 (except for one), the inflation rate was actually higher than the growth rate in cigarettes, and not by a small margin. It was only until recently did cigarette companies & the government start to capitalize on smokers. Now, I bold “Government” because taxes have been steadily increasing on cigarettes since the 90’s. While this may seem to be a deterrent to smokers on the surface, remember that cigarettes are addictive, and deterrents don’t necessarily work (See: Heroin, Meth, etc.).

Final note: New York is currently the most expensive place to buy cigarettes, at 10$ / pack. That is a 3800% increase over 1960 prices, when a pack cost just $0.26.

To do your own analysis, please click on the image below and interact with this visualization.

screen-shot-2016-10-03-at-8-03-19-am

Tools Used:
– Source of Data: Cigarette Historical Prices, Historical Inflation, Inflation Forecasts
– Tableau to visualize
Eric

 

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