Smokers quit for $100,000 reward

There are smoke-free bars, smoke-free restaurants, and even smoke-free prisons. But a smoke-free country?

This week New Zealand’s government squeezed smokers more than ever by announcing a 40 percent hike in tobacco taxes over the next four years. Prices there are already among the highest in the world, and by 2016 they will top $NZ20 a pack on average.

Officials hope higher taxes and new restrictions will bring the nation of 4.4 million closer to a recent pledge to snuff out the habit entirely by 2025.

As well as the clear health consequences of smoking, there is an enormous financial consequence – to the point where someone smoking a pack per day, which has a mortgage, could literally save $100,000 over 25 years by kicking the habit, research shows.

Damian Smith, chief executive of RateCity, said pack-a-day smokers spend about $330 per month, or just over $4000 per year, if they pay $11 per packet of 30 cigarettes (a conservative estimate).

“For a person earning $60,000 per year (close to the average full-time wage in Australia), $4000 in cash equates to almost 10 percent of a pre-tax salary,” he said.

“How hard would you have to haggle with your boss to get a 10 percent pay rise? Or how much   would you be cheering if the last Federal Budget had a tax cut by 10 percent?”

Like a lot of lifestyle changes, there’s real money attached to quitting smoking, said Smith.

“Now I’m not saying it’s the number 1 reason to quit – far from it. Health is, and should always be, the leading factor. But the financial consequences of both continuing to smoke and of quitting are very big,” he said.

Assume you kick the habit. If you’ve got a $400,000 mortgage on a variable rate, right now you’re probably paying about 6.5 percent interest, according to Smith. If you took that $300 per month you saved from not buying cigarettes and added it to your home loan you would increase your monthly repayments from $2701 to $3001.

Due to the magic of compound interest, adding the extra $300 per month is going to shave over 5 years off the life of your loan and almost $100,000 off your total interest bill, RateCity calculations show.

It’s not just mortgage holders that stand to gain financially from quitting smoking, according to Smith.

“Take that $300 per month and invest it in a high-interest online savings account. By the end of year five, assuming current rates, you’ll have over $2660 extra and a total balance of $20,364,” he said.

“I’m not a health guru, nor a public policy expert. But I can say that when you look at the financial impact of smoking, layering on top of the very clear health issues, it really does say that smokers would be better off – healthier, and wealthier – by giving up.”

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