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Money Up in Smoke

Thursday marks the American Cancer Society's Great American Smokeout, the day the organization urges smokers to commit to quitting.

You probably know the zillions of reasons why permanently snuffing out that cigarette will improve your health and extend your life. For the roughly 21% of American adults who smoke, read on to find out just how much your daily habit can impinge on your financial goals. If you're a nonsmoker, don't get too smug. Some of this may apply to you, too.

You can find a million calculators on the Internet to tailor the following calculations according to the number of cigarettes you smoke each day and the price you pay per pack. For purposes of this example, let's say you smoke a pack a day. According to the Campaign for Tobacco-Free Kids, the average pack of cigarettes costs $4.36. In one year, that habit will cost you $1,591.40. That sum of money will buy you a decent vacation or a pretty respectable laptop computer.

The costs compound year after year. In three years, you will have spent $4,774.20. In five years, cigarettes will have drained $7,957 from your bank account. You don't even want to look at the 10-year impact of a habit that costs less than $5.00 a day -- $15,914. You can probably get a new car for that amount of money. (Well, a small one, anyway.)

Because we're here to talk about personal finance, lets see what happens if you invest $4.36 every day instead of buying cigarettes. Let's assume you quit today, saved your cigarette money for a year, and invested $1,590. Assuming an 8% return on your investment, you'd be a little bit better off a year later, with $1,717 in the bank.

Leave that money alone for a longer time, and you get further ahead. In five years, you have $2,336. In 10 years, you have $3,433. That's the proceeds from just one year of cigarette spending. Imagine how much money you could pile up by quitting for good and putting all that money toward a credit card debt, retirement, a second home, a college fund, even a dream vacation fund. Quit smoking for 10 years, invest that money, and you'd have $46,610 in the bank 20 years later.

Consider, too, that that cigarettes get more expensive as states levy higher taxes on them, which is considered a good method for preventing young people from taking up the habit. The Campaign for Tobacco-Free Kids says that the average state cigarette tax has doubled since 2002.

If you have any doubt that smoking may be bad for your financial health, consider the big business of cigarettes. All those folks holding stock in Altria (NYSE: MO  ) , the parent company of Philip Morris, Reynolds American (NYSE: RAI  ) , and Carolina Group (NYSE:CG) stand to make money off your habit.

Then there are the secondary costs for dry cleaning, or maybe teeth-whitening. When you go to sell your car, you might have to have it professionally cleaned or discount the sales price. Sell a home you've smoked in for years, and you'll probably have to pay to repaint the walls and clean or replace the carpets. A small number of employers refuse to hire workers who smoke.

Many statistics estimate the higher health-care costs that smokers and society bear, not to mention lost productivity, illness, and premature death. At that point, the numbers may matter less than their revelation that smokers cut their lives and their potential short.

If you don't smoke, ask yourself about the daily habit that might be poking a hole in your wallet.

For those can't make it through a day without Diet Coke, a two-can-a-day drinker could spend $338 at the vending machine in a year. If you devour a new mystery novel once a week, you've got an annual $363 whodunit habit. If you buy a $7 car wash every week when you fill up the tank, you're paying that machine $364 a year to do something you can probably do yourself.

It's become known as the "latte factor," after those pricey and complicated coffee drinks sold by a certain ubiquitous purveyor based in Seattle. But the principle applies to a lot of things. The idea is not to deprive yourself of every luxury and joy in life, but to identify the things you buy daily or weekly with no thought to their total drain on your money. Then see whether you can cut back or do without.

More habitual Foolishness:

Discover even more smart tips to help keep more money in your wallet with a little help fromMotley Fool GreenLight. You can try our personal finance advice service free for 30 days.

Fool contributor Mary Dalrymple does not own shares of any stock mentioned in this article, and she welcomes your feedback at marydfool@gmail.com. The Motley Fool has a full disclosure policy.


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