I don't mean to get all preachy, but just in case anyone needed an extra incentive to kick a bad habit as we start the New Year, money is a good one. Vices such as smoking, immoderate gambling and drinking put a real dent in your finances.
Take smoking. If you have a pack-a-day habit, at $9 for 20 cigarettes, that's more than $60 a week. You can check out the Canadian Cancer Society's cost of smoking calculator to see how much you can save by quitting. It shows, for example, that within a year you could enjoy enough savings to fund a home renovation, while cutting your risk of a smoking-related heart attack in half.
One reader recently wrote me that he built up a rainy-day fund from the money he saved by quitting a pack a day. "It's been a real surprise how quickly that can build up to real money," he said. "Suddenly, I had about $300 a month that I could spend on something else."
While he quit cold-turkey, the Canadian Cancer Society Smokers' Helpline is a ready resource if you're ready to kick the habit.
As for alcohol, I'll just say upfront that I am no teetotaler. I enjoy a glass of wine with dinner once or twice a week and the occasional homemade cocktail. According to the International Center for Alcohol Policies, I'm still well within moderate drinking guidelines. My spending on alcohol is also in line with most Canadians. I suppose it helps that I have trouble differentiating a vintage Cabernet from a box of Merlot. The latest StatsCan report shows that in 2008 the average household spent $1,157, or 1.3 per cent, of its total expenditures on booze. Since I enjoy my alcohol responsibly, I see no reason to trim this part of my household budget, but it is good to have a benchmark.
The same StatsCan report shows that Canadians on average spent $369, or 0.4 per cent, of their household expenditures on games of chance. That figure is net of winnings and includes government-run lotteries, raffle tickets, bingo games and spending in casinos.
In the U.S., the average household spending on lotteries is about $525 (U.S.) a year and studies have shown that lower income households spend a higher percentage of their money on lotteries than higher income households. Not for nothing is the lottery often called a voluntary taxation.
I do buy lottery tickets from time to time, often with colleagues, when the pot reaches into the significant double digits. The math, of course, doesn't support the purchase of lottery tickets at all. To understand how long the odds are of winning, read this explanation at How Stuff Works.
One of my favourite personal finance blogs Get Rich Slowly sums it up nicely: "Play the lottery for fun if you want, but don't do it because you think it's going to help your financial situation…If you really want to improve your finances, do something boring with your money. Put it in a savings account. Invest it in the stock market. Hell, loan it to your brother-in-law. You're less likely to lose the money with him than with the lottery."