• June 3, 2023

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“I’m trying to quit smoking.” said a client in one of my recent meetings, “Not just for the health benefits: They’re expensive!”

Like many middle- and lower-income Americans, this family had never invested towards their retirement in earnest, let alone college for their kids. Despite making good money, they had a narrow emergency savings buffer. But really: How much of a difference would quitting smoking really make for them, financially?

As it turns out: A lot.

How Expensive Are Cigarettes?

The price of cigarettes varies significantly from state to state. Here in Massachusetts the average pack of cigarettes is $11 a pack compared to a little over $6 a pack in Missouri. The most recent data from the CDC shows that the average smoker has 14 cigarettes per day (20 in a pack and 10 packs in a carton), meaning they’ll go through a carton every couple weeks. As of May, the average cost of a carton in Massachusetts was $123.50 after tax. As a result, a smoker in Massachusetts will spend around $3,211 every year on cigarettes. Even if you’re in Missouri that’s $1,766 a year.

How Expensive Is College?

Since 1963 the cost of a four-year degree – as measured by tuition, fees, room and board – has never fallen. That’s as far back as the dataset from the National Center for Education Statistics goes. Certainly, there were declines when adjusting for inflation, but in absolute terms college has never gotten less expensive, averaging annual increases of 6.1% in that time. That “college inflation” rate has slowed, but the absolute cost is now so high as to be impossible for many American families without outside help. In 2020-21 total college costs averaged $29,033. That same year the median income for an American family was $67,521.

How Foregoing Cigarettes Pays For College

By 2040 you would need about $84,289 to pay for one year of higher education for a child born this year. If the average smoker, instead of spending $3,211 a year on cigarettes, instead invested that amount with an average return of 7%, they would have almost exactly the amount required to pay for the first year of school in 2040 in full.

Clearly if you’re buying more or less expensive cigarettes or attending a more or less expensive school this will vary, as will market returns and other assumptions. The point of the exercise is not in precision, but to point out how making changes in regular spending habits can improve our likelihood to achieve major financial goals such as paying for college.

You Are Bad At Saving: Here’s Why

There are two primary reasons most people cannot save:

  1. Human beings are bad at “mental accounting.”
  2. We typically fail to automate savings and investing.

Mental accounting is a term that describes how people think in terms of relative value rather than absolute value. A dollar is always worth a dollar, but depending on the nature of the money we treat it differently. People are more willing to spend money through a credit card than they are using cash on hand, for example.


One strategy to combat poor mental accounting is to equate purchases with substitute items. For example, you can still buy a chocolate bar for about a dollar. So, if you’re considering a pair of jeans at $100 (plus tax), would it be worth sacrificing $100 chocolate bars? This strategy works best when equating spending with something else you want, so maybe instead of jeans you equate that cost with dinner for two or a day at the beach. This translates the original “absolute” value of dollars into something our brains can more easily process: Relative value. This helps mitigate overspending.

Automating saving and investing is also something we can do to improve overall saving. Many people will automatically deposit some of their money into their checking and savings account, but most do not take the next step and put some of it into an investment account. As a result, when they check their bank account they see the value and both accounts mentally, even if it’s earmarked for saving, making it easier to spend both.

To combat this, use the same strategy your employer uses and set up your own retirement account. Just like automated 401(k) deposits, you can set up a recurring deposit into an investment account with relatively little effort. You can set up these automated plans in one of two ways:

1. Request that your employer transfer a percentage of your paycheck into a separate account, such as a brokerage account. Most employers can split a paycheck between accounts without issue.

2. Set up an automated transfer from your bank account to a brokerage account that automatically invests the deposits.

Brokerage accounts are not just for the wealthy. If you don’t have a brokerage account or you’ve never invested don’t worry: It’s similar to opening a bank account. Contact any firm that does not require a minimum investment and offers automated investing, such as Charles Schwab or Fidelity, or a financial professional for assistance. Making a contribution of $500 each month would fully-fund a Roth IRA for investors under 50, for instance.

Transfer Spending Habits Into Spending Habits

Cigarettes represent a simplistic example of a discretionary purchase that can be converted into savings, albeit with a lot of work. However, cigarettes could easily be replaced by alternate spending habits such as the daily Starbucks
coffee (about $1,500 in coffee each year for regular customers), online streaming services (about $350 annually), or eating out (about $3,500 annually). Every person has different discretionary purchased they make that are unique to their lifestyle, so look closely at your spending to find places where spending can be better put to use as savings towards future goals.

Resources To Help Quit

If you need help quitting smoking, start with the CDC or contact 800-QUIT-NOW for additional resources.


  • Tax Burden on Tobacco, 2020; US Department of Agriculture
  • Office on Smoking and Health; Centers for Disease Control and Prevention
  • How America Pays For College; SallieMae, 2021
  • Massachusetts Department of Revenue, 2022
  • Overall Tobacco Trends; American Lung Association
  • The Real Cost of Smoking by State; Wallethub, 2022
  • Digest of Education Statistics; National Center for Education Statistics, 2022
  • Misbehaving: The making of behavioral economics; Richard Thaler, 2015

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