“Good resolutions are like babies crying in church. They should be carried out immediately.”
―Charles M. Sheldon
Can a New Year’s Resolution make a Million-Dollar Difference? Absolutely! Decisions you make today can make a tremendous difference to your long-term financial health. This week, we examine the financial impact of some popular New Year’s resolutions (ones that aren’t even typically considered to be “financial resolutions”!)
Million-Dollar Resolution #1: Lose weight/Get in Shape
Losing weight and getting in shape is the most common New Year’s resolution. While on the surface it might not seem like a “financial” resolution, losing weight and getting in shame can add multiple six figures to your bottom line! Let’s count the ways:
1) Lower health insurance costs. People who keep their weight in check and stay fit stay healthier and spend less on healthcare costs, not only because they tend to be sick less, but also because they pay less for insurance. Just as smokers pay higher insurance rates, so insurers charge higher rates for obesity. Rates can be up to 25% or higher, based on BMI scores, and yes, these costs can be passed from an employer to employees.
2) Lower healthcare costs. Healthcare costs tend to be significantly lower for those who stay trim, with or without insurance.
Lose a lot, save a lot. According to a Lehigh University study reported in Forbes, obesity now accounts for more health care costs than smoking. Men with healthy BMI (Body Mass Index) and “normal” weight spend $1,152 less per year than men considered obese, mostly due to reduced prescriptions and hospitalizations. Women of a healthy weight save an average of $3,613 a year over their severely overweight counterparts.
Lose a little, save a lot. Other studies have shown that significant health care savings can stem from even modest weight reductions of less than 20 pounds. While not every diabetic is overweight and losing weight cannot prevent all diabetes, a major study by National Institutes of Health reported in UCLA Health.org showed a 58 percent reduction in new cases of diabetes over five years with just a very modest lifestyle and diet intervention with a 5 percent weight loss.
3) Get the promotion. Fair or not, multiple studies have shown that people who are fit encounter less discrimination and get promoted more readily. According to a study submitted to Health Economics journal, the salary differential between normal weight and obese employees averages about 2.5%, with women taking even higher pay cuts. One Cornell University study discovered discrimination was particularly great problem among white women, finding that overweight women earned only 7% of their slimmer counterparts.
After examining absenteeism and other factors, discrimination has been determined to be the main factor in the difference between healthy-weight and overweight workers. It may be unfair, but an employer may assume that an overweight employee might not be as competent, or consider (as they do with older employees) potential costs of insuring an overweight employee.
“We are living in such a politically correct society, we are deluding ourselves into believing overweight people are not discriminated against,” says Steve Siebold, a consultant to Fortune 500 companies. “Many employers look at obese candidates and immediately think, ‘this person failed in controlling their own health, how are they going to run a division?'” he says.
All in all, how much does our extra weight costs us? A Department of Health Policy Report published by George Washington University in 2010 tried to answer that question exactly:
The overall, tangible, annual costs of being obese are $4,879 for an obese woman and $2,646 for an obese man. The overall annual costs of being overweight are $524 and $432 for women and men, respectively. For both genders, the incremental costs of obesity are much higher than the incremental costs of being overweight.
Adding the value of lost life to these annual costs produces even more dramatic results. Average annualized costs, including value of lost life, are $8,365 for obese women and $6,518 for obese men.
As daunting as those statistics are, let’s focus on how much maintaining a healthy weight can SAVE you! If you add up:
- reduced medical costs of $200/month for 40 years
- reduced insurance costs of $50/month for 40 years
- a 4% salary difference over 40 years (calculated on an “average” salary of $50k for 40 years without inflation),
- then assume you could have saved the above amounts at a 5% interest rate, you’ll be ahead by $634,198 forty years from now.
(We’re pretty sure that nothing tastes as good as having an extra $634k feels…)
Exercise: The Millionaire Habit. Not only will getting in shape be good for your pocketbook by saving you money, it’s also possible that it will make you more money if you own your own business. It’s been said that “success leaves clues,” and some of those clues can be found in looking at the typical habits of millionaire businessmen and women.
While those of soft middles and modest bank accounts may trick themselves into believing that the financially successful are chronic workaholics who little time for self-care, studies have shown that self-made millionaires and multi-millionaires tend to make exercise, sleep, and self-care a priority. Authors of The Millionaire Next Door reveal that the average millionaire exercises 3-1/2 hours a week, or an average of 30 minutes per day.
(Apparently, that gym membership may be a very good investment!)
Million-Dollar Resolution #2: Quit That Habit!
Quitting smoking is a popular New Year’s Resolution. And perhaps the fact that there are more former smokers than current smokers in the US (according to the CDC) means that more and more people are keeping their resolution to be smoke-free!
Readers who have no smoking habit to break may identify with a desire to eliminate:
- the happy hour martini (or the extra one)
- the morning latte and muffin that makes a poor substitute for “breakfast”
- or some other less-than-healthful habit.
As with obesity, the insurance and medical costs of smoking are enormous. Smoking raises costs for:
- life insurance – up to double a non-smoker’s rates!
- health insurance – as much as 41% higher.
- medical care (smokers tend to be sick more often and require more medication)
- car insurance (because more smokers get in accidents)
- home insurance (because a smoker’s home is more likely to catch on fire)
- dental care (smokers tend to have more dental problems).
As with weight, there is also a strong, undeniable correlation between being a non-smoker and earning more. Studies have shown that non-smokers earn from 4-11% more than smokers!
And of course, there are the opportunity costs, or the money that could have been made had you been able to actually save the above costs.
Could you quit for a million dollars? The fact is that if smoking cost $8 per day for a pack of cigarettes, plus $200 per month in added insurance and other extra costs, and a loss of 5% of an average salary, by quitting smoking and putting that money into savings earning 5% annually you would save over ONE MILLION DOLLARS – $1,020,804, to be exact, in 41 years.
As hard as it is to quit, very few people could turn down a million dollars in favor of cigarettes or any habit. But here’s the rub – you don’t get a million dollars today for quitting. You get a million dollars eventually, as a long-term reward - and only if you don’t fritter away the money you save on a replacement habit.
Positive Substitution: Whether you are aiming to release weight or stop an unwanted habit, we recommend focusing on positive substitution. Instead of telling yourself that you CAN’T have that donut, cigarette, morning latte or happy hour martini, focus instead on replacing the unwanted habit with a positive one.
Add activities you enjoy to your daily routine. Add organic vegetables and other food that is good for you as well as delicious. Stock your kitchen with exotic teas to cut back on caffeine. Replace your Amazon habit with trips to the library. Host in-house spa days with friends. Discover healthful substitutions for the habits you are trying to let go of, and switch out old for new habits a little at a time.
Adding positive actions and healthful habits feels better than depriving yourself of something you want. And by tying the money you save to a concrete financial goal, such as starting an insurance policy for a family member, saving a down payment for a home, or creating an emergency fund equal to one year’s expenses, you’ll feel great about your new habits!
What are YOUR New Year’s Resolutions?
In a few days, we’ll return with three financial resolutions that can have a million-dollar impact on your bottom line. Until then… what resolutions are YOU making? We’d love to hear!