4 ways good health can boost your wealth
Every year, millions of Americans vow to start working out, quit smoking or otherwise improve their health.
There are, of course, plenty of health benefits to hitting the treadmill, dropping tobacco and ditching the fast food.
But staying healthy is not just good for your body; it can boost your wealth, too.
It can lead, for instance, to lower insurance premiums and decreased — or delayed — medical costs. Over time, these savings can have a real impact on your earning power.
Here are four reasons why healthy living is good for your financial security.
Reason 1. You might collect a bigger paycheck.
Studies have long indicated that regular exercise can improve your mood.
When you exercise, your body releases chemicals called endorphins that can trigger positive feelings, similar to the effects of morphine.
This natural high reduces stress and anxiety, increases self-esteem and confidence and improves sleep and mental function.
All that can translate into reduced sick time and increased productivity at work.
The Effect of Exercise on Earnings, a 2011 study from Cleveland State University, found the productivity boost that comes when a person regularly exercises (at least three hours a week) can lead to higher earnings — up to 10% more than their sedentary colleagues.
More Exercise, More Pay
|3 times per week||10% higher salary|
|1 to 3 times per month||5% higher salary|
The study defined exercise as any physical activity and suggested the salary benefit was similar to completing an additional year of schooling.
"Regular physical activity has been linked to improved mental function, psychological well-being and energy levels, all of which can result in increased productivity and translating into higher earnings," the study concluded.
Reason 2. You'll pay less for insurance.
It's pretty easy to understand why health and life insurance companies charge higher premiums for unhealthy people. Having more health problems or dying younger is going to cost insurers money.
If you're obese, have high blood pressure, high cholesterol or any other poor health indicators, you could face higher premiums.
It can make a big difference if you're a smoker.
Most health insurers levy hefty surcharges on those who light up. How much extra depends on how many employees are under the policy. But if you're buying your own policy on the open market, it can cost you big time.
Starting in 2014, under the Affordable Care Act, employers will be able to assess a health insurance surcharge of up to 50% against employees who smoke.
Some companies used to use a carrot-and-stick approach to encourage workers to kick the habit or lose weight, but more are now instituting penalties.
Companies Promote Health
|Reward or Penalty||Company participation|
|Offer financial rewards for participating in health programs||61%|
|Penalize employees who don't complete health program requirements||20%|
|Reward or penalize based on whether employee smokes||35%|
|Reward or penalize based on weight control or target cholesterol levels||10%|
A 2012 survey from Towers Watson and the National Business Group on Health found that 20% of large and midsize companies penalized employees who failed to participate in health management programs by increasing premiums or deductibles.
Some 21% of the companies surveyed that didn’t have penalties planned to add them in 2013.
And more than a third of companies penalize employees who use tobacco (or reward those who don’t), the survey found.
When it comes to life insurance, being a smoker almost guarantees you'll pay double that of a nonsmoker. It varies by company, but some charge smokers four times higher premiums.
And that's if the company will insure you.
On average, nonsmokers live 10 years longer than smokers, so the insurance company knows they're going to have to pay out sooner for customers who smoke.
A 30-year-old relatively healthy person could expect to pay about $200 per year for a $250,000, 20-year term insurance policy. For a smoker, it could be $500 or more.
Life insurers also will use your body mass index, blood pressure, cholesterol and other readings to determine your premium.
If you're thinking about obtaining life insurance in the next year, you could save a lot of money by quitting smoking, losing weight and improving your health.
Reason 3. You'll save on — or at least delay — medical costs.
Healthier people actually have higher lifelong medical costs than unhealthy people.
That's because healthier people live longer.
But you can increase the odds you'll delay the expense by living a healthy lifestyle.
It's one thing to start developing heart problems or diabetes when you're in your 70s. It's a totally different thing to start having those problems when you're in your 40s.
The American Diabetes Association reports the typical monthly cost to treat diabetes runs from $350 to $900 for someone who does not have insurance.
When you start developing problems earlier in life, it can impact your ability to work and take a toll on your income.
Mounting bills and insurance deductibles also can have a cumulative negative effect on your finances.
Reason 4. Eliminating bad habits will save you money.
If you're a smoker, quitting is one of the biggest positive financial moves you could ever make. It could literally save you a fortune over the course of your life.
Consider that your habit costs you $5 per day. That's $150 per month, or $1,850 per year.
Not including medical costs, elevated insurance premiums and all the other bad things that come along with smoking, that's a whopping $18,500 you'll spend in 10 years on cigarettes alone.
Maintain a 30-year habit, assuming you even live that long, and that's more than $54,000 you'll have spent on cigarettes. And that doesn't even account for inflation and the rising costs of smokes.
But the opportunity costs are bigger. Let's assume you quit smoking and start saving that $150 per month.
Then let's assume you invest it and can earn a 5% return. In 10 years, you'll have more than $27,000, and in 30 years, you'll have more than $137,000.
It's a no-brainer. If you don't want to do it for your health, then do it for your bottom line.