Today, I want you to take out a pen and paper.
If you’re still engaging in alcohol use, I’m going to show you an easy way to calculate precisely how much alcohol will cost you over the next 20 years. And if you’ve stopped drinking, you will find out exactly how much money you can expect this decision to save you.
I can guarantee you that watching this video will be one of the best financial decisions you have ever made.
Now without any delay, let’s get straight into it.
Costs to the Individual
When we talk about the cost of drinking to an individual, we refer to two things: the direct cost of purchasing alcohol and the indirect cost of lost income due to poor performance at work, lost hours, missed promotions, and so on.
You add up these two financial effects of alcohol and get your total financial burden. How much will drinking cost you in your lifetime? We’ll look at the direct costs first.
Let’s say you drink one bottle of wine a day. At $14 for decent quality wine, you’ll be spending $420 a month and $5,040 in a year.
Over 20 years that works out to $100,800 at today’s prices. And that doesn’t include the potential interest. Assuming you set that money aside every month at a closed bank account at a very modest interest rate of 2%, you would be at $123,577 by the end of the 20 years. That’s a pretty massive amount, equivalent to a couple of years’ earnings for most people.
Obviously, if we change any of these parameters just a bit, like the price of the wine or the daily consumption, we get quite different results. But the example gives you a general ballpark figure.
And you can expect similar results for most other kinds of alcohol; a beer addiction will work out a bit less, and hard spirits probably a little more.
Now, as I mentioned, this is just the direct cost, the cash that comes directly out of your pocket to purchase the booze to feed your alcohol problem.
To that, you have to add all the lost income due to drinking. All the extra money that you would have made had you not drunk.
Now, this is trickier to quantify and calculate and will be very individualized for each person.
So what I can do is tell you what this indirect cost looks like and what it’s composed of. And you can apply this framework to your circumstances to arrive at a reasonable estimate.
Poor work performance has the following components:
- Alcohol-related absenteeism. Pretty self-explanatory.
- Alcohol-related presenteeism, which is when you show up to work but would have done better to stay at home, either because you’re hungover or still drunk.
- General quality and productivity at the workplace
Depending on your line of work and how your earnings are determined, you will have to sit down and do your best assessment to evaluate the cumulative costs.
If you work a salaried job, the cost of a drinking problem will probably be in the form of lost hours, lost bonuses, and being skipped for promotion or losing out on the opportunity to progress to a larger company.
If you’re self-employed, the hit to your earnings will probably be easier to measure. If you want to be objective, you can have a decent idea of how much work per month your alcohol addiction is costing you, how many clients you are losing, and so on.
Now, regardless of if you’re self-employed or work for someone else, at the extreme, heavy drinking can cause a complete loss of income and savings. I am talking about losing absolutely everything, including your house and your ability to generate any income.
So calculate the direct costs, depending on what you like to drink and how much, and to get an even better picture, calculate the total expenditures with interest.
You don’t have to worry about compounding interest formulas, algebra, etc. I’ve linked to a free website where you plug in the monthly amount and interest rate, and it automatically calculates the total amount. Then calculate the indirect costs, given your best, most objective estimates.
Those of you who have stopped drinking should still do this exercise. So calculate your likely direct and indirect issues if you had not stopped drinking.
So do the exercise and write down the grand total to get the total amount of money you waste on alcohol one way or another. It’s one thing to hear the ballpark figure and another to do the calculations yourself and have the number in black and white.
Costs on Society and Economy
So now that you know how much drinking alcohol costs you, it’s helpful to open the lens and zoom out a bit to see the bigger picture.
How much does drinking alcohol cost the entire economy, and how does this translate to the average taxpayer?
The typical figure you’ll see in textbooks is $223 billion. That is the direct and indirect cost of alcohol consumption and alcohol problems for the entire economy and costs from a widely cited 2011 study.
On a per capita basis, this translates to $746 per person. This is money that every American taxpayer will pay, one way or another, whether they drink or not.
So let’s see how this figure breaks down.
You have three major categories of costs: health care, lost productivity, and other effects.
Now, believe it or not, healthcare costs only make up $24.5 out of the $223 billion.
The major costs here are specialty care for alcohol addiction treatment, hospital bills, and, tragically, fetal alcohol syndrome. This syndrome touches every aspect of society and the economy, so we will see it in the other two categories as well.
The second category, accounting for $161 billion, relates to lost productivity.
The two major contributors to this category are impaired productivity at $74 billion and increased mortality at $65 billion.
You see, when you die prematurely, it’s not just a blow to your family and loved ones. All the years of schooling and lifetime education that the taxpayer and your employer paid for are also lost. Your replacement needs to be retrained and learn the job from scratch. And this costs a ton of money.
When you consider that alcohol abuse kills an estimated 95 thousand Americans a year, you can see the magnitude of the problem for the economy as a whole.
Lastly, there is a miscellaneous category of “other effects.” So all the other shit that drinking somehow or another brings about is not related to healthcare or work.
This category amounts to $37 billion. The two major components are criminal justice costs at $20 billion, and motor vehicle crashes at $13 billion. Damages from fire amount to another $2 billion.
Let me know if you can think of a more senseless, stupid waste of money than drinking: hundreds of thousands in lost income for each drinker and hundreds of billions for the economy.
I wish I could give you the classic line about lighting your money on fire, but unfortunately, I can’t. Because you can light $123 thousand on fire, and your liver will walk away scott-free.
But if you drink your way through that money instead, your liver will have to do all the dirty work of breaking down and getting rid of the poison. That’s another hidden alcohol tax we didn’t even touch here.