How Much do Americans Spend on Vices?

By Lindsay Frankel
Inside Subprime: May 6, 2020

Vices are behaviors that negatively impact our physical, mental, or financial health. Many adults turn to vices like lottery tickets and gambling in hopes that their luck will turn around, while others turn to cigarettes or alcohol to cope with the harsh realities of their lives. 

Of course, most vices are fine in moderation. Having a glass of wine now and then isn’t going to kill you, and purchasing a lottery ticket here and there won’t bankrupt you. But when these vices become daily habits, they can add up to high costs and a lot of financial stress, especially for low-income earners. 

Some might even consider impulse spending itself, whether that’s splurging on gourmet coffee or buying clothes you don’t need online, to be a vice that negatively impacts the financial status of the average American. When you’re making small, unnecessary purchases on a regular basis, it can be hard to see the big picture with regards to how it will impact your finances. Let’s take a closer look at the average American’s most unhealthy spending choices. 

Cigarettes and Smoking Products

Of all the bad habits that put a strain on your income, smoking is the most harmful to your health. The lifespan of a smoker is at least ten years shorter than a nonsmoker, according to the Center for Disease Control. Yet during 2017, 249 billion cigarettes were sold. According to the Bureau of Labor Statistics, the average American spends $332 annually on tobacco and smoking products; that number appears low because most people are nonsmokers. With a pack of cigarettes ranging in cost from $4.62 to $10.67, a pack-a-day smoker could end up spending anywhere from $1,686 to $3,895 per year on the habit. E-cigarette use has also increased in popularity, growing into a $2.5 billion industry. 

Cigarette smoking is more common in low-income communities. 21.3 percent of adults with less than $35,000 in annual household income smoke, as opposed to only 7.3 percent of adults from six-figure households. And low-income adults are devoting a greater percentage of their income to smoking than other groups. 

Under $30,000$30,000 to $49,999$50,000 to $79,999$80,000 and above
% of income spent on smoking13%6%4%1%

Lottery Tickets and Gambling

About half of adults said they bought a lottery ticket in the last year, according to a 2016 Gallup poll. Lower-income adults were actually less likely to buy lottery tickets than higher-income earners, but another study found that of those who play lotto, low-income adults are putting a greater percentage of their income towards the expense. 

Under $30,000$30,000 to $49,999$50,000 to $79,999$80,000 and above
% of income spent on lottery tickets13%3%1%1%

It’s concerning that low-income adults are using income needed for necessary expenses to gamble. The odds of winning at Mega Millions are just 1 in 302.6 million. Yet 39 percent of Americans view potential jackpot winnings as a retirement plan. The average American spends $834 per year on lottery tickets. If a person were to contribute that amount to a 401(k) plan each year starting at age 18, they would have built a nest egg of over $200,000 by retirement age. 

Alcohol

Excessive drinking, which the CDC defines as eight or more drinks per week for women and 15 or more drinks per week for men, can lead to serious health problems. It also leads to excessive spending, especially if you’re buying drinks while dining out. The average American spends $558 per year on alcoholic beverages. And low-income adults are devoting an especially high percentage of their income to booze. 

Under $30,000$30,000 to $49,999$50,000 to $79,999$80,000 and above
% of income spent on alcohol11%7%3%1%

Impulse Spending

Whether it’s grabbing candy at the register or splurging on a new pair of shoes you just “have to” have, unnecessary spending adds up and can cause financial hardship, especially among low-income groups. According to a study of 2,000 Americans, adults make an average of 156 impulse purchases every year, spending a total of $324,000 on nonessential goods over the course of a lifetime. About one in five purchases are impulse buys. 

Retailers, whether online or in-store, target impulse buyers with sales techniques, such as offering deals that incentivize customers to buy more than they need. Consumers can turn the tables by taking advantage of discounts on items they are going to need in the long run, while refusing to be tempted by nonessential items. It’s okay to stock up on paper towels while they’re discounted, for example, but buying an item of clothing just because it’s on sale will cut into your budget for necessary expenses. 

Budgeting and Cost-Cutting

It’s important to track your spending on vices so you understand how it impacts your budget. If you’re going to spend money on alcohol, for example, you’ll need to allocate some of your income towards the expense every month. That may mean cutting back on other discretionary spending, such as dining out. Budgeting is the best way to ensure you don’t overspend, and it may even help you cut back on some of your unhealthy habits. 

If you’re a low-income earner living paycheck to paycheck and struggling to build savings, cutting your spending on vices could help you get back on track financially. While easier said than done, kicking bad spending habits is an important step towards financial security.

For more information on the middle income consumer, subprime loans and payday loans, see our city and state financial guides including states and cities like California, Texas, Illinois and more.