Consumer IQ

Lose Weight, Get Into Shape and… Earn More?

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With the start of the New Year, many Americans often make a resolution to lose weight, quit smoking or get in shape.

The benefits of improving your health can be seen not just in your physical appearance and well-being, but in your bank account, too.

Whether it’s earning more at work due to less sick time and more confidence, or saving on your health and life insurance premiums, what’s good for your body can also be good for your finances.

Be happier and more productive

A number of studies have shown that people who exercise regularly tend to have higher levels of happiness. Those elevated levels of happiness and confidence can also translate into higher productivity and better work performance.

According to the results of The Effect of Exercise on Earnings, a 2011 study from Cleveland State University, regular exercise can have a moderate impact on income and earnings.

Regular physical activity has been linked to improved mental function, psychological well-being and higher energy levels, all of which can translate into increased productivity and higher earnings.

“The estimates show about a 6% earnings boost for men and roughly a 10% earnings boost for women. For some who exercise more, the reward can be more,” says study author and Cleveland State University Associate Professor of Economics Vasilios Kosteas, Ph.D.

Kosteas says because exercising generally improves a person’s health, it may also mean fewer sick days and lost time.

While it’s hard to infer exactly what contributes to higher earnings, Kosteas says there’s a possibility that people who have the discipline to stick to an exercise routine may already have characteristics that lead to greater performance at work.

He also says other medical and scientific literature has shown there is a direct link between mood and the release of endorphins.

“We know that people feel better when they’re in better shape. There’s a sense of accomplishment and some people have said when they feel accomplished in one area of their life, it may help them achieve success in other areas,” says Kosteas. 

Make healthy choices

Jason Dietch, a chiropractor, wellness expert and co-author of Discover Wellness: How Staying Healthy Can Make You Rich, says staying healthy can have a profound impact on your finances.

It can sometimes be hard to quantify those savings, but Dietch says there is solid evidence to show that being in poor health can certainly lead to financial hardship. A wide range of studies say that between 70% and 90% of all healthcare costs are related to lifestyle and “not a range of genetic disorders or diseases.”

“In most cases, but not always, our lifestyle and the choices we make day in and day out about exercise and the food we eat, dictate our health and our healthcare costs,” says Dietch.

A study in the January 2012 edition of the Journal of Health Economics analyzed the data of more than 20,000 patients and found that obese men had an additional $1,152 per year in medical spending for hospitalization and prescription drugs. For women, the number is even bigger at $3,613 per year.

According to the Insurance Information Institute, consumers who lose a significant amount of weight could save up to 40% on their health insurance premiums.

Kick bad habits

Smoking is another controllable factor that can have a profound impact on your finances. Quitting smoking can save over $2,000 per year alone in cigarette costs, not to mention thousands more in medical costs and higher insurance premiums.

Smokers are hit with higher premiums for not just health insurance and life insurance but often homeowners insurance as well.

According to the Oklahoma Insurance Department, an average smoker in that state could end up paying an additional $3,200 in higher health, life and home coverage, compared to a non-smoker.

The Centers for Disease Control and Prevention finds that tobacco use costs the U.S. economy nearly $200 billion every year in lost productivity and medical costs.

Even under the new health care reform laws, which go into effect in 2014, employers can start assessing a health insurance surcharge of up to 50 percent for employees who smoke.

Because studies have shown that smokers die an average of ten years earlier than non-smokers, life insurance companies can add significant surcharges to policy premiums for smokers.

Steven Spiro, owner of The Excelsior Group insurance agency in Valley Stream, N.Y., says that with all things equal, a smoker typically pays 30% to 50% more for life insurance than a non-smoker.

Watch the savings add up

Dietch says staying healthy may also let you safely carry a high deductible health insurance policy. When combined with a health savings account, it can let you bank the difference in premiums on a pre-tax basis and let those dollars grow and accumulate interest.

Eventually, it will give you a large pool of funds to help cover medical expenses when they do start to add up later in life.

“If you start at a young age and start putting in the maximum amount, you can accumulate a lot of money in there. You’ll use it at some point in your life [for medical expenses] but it can help you come out ahead financially,” says Dietch.

Craig Guillot is a business and personal finance writer from New Orleans. He covers insurance, investing, real estate, retirement and debt. His work has appeared in such publications and web sites as Entrepreneur, CNNMoney.com, CNBC.com, Bankrate.com and Investor’s Business Daily. He is the author of “Stuff About Money: No BS Financial Advice for Regular People.“