The Impact Health has on Wealth

The Impact Health has on Wealth

July 13, 2020
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Albert Einstein is given credit for coining the phrase, “Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t pays it.” If compounding interest is the 8th wonder, compounding inches (to the waistline) must be the 9th wonder. 

I recently stepped on the scale; that was my first mistake. I realized that with little effort, I have managed to grow a couple of inches, but not in stature. As a result of this epiphany, I have been thinking more and more about my health. Being a financial nerd, I had to do some digging on the impact health has on finances. The following are a couple interesting facts I found from economic studies and medical journals.

Healthy people tend to earn more

Based on the information provided by the National Bureau of Economic Research, here are some findings (The National Bureau of Economic Research, 2017).

  • Healthy people earn 28% more than unhealthy people
  • Unhealthy people work less: 90% of healthy people participate in the labor supply compared to 70% who are unhealthy. 
  • "The median wealth of the healthy is almost twice that of the unhealthy; $230,000 for the former versus $120,000 for the latter (in 2015 dollars)"

These findings make a lot of sense. In my opinion, the cost of lost time from work due to health issues could definitely have a large financial impact. Though I see no way of measuring it, I'm sure lost productivity on the job due to health issues could also account for loss of income.

There can be lifetime cost savings in losing weight

In an article published by the John Hopkins Bloomberg School of Public health, it suggests the following (Johns Hopkins Bloomberg School of Public Health, 2017).

  • A 20-year-old who goes from obese to overweight would save an average of $17,655 in direct medical costs and productivity losses in a lifetime. 
  • This amount jumps to $36,278 in lifetime savings for a 50-year-old under the same circumstances. 

One thing that's interesting about this is it goes through the savings of going from obese to overweight. I would be curious to see how the numbers would change if it went from obese to average weight. From a retirement planning perspective, these costs translate into the need for more retirement savings to account for the additional expenses.

Exercise can help lower healthcare costs

In the Journal of the American Heart Association, we see the effects of optimal exercise routines on healthcare costs (Journal of the American Heart Association, 2016).

  • The average healthcare expenditure of those with optimal physical activity is $2,328 compared to $5,475 for those without optimal physical activity per year per capita. 

On those days when you find yourself having a hard time getting motivated to work out, perhaps you can remind yourself that this may help save on medical costs in the future. 

Conclusion

There is plenty of data to suggest there is a financial incentive to strive for a healthy lifestyle. Keep in mind that there are health-related conditions that are out of our control. Also, don't confuse health with being skinny. Everyone should be proud of who they are in their own skin. That being said, there is a strong argument for us all to strive for a healthy lifestyle. By improving your health, you can improve your wealth.

Bibliography

Johns Hopkins Bloomberg School of Public Health. (2017, September 26). Weight Loss For Adults at Any Age Leads to Cost Savings, Study Suggests. Retrieved from jhsph.edu: https://www.jhsph.edu/news/news-releases/2017/weight-loss-for-adults-at-any-age-leads-to-cost--savings-study-suggests.html#:~:text=If%20the%20same%20person%20were,save%20an%20average%20of%20%2418%2C262.

Journal of the American Heart Association. (2016, September 7). Economic Impact of Moderateā€Vigorous Physical Activity Among Those With and Without Established Cardiovascular Disease: 2012 Medical Expenditure Panel Survey. Retrieved from ahajournals.org: https://www.ahajournals.org/doi/full/10.1161/JAHA.116.003614

The National Bureau of Economic Research. (2017, October). https://www.nber.org/papers/w23963. Retrieved from nber.org: https://www.nber.org/papers/w23963.pdf