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Health Creates Wealth

For years I've encouraged people to work out for some very obvious reasons. To recover from injuries, remain healthy and active as they age, and look more attractive for potential partners.

It now appears like there's a rather significant monetary reason to be fit. Getting in shape can help your bottom and your bottom line!

The RAND Corporation released a report by senior RAND economist James P. Smith called "Healthy Bodies and Thick Wallets: The Dual Relation Between Health and Economic Status." In that report, Smith establishes the link between economic status and health.

Looking at ten years of data (from 1984 to 1994), Smith showed that respondents who reported excellent health in 1984 had 74% MORE WEALTH at the end of the study than those who described their health as fair or poor.

That's a somewhat staggering statistic. Let it sink in for a minute.

Individuals whose health improved or remained at high levels for the ten years studied continued to accumulate wealth. Those whose health declined saw their wealth go down as well. Smith pointed out that, "These differentials rival in size the wealth and income differences by schooling, a subject receiving far more attention."

How did that break down in dollars and cents? A cross-section of healthy 35-44 year-olds nearly doubled their household wealth to $194,000. (Remember, those are 1994 dollars!) Those who listed themselves in poor health at the start of the study saw their wealth grow only $9,000. And those whose health declined during the study lost money.

There are some rather obvious and tangible reasons for some of this.

  • People who work out and watch what they eat are less likely to develop asthma, cancer, diabetes, high blood pressure or suffer from a stroke. Any of these illnesses can cost hundreds or thousands every year in out of pocket expenses and missed work.

  • Exercise is a great tension reducer. When you exercise, your body releases endorphins, which helps shut down your stress response. People who work out tend to be more relaxed and can anticipate, rather than react to problems that may arise.

  • If you're overweight, smoke, or a combination of the two, health and life insurance companies charge 20 to 400% more for your policy.

  • Smokers who inhale just one packet of cigarettes per day, at an average cost of $3.26 per pack, will spend at least $1,186.64 per year on the habit.

  • Because of rising health insurance rates, some companies will no longer employ people who smoke, even if they just smoke at home! Scotts Miracle-Gro (with over 6,000 employees) announced in 2005 that workers must quit smoking by October of 2006 or lose their jobs. If they can enforce that rule, it'll be interesting to see what other health restrictions companies will put on employees.

  • There are additional penalties if you're overweight and you get sick. Depending on how overweight you are, you can expect to pay 10 to 36% more each year on hospital stays and ambulances.

Then there are the indirect consequences of being overweight.

Doctors William Ford and Charles Baum, economics and finance professors at Middle Tennessee State University, co-authored a study called "The Wage Effects of Obesity: A Longitudinal Study." published in 2004. In that study, they found that overweight men earn an average of 3.4% less than their fit counterparts.

Women face an even greater wage penalty. An overweight woman earns on average 6.3% less than co-workers.

That disparity exists even when all other things (such as educational background, work experience and socio-economic characteristics) are the same.

Add all those factors together and the financial argument becomes rather compelling. Getting in shape can help you increase your wealth by tens, possibly even hundreds of thousands of dollars over a lifetime. Can you afford to stay out of shape?

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beginning any diet or exercise program.