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Background: Healthcare expenditures exacerbate poverty, with about 39 million people falling into poverty every year because of such expenditures. Tobacco and alcohol consumption in addition to harmful health impact have economic consequences at household level. Aim: To evaluate healthcare, alcohol, and tobacco expenditures among households in rural Puducherry and their impact on household expenditure patterns. Materials and Methods: A community-based cross-sectional analytical study was conducted in selected villages within 5 km of a medical college hospital in Puducherry from September 2016 to June 2017. Sociodemographic details and various household expenditures were obtained from 817 households with 3459 individuals. Data were analyzed using STATA (v14). Results: Higher mean percentage of health expenditure was found among households with low socioeconomic status [17.7 (95% confidence interval (CI): 14–21.3)] and no health insurance schemes [13.4 (95% CI: 11.1–15.7)]. Households with low socioeconomic status [13.1 (95% CI: 7.5–18.7)] had higher tobacco–alcohol expenditure. Increased health expenditure among households was positively correlated with loan (r s = 0.48). Increased alcohol–tobacco expenditure among households was negatively correlated with food (r s = −0.52) and education (r s = −0.70) expenditure. Conclusion: Healthcare and alcohol–tobacco expenditure individually contributed to one-tenth of the household budget. Spending on healthcare, alcohol, and tobacco created significant negative influence on investment in human capital development.