Friday, January 15, 2016

Your Three Largest Expenses - Part 2: Transportation and Your Commute

After housing, your next largest expense is transportation. Transportation costs for commuting to and from work cost thousands of dollars for most people over a career.

The cheapest way to get to work is to walk or bicycle. For most people living close to work that is a possibility. People who live in the city are the ones who can take advantage of this inexpensive way to get to your place of employment. I am sure there are also people who live in the suburbs who could walk or bicycle to work. However the majority of people who work either have to take a bus, use another form of public transportation such as a taxi or subway, or use a car.

In our early marriage years, we only had one car and I had no license. So when we lived in the city and I worked, hubby dropped me off at work on his way to his job. He went straight to college 2-4 nights a week after work. I took 2 buses from one city to another to get home at night. He traveled a bit for his job, so I took buses both ways those weeks. When we moved to the suburbs, I was offered a promotion to a different job in the same company but a different city for 12 weeks of training. I got a ride for those weeks with a neighbor. When I went back to working across the street from hubby, I found a ride on the nights that hubby had school.  After a year and a 1/2 I resigned to become a SAHM.

Finally at the age of 24, hubby taught me to drive and I got my license. But we still had one car. So hubby carpooled for the rest of his career until we reached financial independence and retired. I had a car for two weeks a month when hubby did this and I worked my schedule around his. Finally when my sons were in upper elementary grades, we bought a second car so that I could get them to activities, etc. We had a second car until we retired early.  We will be financially independent 15 years this summer and we have only had one car all of that time. Just once did we have to rent a car because we needed a second one. 

I only tell you all of this to show you that you have many options on how much you spend on transportation. Biking costs are minimal. Walking is free. Public transportation is cheaper than an automobile. 

Commuting by automobile costs thousands of dollars a year. Besides the cost of purchasing the car, filling it with gasoline, oil changes and maintenance, the wear and tear costs. This is one of the reasons that hubby car pooled for 27 years. He had a 25 mile commute one way, so he and his friend, and friends for some of the years shared the cost. They had to pay for a monthly parking permit too so they shared that. This saved us thousands of dollars over those years. Sure it was inconvenient at times for them to do this but they always worked it out. I never felt inconvienced either even when the boys were in nursery school. Four of us carpooled and I took my week monthly when I had the car. 

Even purchasing the car, you have options. You can buy a well maintained used car which is cheaper than buying a new one. You can pay cash for that car instead of getting a car loan and paying interest on that loan. Have you ever added up the interest you pay to buy a car and realize just how much more that car really cost you? You can keep your car till it dies instead of trading it in every two or three years which is the most expensive way besides leasing to own a car. 

When you buy a new car, keep it for 8-15 years. Get your money's worth out of it.  When you are purchasing the car, don't let the dealer talk you into expensive accessories that you don't really need that add many dollars to the base price of  the car. A car only needs to get you and your family from one place to another so you probably don't need to pay for a luxury car. 

We always kept our cars until they died with the exception of a Dodge (Lemon) and a Jeep that we donated to the local fire dept. with 100,000+ miles on it. It had no A/C and when we first retired we lived in a hot state for many years. Our car before the one we have now was 12 years old when we traded it because it was starting to cost more in maintenance than the car was worth. The last three cars that we have purchased we paid cash. All of the cars before those were paid off long before the loans were due because of our hatred of paying interest. When we had those car loans in our younger years, we put extra money on the principal each month to pay them off in a year or two. By paying cash, I have always been amazed at how low a price you can get the car salesman down to.  When you actually believe that they have come down as low as they will, then ask him how much lower he can go because you are paying cash. You usually will get another $1,000.+ when you tell them that.

If you can't pay cash, get the lowest interest rate or 0% rate that you can. If you have a 0% rate that is a free loan. Make darn sure though that you pay that loan off a month or two early. If you wait until the last payment and don't get the money to them on time, they will charge you interest for the entire loan. The way to get the lowest % loan is to keep an immaculate credit rating in the high 700's or 800's. If you do not have a great credit rating, you will pay a higher % not only for the loan but for your car insurance.

Whether you buy used cars or new cars, you have many choices that affect how much you pay. When you are buying keep in mind that a car is not an asset. They depreciate every year.  I personally don't like putting my money into assets that depreciate. So I will pay as little as I have to and get every dollar back out of that car by maintaining it well and keeping it for years.

Whether you bike, walk, or use an automobile, pay as little as possible for that commute and keep more money in your pocket.

Besides commuting and loan costs, there are other costs associated with your car. Things like insurance, registrations, inspections, gasoline, oil changes and maintenance. I will talk about them another day.

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