It’s no secret that long commutes suck, especially in the car. Perhaps the worst aspect is that it’s a waste of your free time and a waste of your money. But commuting farther also increases your carbon footprint and can even take a toll on your health – personally I find myself mentally exhausted on those days where I spend an hour and a half sitting in traffic to get home.
My current commute is over 50 miles each way. My morning drive takes just under an hour, but the ride home is typically an hour and 15 minutes. This frequently stretches to as long as an hour and a half during the summer months. Annually I am racking up a minimum of 26,000 miles and spending over 500 hours in my car just to get myself to work. That’s insanity.
Fortunately my days of long commuting are numbered. I just accepted an offer for a job that is 12 miles away from home and will be about a half hour drive each way. This new job will save me about 20,000 miles of driving and allow me to reclaim over 300 hours of my personal time each year. I know that this new commute will save me a fair amount of money, but being a personal finance nerd, I wanted to figure out exactly how much.
In my budget breakdown from the first half of 2019, I discovered that my car expenses comprise five categories: car payment, gas, insurance, tolls, and maintenance. My insurance payment won’t change based on mileage, so we have four other categories to look at.
- Depreciation: I think this is a better variable to look at than a car payment for this exercise since car payments are fixed for a certain number of months and then drop to zero. Depreciation is essentially a way to look at what you’re spending simply for the privilege of owning the vehicle. I do about 4,000 miles of “other” driving per year, bringing my new annual total to 10k miles, down from 30k miles. I’ll assume that a car has a useable lifespan of 250k miles or 12 years (typical for our salty winters), at which point in time I will say the car is worth $0 for simplicity. My car cost me $22,000 out the door new.
Although cars depreciate exponentially, I’m going to use a straight line depreciation here. Since I like to drive cars until the wheels fall off I don’t care about the resale value after a few years, and it simplifies the math. A straight line depreciation is calculated by dividing the cost of an asset (minus its resale value) over the lifespan of the asset.
My current commute will have me hitting 250k miles in 8.33 years, or 100 months. If we depreciate the original $22k cost of the car linearly over those 100 months, it’s an average monthly cost of $220. My new commute will kill my cars from rust long before mileage. A straight line deprecation of the car over 12 years leads to an average monthly cost of $152, a monthly savings of $68. - Tolls: This one is easy. My new route will no longer take me through a toll road, instantly saving me $58 per month with no effort.
- Gas: Another pretty simple one. I’m currently spending $145 per month on gasoline. Since my annual mileage will be reduced by 2/3rds (10k versus 30k miles), I will save $96/month on gas.
- Maintenance: According to several sources the average annual maintenance cost of a Toyota Prius is $450. I’ll go with that number, since the average driver puts about 13,000 miles per year on their vehicle which is close enough to my new commute. This comes out to $37 per month, a monthly savings of $20 over what I am spending now.
Adding all of that up yields a total monthly savings of $242. Of that amount, $174 per month (tolls, gas, and maintenance) will be realized immediately to the effect of a respectable 5.5% reduction in expenses. The savings on vehicle depreciation – having to purchase a new car less frequently – will not change my current monthly budget but will have an impact on my spending over the long-term.
Now that’s a healthy boost to my savings rate! Check out what happens if I save and invest that $242 per month towards my financial independence nest egg over the remainder of my working career, until I expect to retire at 40:
Awesome! If I work until 40, the compounded savings from reducing my commute will add nearly $60,000 to my portfolio over that period. That money could be used to either reach my $1 million net worth goal sooner and allow me to retire earlier, or to keep on track to retire at 40 but reduce my withdrawal rate for added safety.
I’m looking forward to spending less time on the road, reducing my carbon footprint, and getting an effort-free boost to my savings once I start my new position. Just waiting on a starting date after accepting the formal offer!