Getting Around: Work, Food & Fun

The average household spends close to 16% of their income on transportation. It’s the largest expenditure after housing. The average spending on gas, maintenance and repairs is over $2,000 every year. That doesn’t include loan payments, insurance, title and registration fees. Owning a car is expensive.

On the other hand, using public transportation such as bus or rail can cost significantly less. Monthly transit passes in larger metropolitan areas average between $70 – $120. That’s an annual expense of $840 – $1440. Unfortunately, mass transit is not an option for millions of commuters. Research shows that only 5% of U.S. commuters use transit to get to work. But using public transit can really eat into your valuable time.

The choices you make about how you get around every day, have a significant impact on your financial health. As you plan your activities and errands, so much comes into play. Your options are limited depending on where you choose to live. Finding a way to optimize housing and transportation takes time to work out.

Take a moment to think about where you live and why you chose that specific place. How many different options do you have to get from where you live to get to the grocery, coffee shop, library, bank, school, work or place of worship? There is a constant trade off between housing and transportation.

Here are some steps to help you think about your specific situation:

1. Do a quick brain dump – write down all the things that help you be your best self. List out the sounds, visuals, scents, weather, environment and social engagements that you want in your life.
2. Clearly define how much money you can allocate for housing and transportation (should never exceed more than 50% of your net income).
3. Once you have a total dollar amount to work with, you can begin to run different scenarios and see exactly what you can accomplish by making some changes.

Let’s say for example, you make $1,200 every other week, after taxes and other deductions. That works out to $31,200 a year or $2,600 per month. You would have a maximum of $1,300 per month to budget towards housing and transportation. By putting a limit on your fixed costs allows you to have flexibility on using your remaining income on food, health, savings and discretionary spending.

To put things in perspective, the average purchase price of a used car in the U.S. is $18,500. Assuming a loan at 6% for 60 months, that would be a monthly payment of $358. Add in car insurance at an estimated $50 per month (must maintain full coverage since there is a loan) and gas/oil/maintenance of $200 per month, brings the total monthly transportation cost to over $600 per month. That leaves $700 maximum to use for housing costs.

Depending on your response to item 1 above, you can choose to allocate more towards housing and less towards transportation. You can choose to live in the country and ride your bike to town. You can choose to live by the beach and walk everywhere. It’s all about prioritizing what matters most to you and figuring out how to make the math work.

Follow our blog as we continue the conversation around transportation and the impact it has on your financial health. Until next time, keep building a life you love.