Did you know that more than 76% of commuters drive to work ALONE? If you are one of those 76% then this post is for you. If your primary mode of transportation is a car, have you considered how it aligns with your overall financial goals? Let’s take a peek under the hood:)
In my last post “Getting Around: Work, Food & Fun” , I shared that the average household spends close to 16% of their income on transportation. That means some households are higher, while others are lower than 16%. Have you done the math for yourself? Let’s do it:
- Car loan payment each month
- Insurance payment each month
- Annual title & taxes (divide by 12 for monthly amount)
- Average gas expenditures each month
- Average oil & maintenance expenditures over last 12 months (divide by 12 for monthly amount)
- Toll charges, Car washes, Detailing, Supplies (calculate monthly average)
Add up all of the monthly costs associated with owning and maintaining your car(s). Next, divide that monthly figure by your monthly income. For example, if your total monthly car costs are $600 and your monthly income (after taxes & deductions) is $2,600, then $600/$2600 = 23%. That means your transportation expenditures are using up almost one-fourth of your net income. Is that good? Is that bad? It depends.
It depends 100% on what YOU want to accomplish at this point in your life. You have a fixed amount of income to allocate across different priorities. Financial Wellness is all about allocating your resources in the most optimal way to accomplish what matters most to YOU. What is most important to you? Start there.
Remember that all of the costs associated with owning and maintaining a car can be controlled – by YOU. Here are some of the most important factors you can control:
- State/County – impacts insurance rates, title and registration, and weather conditions
- Credit Score – impacts both insurance rates and loan interest rate
- Debt-to-Income – impacts total loan amount you qualify for
- Gas/ Wear & Tear – distance to work, driving habits and quality of maintenance
- Loan Payment – depends on down-payment, interest rate, year, make & model
- Make/Model – impacts cost of insurance, repairs and regular maintenance, and long term resale value
Seek to be intentional about what vehicle you choose to invest in and why. Stay focused on your big goals. Be willing to allocate only what is necessary, rather than as much as you can “afford”. Don’t let emotions or sales people talk you into something that will keep you from reaching your goals. Keep the first things first. Remind yourself every day where you are headed, what you want to accomplish and that you are worth it!