Reach FI Faster by Cutting Your Transportation Expenses
When you cut your expenses, you are accelerating your path to financial independence. Choosing to focus on your five major expenses can allow to dramatically cut your overall spending. One of those five major expenses is transportation. We will dive into different ways to slash your transportation spending below.
Transportation costs can add up
According to the Bureau of Labor Statistics, the average American household spends $9,761 on transportation each year. Unfortunately, that figure can make a major dent in any budget. When you consider the costs of buying and maintaining a car, spending almost $10,000 a year to maintain your vehicle may not seem outlandish.
A few expenses that are associated with your transportation costs include:
- Buying the car. The upfront cost of purchasing a car can be overwhelming if you don’t buy intentionally.
- Financing the car. If you can’t afford to buy the car outright, then financing can be very expensive.
- Fuel costs. If you plan on driving your car anywhere, then you’ll need to factor in fuel costs.
- Repairs. In order to keep your car running, you’ll need to keep up with any repairs. Even routine maintenance can add up quickly.
- Insurance. Many states require a minimum level of insurance in order to stay on the road. Generally, this expense alone can be hundreds of dollars each year.
Depending on the type of vehicle you drive and how often you drive it, the amount you are spending on your transportation might be even higher.
How to eliminate transportation expenses
Luckily, it can be fairly easy to cut down on your transportation costs. However, it is important to get creative. Don’t rule anything out without thinking through the options. You’ll need to consider a variety of tricks to find the best methods for your own life. Although not every tactic will work for everyone, a combination of these tactics could work for you. Here are some of the best ways to dramatically reduce your transportation costs.
Although walking may be a slower method of transportation, it is very economical. Plus, it is good for your health. Think about the possibility of walking to work or to run your normal errands.
Ride your bike
Biking could be your commuting solution if you live close enough to your office. With a bike, you’ll be able to make your commute and work out at the same time. Plus, you’ll be saving on fuel costs!
Overall, a bike could be a great option for your transportation needs. If you decide to use a bike for commuting, I recommend buying a sturdy basket to help carry your belongings.
Move closer to work
If you would love to walk or bike to work but live too far away, then consider moving closer. Weight the costs of moving closer to the office against the transportation costs of driving to work each day. In some cases, it might make sense to move closer. Especially when you consider the time you would save each day.
If walking or biking is out of the question, then consider carpooling. Find a few coworkers that live in your direction and get started. Not only can you share on fuel costs, but you also gain new friends in the process.
Use public transportation
Although this is a less useful option in some parts of the country, public transportation can be excellent in some cities. Check out the bus and metro routes in your area to find the best option for you.
Buy cars used
In just one month after purchasing your car, it will lose 10% of its value. In the first year of a new car’s life, it will depreciate by more than 20% in value. Unfortunately, when you buy a new car, your balance sheet will reflect that sharp drop in value.
The best way to avoid these depreciation costs is to buy a used car. You do not need to buy a 10-year-old car in order to reap the value benefits of buying a used car. Even if you buy a car that is one year old, you’ll avoid a 20% drop in value. If you buy used cars over the course of your lifetime, you’ll be able to save a significant amount of money.
Consider becoming a one-car (or no car) household
Are there two cars sitting in your driveway right now? What if you sold one of those cars? Or both of those cars? You’d be able to eliminate the costs of maintaining your cars immediately. Plus, you’d have any money from the sale in your bank account.
Before you eliminate this idea outright, think about what your life would look like without a car. Although it might require more creativity, you might be surprised how easily you could make the transition.
Investigate your auto insurance
Auto insurance can cost you hundreds, or thousands, of dollars each year. The key to reducing this cost is to get multiple quotes for your auto insurance. You should reassess your auto insurance needs on a regular basis. You may find that you need to switch insurance companies or drop comprehensive coverage at some point.
DIY car repairs
If you are mechanically inclined, then you can save big on car repairs. Although it may require some time, you could save hundreds of dollars in labor each year.
If you are unable to repair your own car, then you need to find a fair mechanic. Ask your family and friends for recommendations to find the best mechanic in your area.
How I’ve cut my transportation costs
Personally, I’ve been able to cut my transportation costs dramatically. In fact, I’m currently driving a Mercedes for almost free.
The bottom line
If you can eliminate your transportation costs, then you can put that money you save towards your FI goals. It could help you move down the path to FI at an accelerated pace. After you tackle your transportation costs, then you should consider slashing other expenses such as your food or housing. Check out my other posts in this series to get started!