One of the most expensive line items in a personal budget tends to be transportation cost. Between car payments and the fluctuating price of fuel, there is always something being spent on our vehicles. Unless you live in a downtown apartment and can walk to work, driving has become a daily necessity to survive in this trip we call life.
When I started being intentional about this whole personal finance thing I didn’t realize how much I spent on using my vehicles every day. After collecting data for the last year . . . here are 4 tips I have either used, or have considered doing to reduce transportation cost.
Big picture I spent a total of $5,314.26 on both vehicles so far over the year. With my base being $50,000, that’s almost 11% of my salary. If you’re looking at take home pay minus some other expenses, it’s almost 16%.
EPHIN EPH. I’m a base level analyst for corporate finance, and anything more than 10% of the balance sheet is considered “Operationally Significant.” And I don’t even have a car note . . .
1. Knowing Exactly How Much You Spend on Transportation.
Getting caught up in car payments and monthly insurance premiums, we don’t tally everything up. Using a personal budgeting app allowed me to measure exactly how much I was spending to use my truck and motorcycle over the year.
I also created this transportation costs calculator to find out my CPM (costs per mile), and what I should budget per month or week. After entering all figures in the calculator, and wiggling magic fingers at the screen, it produced the following:
If you want a copy of our transportation calculator, click here.
Crazy perspective to look at your cash costs per day for transportation. Just thinking it costs me almost $10 a day to commute back and forth to work in my truck is nuts! Just think, if it costs $.32 a mile, and the coffee shop is 4 miles away . . . that trip now costs $6.46 instead of $5.18 for a drink.
Or another example. That two hour road trip to visit your friend on a whim doesn’t just cost $30 in gas. At 240 miles and your CPM is $.22 (cash) and $.32 (total), that’s $53 in cash costs, and $77 in total costs including depreciation!
2. Batch Processing Errands.
Cranking up the car and jolting off is just too easy. Many times we don’t really think about the time element, or cost element, of running errands. Running to the grocery store today, the bank tomorrow, Office Depot at lunch time . . . these sporadic miles add up. Batch processing errands helps efficiency with your time and transportation costs.
Example: Down the street from my home there is a shopping center that has a gas station, grocery store, and my local coffee shop. So in one shot I can fuel up, hit the coffee shop to type up an article, and pick up my groceries. This saves dollars in CPM, and time when these trips are planned before hand. Performing these trips separately can add another 30-45 minutes per week driving, and $3-$5 in transportation costs. May not seem like a lot, but over a year can add up.
3. Budget and Only Buy the Fuel You Need.
This may be a weird one, but hear me out.
This can certainly apply to fill ups at the pump too. When the tank is always full, it’s easy to justify that small impromptu weekend trip, or driving across town to get a drink with friends. However planning out your fuel costs for the week can be a big line item on your budget.
This is certainly a little easier to perform with a cash envelop system, but figure out how much gas you’ll need for the week to commute to work, or going out one night with friends, AND ONLY BUY THAT MUCH GAS. Again, it’s a little weird, but when there is no money for gas, it’s that much harder to take it from something else.
I use a separate account and debit card for weekly budget items, and have a certain amount direct deposited every two weeks. My resolve is whatever is in that account is all I have for gas, groceries, and entertainment for those two weeks . . . no exceptions (except for emergencies).
By doing this I’ve easily cut down my fuel costs from about $200 a month to $160, true story.
4. Don’t Buy a New Car . . . Ever. (Unless you are crazy wealthy).
It is definitely a myth that you have to have a new car for it to be reliable. In some ways I believe it can be not as reliable because of break in periods, new car maintenance schedules, potential recalls, etc.
With the average monthly car payment now being over $500 a month, it’s no wonder why so many people are living paycheck to paycheck. For the average middle class person/family in the rat race . . . it doesn’t make sense to pay a note on a depreciating item. This works against your net worth, and keeps your CPM much higher than it needs to be for the same outcome!
Using my Colorado as example as is VS if I were to buy a new one.
What could you do with an extra $12 per day? Looking at the per diem may not sound like a huge number, but re-frame it: Weekly becomes $84, monthly $365, annual it and that becomes $4,380. With this perspective, and considering you are only doing A to B transportation . . . is it worth the extra expense?
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