How To Save $100,000 On Your Daily Commute I Basic Capital

Personal Finance, Investing & Lifestyle » How To Save $100,000 On Your Daily Commute I Basic Capital

How To Save $100,000 On Your Daily Commute I Basic Capital

Basic-Capital – 23 October 2017

In this article, we will look at how to save $100,000 on your daily commute.

We will be looking at the incredibly high price of commuting.

The two examples we have chosen are the commuting in the US by car and commuting in the UK by train.

The examples are quite diverse, however that’s exactly the point – they show that commuting is universally expensive.

In both examples, commuters save six figure sums if they cut out the expense of commuting by cycling or walking and investing their money in an index fund instead.

Commuting In The US: Scenario One

According to a US census, over 120,000,000 Americans commute to work each year. They drive alone in their own cars while their spouses drive to work separately.

This demographic makes up a large portion of working population as well – 86% to be precise.

When you breakdown this deal however, it’s not great value. Instead it just seems ludicrously expensive.

Lets look at the numbers to see why…

The study mentioned that the average American spends 30 minute commuting to work. If they are driving at the average speed of 50mph, they drive roughly 25miles each way – 50 miles a day in total.

The average price of petrol per gallon in the states is $8.93.

If you car has a fuel efficiency of roughly 20 mpg, it would cost $8.93 to commute for an hour to work each day.

Each year, that would cost $3,032.

And after ten years, that would cost $30,362.

If you are married and your spouse drives to work, she would probably spend on average the same amount of time commuting to work – $30,362.

That would be a grand total of $60,724 spent on commuting over a ten year period.

Commuting In the US: Scenario Two

If you had cycled or walked to work instead – how much would you have saved over a ten year period?

If:
-your index fund had an average return of 7% after inflation (the historical average over 150 years)
-you held it for ten years
-you invested $505 every month (the combined savings on both cars)

You would have accumulated roughly $100,000 in ten years.


In year seven, the fund had only accumulated $64,741 in total.Three years later, that figure will have risen to roughly $100,000. This difference over a three year period illustrates the power of compound interest.

Do you think it’s still worth it?

Probably not.

Commuting in the UK: Scenario One

In our second example, we’ll look at the price of commuting in the UK. I chose the UK because its a global nation with an impressive transport infrastructure. The average commuting times in Europe were difficult to find, choosing London was
therefore a reasonable alternative.

We will focus on commuting by rail, rather than by car in this example.

A recent study in the UK shows that commuters spend on average 14% of their wages on a monthly pass. The prices in total amount to £4,644 per year.

Using the same formula as above, we can establish that commuting costs roughly £46,440 every year. If we multiply that figure by two (you and your significant other), we find that on average you are paying £92,880 every ten years.

If you had invested in an index fund, you would probably be much better off.

Commuting in the UK: Scenario Two

If this family cycled to work, or were lucky enough to walk everyday, they would be able to add £774 to an index fund every month.

In total, that’s £9,288 every year.

If:
-your index fund had an average return of 7% after inflation (the average)
-you held it for ten years
-you invested the £774 every month

The results would be staggering…

You would have accumulated £153,000, or $194,000!

Note: the calculator above only operates in dollars. This does
not affect our calculations, as we were using the values in the
calculator only.

 

Conclusion


We looked at how to save $100,000 on your daily commute by making adjustments to aggressively cut costs.

You will also have gotten healthier in return.

The article demonstrates that accumulating large quantities of money over time, when you cut spending and invest in index funds.

I would recommend you do your own calculations and would allow you to save money. You could easily find you save $100,000, or more.

I used this compounding calculator for my calculations – it’s pretty useful.

If you want to know about you can cut your costs further, click here.

Note
-I did take the price of oil over time into account

2017-11-08T17:14:46+00:00 October 21st, 2017|Thrifty|
Simple Share Buttons