Tuesday, March 16, 2010

Dissect Your Budget - Part 6 - Transportation


Tip #242 - Dissect Your Budget - Part 6 - Transportation. In this series, we are taking an in-depth look at each line item in our budget in an attempt to squeeze out some of the "fat" that is in there in order to put away more money. So far we have talked about housing, utilities, telephone/Internet/television, food, and clothing. Next on the list is transportation. To many people, this would be "automobile" but that would not be the case for everyone, so transportation covers this area more generally. This line item is a "need" in nearly everyone's budget (in the US). It is the very rare household that would not need a way to get them to their job or to the store to get groceries. Some people in NYC might get away with it - if they walk to work and to the grocery store - but even then they probably have a bike, take the subway, use a cab or need to rent a car occasionally, all of which have costs associated with them.

Depending on how fine you like to break up your budget categories, this area takes into consideration auto maintenance, gasoline to run your car, car payments, public transportation (if you use it), and car insurance. This can be a very big line item or many small ones. We will discuss them as a group today. So how can we reduce our transportation costs? If your household needs a car, the first thing would be to buy a car that is a good value. In other words, a Honda is probably a better value than a fancier Lexus. A Kia may be a better value than a Honda. Consider your car a way to get from Point A to Point B or as we used to say in college, "an AB car" - it gets us where we want to go and nothing more - no fancy features, expensive styling, or name brand status. If you need a car to drive you to your job, get one that is reliable and will last a long time, and that doesn't have extra features that you don't need. Find one that is good on gas and one that does not involve costly repairs (Saabs come to mind). All you need is a car to take you where you need to go.

When buying a car, find one that is most affordable to you. For many people this might be a used car. Some suggest buying one that is two years old when most of the depreciation has happened. If you go this route, make sure you have a good mechanic who can spot trouble. I prefer to buy new cars that aren't being sold after a year or two because something is wrong with them. If you are really low on funds, then find a solid used "beater" car. Whichever you choose, keep your car for 10 years or more. A good car with proper maintenance should last at least that long. The biggest expense is the initial expense. The longer you keep the car, in general, the less per year that the car costs you.

In addition to the car itself, there are other ways to reduce your transportation costs. Check out gasbuddy to find out the cheapest gas prices in your area. It probably doesn't make sense to go out of your way to get gas there, but you might find a cheap gas station on your everyday routes. Get the best insurance for the cheapest price. Call around for different insurance quotes. You can probably lower your insurance costs with a few phone calls. Some companies that are know to have low insurance rates are USAA, GEICO, and Erie Insurance. Or you may want to consider changing your policy - perhaps with a higher deductible. If the car is old enough and not worth much you might want to take the collision off your policy or lower the amount of it. Keep your car maintained - rotate tires, change the oil, keep the air pressure full on your tires, and do other routine maintenance to keep your repair costs down.

Use your car less. Look for alternative ways to travel - walk, ride a bike, or take public transportation, if available. Combine trips. Pick up milk on the way home from work - don't make a special trip. Carpool with friends when you go out or with co-workers when you go to the office. If you are a two-car household, consider whether you really need two cars. Maybe when your second one stops working, it will be worth it to not buy another car. All of these options may take an adjustment to your mindset and your schedule, as using methods besides solo driving takes longer and more creativity than jumping in your car and going. But all are good for the bottom line (and for the environment). They are worthy of consideration.

If you are one of those people who relies on public transportation, think creatively to bring your costs down. Most public transportation methods offer monthly or frequent-user passes. Try the bus instead of the subway if it's cheaper. Challenge yourself to walk ten blocks rather than take a cab. Bike to work. Or maybe you can chip in for gas for a co-worker who drives by your house on the way to work.

There are many ways to bring down your transportation costs. Many will take extra time or more effort or creativity. But when combined with savings on other items in your budget, it can be very worth the effort to put more money in your pocket.

In Real Life (IRL) - We are a two-car family. And I hate to admit that my husband commutes about 25 miles to work EACH WAY. Oy. In our defense, we picked our housing location because it was midway between both of our jobs. But now that I am not working, it seems silly that my husband works so far from where we live. But at this point, we love where we live, so we have to put up with the commute and the expenses that come with it. I, fortunately, drive my car very little during the day. As long as the weather is nice, we try to walk at least one way to preschool as well as to the library, piano lessons, and gymnastics at our local community center. I might put 20 miles on my car per week, if that. Because I put so few miles on my car, my husband and I have switched cars for the past year to put off buying a new car. His car is getting up there in miles, and mine was pretty low. By doing that, we have delayed making a huge purchase, and it is giving us time to save up for a new car.

When walking takes too long, we sometimes ride our bikes to do errands. We have a bike trailer for the kids that we bought for recreation purposes, but it works well for groceries, too. On the rare occasion that I go for a Mom's Night Out or when my kids go to activities, I try to carpool with other moms as often as possible. When we go downtown, we always take Metro. We have a stop that is just a mile from our home. And for nine years when I worked downtown, I always took public transportation. In fact, our company paid toward our Metro use. Combined with walking to the Metro stop, it made for a nearly free commute for me - almost unheard of. My husband has called around for the best insurance prices (he works in insurance so I leave this job up to him). And he is very strict about maintaining our cars. They are currently eight and nine years old, respectively. We hope to keep them for as long as possible.

Can we do better? Yes. We could bring those costs down more. I wish my husband would carpool with someone who lives relatively close to us. But because of office dynamics, he doesn't wish to do so. I wish we could cut out some unnecessary trips to thrift stores or grocery stores. I try to stop on the way home from other places, but it's just sometimes easier to go out alone at night without the kids. And lastly, I wish I didn't waste gas in the carpool line when it is raining or cold (I'm a cold-weather wimp). As I said, there's always room for improvement. How can you reduce your transportation costs?

1 comment:

Brittany said...

Since I discovered your blog a day or two ago, I have been reading it nonstop, starting at the beginning. Thank you for all your helpful advice and encouragement to living a financially smart life! I am driving a 1989 Volvo that is older than I am, and was bought used in the early 90s by my parents. Neither of them have ever bought a new car, and don't feel the need to keep up with the Joneses. If I were to ask them, they'd say that cars made the difference in their financial picture. Even now, we have vehicles that are from 1989, 1995, 1996, and 2002--making our newest vehicle 8 years old! When buying a used car, thorough research and good, timely maintenance allow people to have a reliable car that doesn't have to be new! My plan is to buy my next car in about 2 years when I am done with college, and then I'll likely buy a 4-5 year old Toyota or Honda.