When it comes to frugality, not all strategies are created equal.
For instance, cutting back on daily treats like expensive coffee can save money, but it doesn’t save much. And you have to fight that battle every day.
The pareto principle suggests that most of the time, 80% of the results come from just 20% of the causes. It would predict that 80% of your spending comes from 20% of your expenses.
For most people, this is very close to being the case.
Most people’s top 3 expenses are:
Cutting back in any one of these categories is a “big win” when it comes to saving money.
The best part about cutting back on the first two categories is that you make the changes to your lifestyle up front, and the savings come in on autopilot.
If you want to effortlessly hit your budget, you should live well below your means in terms of housing and transportation.
One powerful strategy is to try and become a one car family. Today we’re going to break down some of the benefits and challenges of having two people make do with one vehicle.
The Biggest Savings: Depreciation
Cars cost a lot of money.
At least you’re able to sell them for something when you’re done using them, but you can be you won’t get back as much as you paid.
The difference between how much you paid for a car and how much you sold it for is called depreciation. It’s usually. the biggest cost of owning a car
The best way to avoid depreciation is simple: Don’t buy a car.
Another strategy for lessening depreciation is to drive any car that you do buy for as long as possible. This technically increases the cost of depreciation in absolute terms, because the car continues to lose value as you drive it.
But cars stop losing value so quickly the older they get. A car with 60,000 miles is worth way less than one with 30,000 miles, but a car with 250,000 miles isn’t very different than one with 220,000 miles. This slowdown in depreciation let’s you lower the annual cost of depreciation by driving the car longer
The Biggest Monthly Savings: Insurance
Insurance costs can vary wildly depending on your age, location, driving record, the vehicle you are insuring, and the policy you have.
Maybe you’re paying $30 a month to insure a clunker out in rural nowheresville, but you could be paying hundreds to insure your Maserati in NYC.
My car costs less than, but pretty close to, $1,000 a year to insure.
I pay my policy up front, so I make payments covering six months at a time for January and July for both of our family vehicles. It’s never fun writing that check.
While there are ways to save on insurance, such as frequently shopping for a better deal, having liability insurance is required by law. There’s no way around it: If you have a car, you have to pay insurance.
The Biggest Headache: Repairs and Maintenance
I hate taking my car to the shop. Do you hate taking your car to the shop?
It’s not a fun chore, you never know how much it will cost, and you’re always afraid they’ll uncover something else wrong with your car. Chances are, it will be something expensive to fix.
Earlier, I mentioned that the best way to save money on depreciation was to drive the car for as long as possible. But guess what? The more you save on depreciation, the higher your cost of maintenance and repairs will be. Yes, you’ll probably save more on depreciation than you spend on repairs, but the repair costs won’t be fun.
If you’ve never had a car that isn’t running towed to the shop as you hoped it’s something cheap like the starter instead of expensive like the alternator, it’s quite the unpleasant experience.
The Most Frequent Savings: Gas
Before I was born gas was always well below a dollar a gallon. When I was growing up it was a good deal when you could find it for less than a dollar. When I started driving, $20 was always enough to fill up the tank of a compact sedan.
Then at one point gas went to $4 and that was painful. It miraculously fell below $2 in 2020, and now it’s hovering around just under $3 a gallon in my area.
So I’m spending $30 or so bucks every two weeks to fill up my tank.
Other Savings: Registration and Parking
These aren’t big expenses, but they really get you with cars, don’t they? You have to pay to buy the car. You have to pay to insure the car. Don’t forget about repairing the car. Oh, and fueling the car. Is that it? Yeah, that’s pretty much it. And there’s the annual registration fee. And you sometimes have to pay for parking. But that’s pretty much it.
Killing Your Commute
The best way to get rid of your second car is to kill your commute. The best way to kill your commute is to find a job that lets you work from home.
Two years ago, this was probably much more difficult. We live in a different world now. A world where meetings are something that require a link instead of a room. A world where everyone worked at home for more than a year.
My job is wanting people back in the office. But they’re also desperately struggling to hire workers. I know of one co-worker who successfully negotiated a permanent work from home arrangement. I know another guy who has worked from home all this past week.
Finding a job where you can work from home isn’t a guarantee, but it’s more feasible now than it’s ever been.
Finding Alternatives For Your Commute
If you can’t kill your commute, can you find a feasible alternative?
Walking, biking, public transportation, carpooling with a coworker. There are lots of options.
Obviously if you live 20 miles away from the office, walking or biking isn’t going to work. But maybe the bigger issue is the fact that you chose a job 20 miles away from where you live. Not only are commutes expensive, they make people miserable. It’s probably time to start up a job search.
My commute used to be 30 minutes and it’s now 15-20. It’s a lot better, but still unpleasant.
Long commutes are something that we’ve taken as a given when we should have declared war on them.
Running the Numbers: Bus Pass vs Car Ownership
I just checked the website for the public transit system in my area. And I live in Gainesville FL, so when I say “public transit” I mean the bus.
It costs $1.50 for a one-way fare and children ride for free. You can get a full-fare pass costs $35 a month.
That’s about half of what I spend on car insurance.
And I already said that I fill up my tank every two weeks for about $30. So that’s about $60 in gas and $30 in car insurance that I would save by taking the bus.
That’s nearly $100 in monthly savings, without even factoring in the cost of buying a car. Or of repairs.
What About When You Really Need a Second Vehicle?
Of course, one reason why people hold on to their second car is “just in case.” What happens when both spouses need the car at the same time? Then you’ll be glad you have two cars!
Sure, but a second car is a very expensive insurance policy against mild logistical inconveniences.
Especially when you have other options. One person walks. One person drops the other off. One person calls an Uber.
Yes, that last option costs money, but you’re saving lots of money by getting rid of the car. How often are you really going to need an Uber ride? And how many Uber rides could you afford with the money that you saved by not owning a car?
We’ve just seen that I could save about $90 a month just on insurance and gas by not owning a car. So if an Uber ride costs about $25, I could take three of them a month and still be coming out ahead on just gas and insurance.
And cars themselves costs tens of thousands of dollars. That’s a lot of Uber rides.
The Big Benefit of Selling Your Second Car
Normally when you sell your car, the profit gets immediately swallowed by your next car purchase.
But when you go from being a two car family to a one car family, you get to pocket the cash.
Your car might not be worth a lot, but if it runs, it’s worth something. Maybe $850. Maybe $2,000. It doesn’t really matter.
And of course, you can use this money as a safety net against the last concern: Needing to take an Uber ride in a pinch. Let’s say you get $1,500 from selling your car. You put it in a savings account to cover any unexpected transportation needs. You could use it for repairs on your remaining car, or to hitch a ride when you need one. At $25 a pop, you’ve got 60 potential Uber rides to help you when you’re in a bind.
This is something I haven’t been able to pull off yet, but I’m trying. I worked from home for most of the pandemic, but I knew I would probably be back in the office. If I can get to the point where I get official permission to work from home full time, our second car is gone.
I don’t even care that it’s a stickshift and I like driving stick. It’s gone.
My goal is to become a one car family. It’s a simpler, cheaper life.