Shaolin Sacrifice: How ditching your car can save you Half a Million!
The Shaolin Investor seeks to sacrifice material possessions in order to achieve peace. Sometimes the best investments we can make isn’t buying something, but rather, removing something from our lives. And for the modern soul, one of the biggest expenses is their transportation. Often times the benefits of car ownership far outweigh the costs. While giving up car ownership might not be visible for every investor, it’s important to consider the top four benefits to giving up your car. But first, it’s important that we get a full understanding of how bad your auto situation is. I recommend completing the following exercise:
Calculate the Full cost of car ownership
1. Calculate your monthly “Cost of ownership.” This is including car insurance, cost of gas, as well as average maintenance costs such as oil changes and wear and tear on the vehicle.
2. Calculate your commute time: Take your daily commute time, multiply it by how many days a week you work, multiply that by 4 (four weeks a month) and then by 50. (Assuming you have 2 weeks of vacation a year)
3. Calculate your commute time Cost: Take the number of hours you commute and multiple that by your hourly wage. That number will represent how much money you’re NOT making while you commute.
4. Then calculate your after tax yearly income. This information will be easily available on last year’s W2, or you can look at your current pay stubs and multiply accordingly.
Now, look at your totals to get a better picture of just how much your car is costing you.
Here’s my personal breakdown from my last job.
Car Payment
$325 per month
Cost of Ownership
Full Coverage Car Insurance -$120 per month
Gas- $100 per month
Parking Pass for Trendy Downtown Job – $200 Per month
Maintenance costs- $50 per month.
Total: $600 per month.
40-50 minutes each way: Total of 80 to 100 minutes per day. This equates to roughly 33 hours per month, or 400 hours per year.
My hourly pay was $22.40 per hour. Multiplied by 400 hours and that equates to about $8,000 per year of money I was NOT earning.
$35,000 per year.
Minus $7,200 in Car costs
= $27,800 yearly pay.
Unpaid Driving time: $8,000
To summarize, I was spending spending $7,000 a year in car expenses, and I was also losing $8,000 a year in unpaid commuting costs.
Now that you have an idea of just how expensive car ownership is, let’s take a look at the top four benefits of giving up your car.
Maximize Your Retirement
Americans spend a ton on their monthly car expenses. According to finical guru Dave Ramsey the average American has a $475 a month car payment. That money, when placed in a IRA or 401k could be worth over half a million dollars after 20 years! This is due to the power of compounding interest. Compounding means that the more time your money has to grow, the larger your pool will be when you retire.
Let’s look at my costs for example:
Yearly Car expense $8,000 per year for 3 years = $24,000.
V.S.
$8,000 saved in an IRA a year for 3 years =$24,000
The current rate of return on the S&P 500 is on average about 10 percent.
So let’s say that I don’t put in anymore money for retirement for the rest of my life.
Starting Balance: $24,000 X 10% average interest rate X 30 years of compounding.
= $418,785.65
So before you consider updating your current car, remember. That same monthly car payment could be worth well over $500,000 by the time you reach your 60”s. However, people are wasting their prime working years by paying high monthly car payments. They constantly buying new cars, getting new leases, trading in, etc. at a time when their retirement needs to be a top priority. By even sacrificing a car for just a few short years, we
Help your Physical Health
Another consideration is the overall effect on your physical health. According to the latest U.S. Cenus, there average commute time is approximately 26.1 minutes each way, or a total 1 hour a day. That equates to 5 hours per week and nearly 200 hours, or 9 days a year. In addition, most of those Americans are working in office settings where they sit for upwards of 30-40 hours per week. Add in 5 hours sitting in a car, and an hour or two sitting in front of the TV a day, and in total the average American is spending about 50 hours a week sitting down. This much lack of physical activity can cause a wide array of health concerns. Obesity, back and spinal problems, lack of energy, all of these can be contributed to a lack of physical movement.
So by ditching the car, you could find yourself with a much more physically active lifestyle. Even a simple 20 minute walk to the bus stop a day could help burn calories and help keep you in good shape. Or perhaps you skip the bus, and bicycle to work a few days a week. Either way the increase in physical activity will do wonders for your overall state of wellbeing.
You can get back the most valuable resource: Time
Time is the most valuable resource any of us get in this life. Why waste it on commuting to a job. As stated above, the average American worker is spending 10 days a year driving to and from work. That is a lot of life that is being wasted when it could be put to better use. Think about what you could do with an extra 10 days a year. That’s two 5 day vacations, that’s 1 day of volunteering a month, 10 day extra days to finish your breakout novel. Where ever your passions lie, getting more time dedicated to them will prove to be a priceless entity in itself.
Help the environment
According to a report by Environmental Defense Fund, cars release approximately 333 million tons of carbon dioxide into the atmosphere annually, which is 20 percent of the world’s total. Carbon Dioxide is a major source of the air pollution in the world today. Thankful with the advent of ridesharing and increased spending in public transport, we are now seeing less cars on the road overall. And by sacrificing your car, you can feel good that you are doing your small part to help the environment.
Next Steps
So as you can see from the examples above, car ownership can be a devastating burden, both financially, physically and emotionally. Those on the Shaolin path will seek peace and harmony in their lives through minimizing anything that keeps them from finding their Nirvana. So if you’re ready to ditch the car, or downsize your car to an older cheaper model, please check out the following links to help you in your journey to peace.
Help getting out of your Lease
Swapalease is an online database that connects people in leases, with people who want to buy them out of their leases. This is an excellent way to get out of your overpriced lease.
Remote Jobs
Working Nomads is an excellent resource for people looking to work remotely. With hundreds of jobs to choose from in a variety of industries, you could ditch the commute entirely and work with just a resume and a few clicks.
Ridesharing
Zip Car, a car sharing service, saves its users on average 500 a month in car payments and insurance costs. Not only that but Zipcar reports that drivers 90% of Zipsters drove 5,500 miles or less per year, saving 32 million gallons of oil (219 gallons each!)Not only is Zipcar car saving drivers money, but it is also saving the environment.
Consider an Alternative form of Transportation
No car ditching article would be complete without a car alternative. And as a motorcycle enthusiast, I think there’s nothing for freeing than commuting to work via motorcycle. I’ve ridden everything from Harley’s to Sport bikes, and in my opinion there’s no better commuter bike than the Triumph Bonneville. It’s the perfect mix of a lightweight design, a tall, upright seating position, and great MPG.
