Most people treat commuting like it is just part of life. It is not. It is a recurring cost, and from a personal finance perspective, it is often one of the largest ones you have.
Start with time. Take your daily commute and annualize it. Sixty to ninety minutes a day becomes roughly 250 to 375 hours per year. Multiply that by your hourly wage. At $30 an hour, that is about $7,500 to $11,000 of your time gone. Unpaid.
Then add the direct costs. Gas, maintenance, tires, insurance, parking, depreciation. For many Canadians, this is another $5,000 to $10,000 per year without much effort.
So your commute is not just an inconvenience. It is a $10,000 to $18,000 annual expense when you combine time and money. That is a real number.
Now compare that to living closer to work. Yes, housing often costs more. Maybe $500 to $1,000 extra per month, or $6,000 to $12,000 per year.
Look at that comparison. In many cases, you are close to break even, sometimes even ahead, while gaining back a few hundred hours of your life every year.
This is where most people get it wrong. They accept the commute as fixed, then optimize everything else. They spend time fine tuning investments, chasing small percentage gains, and shaving fees, while ignoring one of the largest recurring drains on both their money and their time.
If you want to take personal finance seriously, treat your commute like a line item. Price it. Compare it. Decide if it is worth paying.
It usually is not.
Your Commute Is a Financial Liability
byu/AnarchoLiberator inpersonalfinance
Posted by AnarchoLiberator
36 Comments
Also factor in the cumulative physical hazard of commuting in fast, heavy traffic by car.
Not saying that time isn’t important, but the way you’re framing it isn’t quite right. You’re only “losing” that money if you would otherwise be doing something during that commute time to earn it, which is almost never the case.
You’d like the book, “Your money or your life”.
I actually like my commute that’s my quiet podcast time. But my commute is also 90% on a low traffic fairly rural highway. I imagine commuting in an urban area is not relaxing.
I’m with you that your commute is a real cost in terms of time and money. I take a slightly different tactic to look at it and instead find my true hourly pay instead of finding the extra cost of my time, but they work out similarly.
The math becomes much more complicated when you have a partner and/or children though.
Everyone on r/wfh would agree with this. It’s hard to think of a salary increase that would temp me into taking a position with a commute.
>Start with time. Take your daily commute and annualize it. Sixty to ninety minutes a day becomes roughly 250 to 375 hours per year. Multiply that by your hourly wage. At $30 an hour, that is about $7,500 to $11,000 of your time gone. Unpaid.
While I agree with your overall premise of thinking critically about the cost of commuting, I disagree with this math.
The value of one’s free time is not equivalent to their hourly wage.
Some people value their free time very little (e.g., money is tight, they have a lower paying side gig, etc.) and shouldn’t spend more just to live a bit closer to work.
Some people value their free time very highly (e.g., high stress & high paying job) and can afford to “buy” more free time by living closer.
Not everyone’s commute is equal. I commute by train and I do a lot of reading and watching shows. I have to buy a train ticket but it’s pretty invaluable as far as personal time goes.
>Yes, housing often costs more. Maybe $500 to $1,000 extra per month, or $6,000 to $12,000 per year.
That seems like a lowball estimate, at least in major metro areas of the US.
But regardless, once you back that out, you’re only saving a net $4,000-$6,000 annually (following your math). At that rate, there may be additional factors that you’re willing to incur that cost for. Better schools, more access to nature, more square footage, etc.
My commute is about seven minutes round trip and only six miles round trip.
I’d say this analysis won’t work in a lot of markets. Probably every urban market. I know I’m spending almost 250% more than further out in rural area to live in the community I want to live in.
Editing to add – I still have a 25 minute commute 3 suburban cities south of me. The rural would bring it to 50 to 60. Where I used to live the commute got so terrible because the price of housing was so much less that the place blew up in population and the highway went from 60 to stop and go traffic for 8 miles into town (25 minute drive instead of 8).
Let me throw a spanner in the works…
You’re not gonna have the same job at the same location forever.
You get promotions, change of career path, marriage moves people sometimes , other family problems might lead you to move
Going all in on location is a bad idea
Guess i should sell my house that’s at 3% to move 15 miles closer at 7%.
Sounds solid.
This is what led me to move close to my work. And then after a job change, start using transit, then after realizing bike infrastructure was good, starting to bike to work.
Getting an extra 40-45 minutes of biking in every day while going to work is like two birds with one stone. I get to work, and a little bit of exercise at the same time.
My commute is the price of living where I want to live. If you’re happy to live in a cardboard box outside your employer, more power to you
Agree 100%. Living close to work is an ultimate life hack
My commute is from my bed to laptop. That’s gotta cost me at least a few cents per day.
I basically did this with spending time going to the dump every weekend vs paying for someone to give me a trash can and get it picked up weekly. I decided I’d rather have potentially hundreds of hours of my life back *not* going to the dump on my own.
What a great way to live life. Lets price and line item everything. NOT.
My 5 minute bike to work is a financial liability?
A work from home commute is as optimized as it gets. You would have to offer me at least $30k more per year for me to even consider leaving my remote position.
While I agree there are costs associated with commuting, your “math” here only works if you can convert those commuting hours into actual paid work hours. NOT saying that getting those hours back to enjoy life or get chores done and that has intrinsic value, but not actual bottom line financial return. YES you will save the gas, and tolls and wear and tear on your car and that does help your financial bottom line. IF you have hourly childcare costs during your commute then those savings would apply as well.
True.
But it’s in the bucket of “cost of living”. There’s a baseline expense to just live and live life in modern societies.
Gotta eat, gotta have shelter, gotta have decent clothing and hygiene and gotta have transportation to work. Gotta pay taxes.
How fancy and how costly is more so the nuanced question.
….. And even if provided much less costly carpooling or public transportation options to work, **majority** still pick private car ownership because of autonomy, convenience, and pride.
Ive never worked more than 10 minutes from home because I would hate wasting so much time. I can’t imagine being one of the people who have multi hour commutes.
Not sure I would put my “time” as an expense though. You’d be paying more to get a place closer to work probably if you work at one of the multi hour commute places. So you trade time instead.
This math only makes sense if you park your new home within walking distance. Otherwise you’re still paying for vehicle maintenance fees, just slightly reduced.
The difference between commuting 40 min to my job and living next to work is $1000. My time isn’t THAT precious. Would be nice tho 😂
When evaluating commutes, I just used the IRS standard milage rate for an easy estimate.
My wife and I did this calculus when we relocated for jobs. We both walk/bike to work; its about a 10 minute commute, which gives a solid bookends to each work day, and it let us sell one vehicle. We joke that our other vehicle is only used for groceries and fun stuff; I think we’ve driven a total of 40k miles in 7 years, which is unheard of in Montana.
I was probably spending $6,000 or more per year on commuting costs and buying lunch at the office (I seldom had the foresight to pack lunch and working in NYC has too many tempting options for great, fresh food). Working from home has been a great bonus.
I pay roughly 20% more to live close to work but my commute is either a 20 minute train ride, 15 minute bike ride, or hell a 45-60 min walk if i wanted to walk it. my commute would be at 60-90 minutes if i moved further away, require me to own a car, and pay tolls/parking/etc..
Even if someone double my salary, I wouldn’t take a job an hour away. Money wise it would be a smart move, but there’s a lot more that comes into play at this point in my life.
I agree with the sentiment, but the math here is deeply flawed. You’re going to have to pay for insurance no matter what unless you don’t own a car, you don’t have to pay for parking in most places, tires generally last for years under normal commute usage, and maintenance is wildly overstated as an expense.
Hell no. I live in the country, work right in the middle of town (mid size city). There is no amount of money that could make me give up my lifestyle just to live closer to work.
There are many places where living closer does not eliminate the need for a vehicle. So that cost, though maybe reduced in the categories affected by a longer commute, still exists, so it’s not that clean of an equation.
25$/week to take the tolls plus 100$/month to park at work. That and among a few other things are why we’re leaving this area and moving back home
I see what you’re saying but this is flawed. For many people, they would have a car whether they had a short commute or a long one. So that’s a non-factor. Also, you said commuting costs you $7,000 to $11,000 in unpaid labour. It actually doesn’t because it’s not like you would’ve been getting paid otherwise. With a short commute, you can just sleep in more.