Your Car is Robbing You Blind!

As I wrap up things here in the USA to plan for my trip to Asia I faced a difficult decision. Do I park my car somewhere and pay a monthly parking fee for a few months while I decide how long I’m staying? Or do I sell it and be done with it.

Keeping the car would mean continuing to make car payments, car insurance payments, vehicle registration, as well as a monthly parking fee somewhere. Ugh.  The expenses were going to add up to around $400 a month. I decided to sell it.

I got a better deal than expected. After I sold the car I was able to determine the total cost of ownership. Despite getting a good deal buying AND selling it, I was floored by the total cost.  Mr. Money Mustache was RIGHT. Cars are EXPENSIVE!!!

My Car Cost HOW MUCH?!?

Let’s calculate the total cost of ownership.

I bought a 2016 Honda Fit around Dec of 2016 for $17,940. Throw in sales tax, county fees, title, doc service fees and we wend up around $19,800. But of course, this was the end of the year. Almost exactly two years later, I sold it for $12,000.

This means I lost $5,000 on car depreciation.  That’s not that bad for driving a mostly new car for two years. But wait there’s more.

We also need to figure, gas, oil changes, new tires, insurance, registration, IPASS, and car washes.  Rough estimates are as follows.

Category Monthly Annual Notes
Gas $115.00 $1,380.00 Around 12,000 miles a year
Maintainance $50.00 $600.00 Oil Change, Car wash, New tires
Insurance $80.00 $960.00 Minimum required
Tolls $26.00 $312.00 Occasional trips to the city
Parking $25.00 $300.00 City parking
Registration $8.33 $100.00 Registration
Depreciation $326.00 $3,912.00 Depreciation loss upon selling
Total $630.33 $7,564.00

Over $600 a month to buy a tiny fuel-efficient economy car.  One of the cheapest on the market. Yikes.

Now, of course, keeping a car for only two years is far from ideal. Most of the depreciation happens in the first three years or so. But that still only accounts for about half the expense.

What’s crazy to think about is this is a Honda Fit which is one of the more fuel-efficient cars. How much more are people spending to drive bigger, less fuel-efficient cars. In the future, I’ll do whatever I can do stick to Ubers, biking, or some type of public transportation.

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pennies and coins

The Jobless Budget

The other day I was talking to a friend who is strategizing tackling some student debt.   My friend is a gainfully employed professional who makes a good salary.   Over the years I get the impression she hasn’t widdled away at her debt as much as she would prefer.   It’s not my place to judge her spending but I have noticed she lives fairly well.  I asked her a question to try to put spending habits under a different lens.  “How would your spending habits change if you were to lose your job and your income was cut off?”

Suddenly there were cuts that could be made.   “Well I’d probably stop spending my whole paycheck at expensive organic grocers” she joked.  And she’d probably spend a bit less on fancy hipster dining.  Anyone that has lost their job and had their income shut off has been put in a place to reprioritize what is a want vs a need.   Interestingly enough my friend did not say she would give up her apartment and sleep on the street.  She also didn’t say she would give up food.  Just expensive food.

So Just What Is Necessary?

Well from a no income perspective, it makes sense to only spend on what you truly need to stay alive right?   Rent, food, utilities, (we’re not gonna last too long without electricity and internet these days.  Cell phones too.)  So what might a jobless budget look like?   Well if you lose a job saved up some credit card points prior to it and take a little trip we won’t judge too much.

The Reasonable Jobless Budget

Evil Health Insurance$300.00
Cell Phone$45.00

This is only an approximate budget but it would probably apply to many people’s livings if you consider living expenses, not including debt payments.   The idea is that a living expense somewhere under $2,000 a month is doable if you give up some luxuries.

If you’re more determined you could even get it closer to $1,000 a month.

The Extra Lean Budget

Category Amount
Get a Roommate or Roomshare$500.00
Still Evil Health Insurance$300.00
Beans & Rice$150.00
Keep the lights off$40.00
Budget Prepaid Cell$35.00
Go to the library$0.00

These numbers are only rough estimates and of course, everyone’s situation is different but they can serve as a useful starting point.   There’s no gas budget in here because if you’re not working you probably shouldn’t be driving too much.  You’ve got time to walk right?

This isn’t THAT bad

While this type of life might not be the most luxurious and exciting, you’re still eating and have a roof over your head.   So the question arises, could savers and investors looking to gain financial independence live a life like this for some time in order to get ahead?  If you’ve got debt looming over your head and your stuck paying interest on loans it’s in your best interest (no pun intended) to get out of these shackles and take charge of your life.    If you’ve lost your job, in a sense you’ve been given the gift of focus and perspective to see what really matters.   Six dollar coffees and ten dollar burritos are a want and not a need.

Hipster Food
Just Say “No” to Overpriced Dining

My point is that we ought to live a bit more like our income isn’t a guaranteed thing because it’s not.  That’s a lesson well learned by anyone who’s been out of work for a period of time.   It’s a lesson with roots in a good understanding of wants versus needs.

So consider spending a month or two living as though you’ve lost your income.  It may bring things into focus.  It may make you feel empowered to realize you need less than you thought.  And you never may prepare you for if you really do lose your income.

Trying to budget and track your wealth? Consider using the free tool Empower (formerly Personal Capital). Sign up with my affiliate link to get a free $20 Amazon gift certificate and I’ll get one as well.