Some Thoughts on Higher Gas Prices

I’m lucky. I don’t commute to work, unless you consider a stroll across the house to be a commute. I don’t put daily miles on a vehicle, though I do need to travel to the library and the post office for different work-related tasks.

My wife, Sarah, does commute to work, though. She drives about 35 minutes each way every weekday. Even though she’s driving a Prius that gets her nearly 50 miles per gallon, the price of fuel adds up, as does the price of car maintenance and other concerns.

It’s not exactly a secret to know that gas prices are inching upwards. The nationwide average is $3.67 a gallon as of the writing of this post.

So, let’s say you have a commute similar to Sarah’s (say, 20 miles) and you’re driving a typical automobile that gets 25 miles per gallon. If you drive to work five days a week, forty eight weeks a year, you’re going to gulp down 384 gallons of gas a year. Under current gas prices, that’s $1,400 a year just to commute to work – and that’s just for gas. It does not include maintenance, parking costs, or insurance.

If you compare this to gas prices even a few years ago, you’re talking an extra $700 a year just for the commute. If you’re making an average salary of $35,000 a year, that’s 2% of your salary gone. That’s the real cost of higher gas prices for the average person.

There’s also the secondary cost, which pops up (for example) in the form of increased prices at the store as companies pass along the increased price of shipping to you, the customer.

The “Band-Aid” solutions for this problem are well known. Carpool. Use public transportation if you can. Buy a more fuel-efficient car. Ride a bicycle to work.

What are the long-term solutions to the problem, though? To me, high fuel prices are a good motivation to start considering some other changes in your life.

For starters, consider job opportunities or career shifts that require less commuting – or none at all. Telecommuting works in some professions, but not nearly all of them. For many jobs, a more local option is well worth investigating.

One of the motivations for my own career switch to self-employment was the cost of the daily commute. I estimated that between the fuel costs, the maintenance costs, the parking costs, and the vehicle depreciation, my daily commute to work was costing me about $3,000 a year. That was after-tax money, too, meaning that the actual impact on my salary was around $4,000 per year.

In other words, I could get a job paying $4,000 less per year that was very close to home and see no negative impact in my financial life. I would see a positive impact in terms of my daily time, though, because I would no longer be investing the time in my commute.

One effective way to do this is to start developing a side business right now that can supplement your income, but don’t give into lifestyle inflation.

When I started The Simple Dollar in 2006, it slowly built itself into a side business that I channeled into debt repayment, a house down payment, and other needs. Our lifestyle did not inflate at all – if anything, it deflated. It was because of this reasonably strong income stream from a side business, our vastly improved debt situation, and our lack of additional spending that I was able to start working from home. Nothing more, nothing less.

Working from home has made our family feel the pinch of the gas price increases far less than other families. We’re affected by it, sure, but the impact is pretty small. We have one person who commutes and that person commutes in a very fuel-efficient car. We have the effort put into building a side business to thank for that.

Another option is to consider moving closer to your place of work. If you’re living in an apartment, this move is actually rather easy, as you just need to find a rental unit closer to your workplace.

Flipping the calculations above on their ear, if I found a place near my work, I could actually spend $300 a month more on my monthly housing bill and still break even because of the savings due to the minimized (or eliminated) commute. This likely would have resulted in much improved housing, particularly if I liked the area, plus it would have meant less time commuting.

The only thing that held me back from this solution is that our housing location was central between my workplace and Sarah’s. We commuted in opposite directions, so a reduction in my own commute meant a direct increase in the length of her commute.

In the end, the best financial solutions are the ones that leave you less reliant on the fluctuations of prices around you. The less driving you do, the less you’re impacted by changes in fuel prices. The same is true for other things: the less heating and cooling you do, the less you’re impacted by fluctuations in home energy prices, for example.

Carpooling, using mass transit, and telecommuting are strong steps you can take immediately, but don’t disregard longer-term solutions like these. They provide savings in terms of both money and time, and those savings often last for much longer.

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20 thoughts on “Some Thoughts on Higher Gas Prices

  1. SavingFreak says:

    We could all greatly reduce our gas consumption by changing the way we drive. Just focusing on accelerating slowly and trying to keep your speed consistently around 45 mph will make a huge difference in your overall mileage.

  2. valleycat1 says:

    Re comment #1 – if I were to maintain a 45mph speed in my normal daily driving, either I’d be creating a hazard by being way below the limit (& even more below the speed a lot of people here drive on freeways), or I’d be breaking the law & creating a hazard by speeding considerably above the limit.

    We get better gas mileage by not driving aggressively and by not speeding. Living in California where the prices are usually at least $0.75 more than the rest of the country will do that for you. Our gas for the past month has been right around $4/gallon & now well over that.

  3. Andrew says:

    Don’t move to be closer to your workplace unless you are certain, beyond any doubt, that your job is secure and will remain so.

    Don’t move to be closer to your workplace unless you love your job and wouldn’t be happy anywhere else.

    Don’t move to be closer to your workplace unless you will at least break even after factoring in moving costs.

  4. AndreaS says:

    Over a period of a few months my daughter and her husband shelled out a total of $3500 in repairs, one repair at a time, on their two older paid-for cars. It’s hard to guess if “this” is the last big repair, or if this is part of the longer trend of more repairs. In the case of her jeep, it had a troubling noise our superb mechanic had not been able to resolve. We felt it was time to shop for a different vehicle.

    My daughter had been driving a Jeep Liberty for a 50-mile round-trip commute for a low-paying job. We had previously figured despite the gas, she was still coming out ahead by working at this job she loved. We also thought she could not afford a newer car. However when we began discussing whether she should trade in her jeep, and I researched most economical cars, I learned the IRS now figures it costs 55 cents per mile to drive a car, on average. I initially felt this was an over estimation… until I saw all those repairs. AAA has a chart that breaks this down more by car type. We started crunching numbers in her specific situation and feel that 45 cents was closer to right for her older jeep. Basically, the newer your car, the higher your per-mile depreciation rate… older cars have a lower depreciation rate, but more repairs. Bigger vehicles cost much more per mile to drive.
    To figure a more precise per-mile number for my daughter’s jeep we had to figure depreciation rate by considering what she paid for the jeepr and the current blue book value. We took the difference, and divided by the miles she drove since she owned it and came up with a 10-cent per mile depreciation rate. Then we added in repairs she paid, insurance, tires and so on.
    We also figured that if she switched from an 18 mpg car to a 30 mpg car, she would save about $100 a month on commuting alone. She traded in her jeep for a year-old Kia Soul, which still has 70,000 miles on the warranty. (She has two little kids, so needed the roominess.) Her monthly payment is about $200 a month. She will more than break even on gas and short-term lack of repairs.
    But in looking at her distance for commuting and how many miles she actually drove since she owned her jeep, we found only half was commuting to work. A high percentage of the rest was for social reasons, going to yard sales, and errands. A large percentage of these non-commuting miles could have been avoided. She knew the gas cost of driving to visit friends, but had not been thinking she was “using up” her car at a faster rate.
    Gas is the smaller portion of the total cost of driving. I worked out the true cost of driving various places she tends to drive. This exercise is useful to understand the true cost of getting places. This alone is a deterrent for driving.
    Where we live, most good jobs are at least a 40-mile round-trip commute. It is a long shot to find a job significantly closer, but she is now watching for openings.

  5. Johanna says:

    So, now that you don’t have to commute to your old workplace anymore, have you even thought about moving closer to Sarah’s workplace?

    There are benefits to having a short commute that go beyond paying less for gas. There’s more free time, and less stress. Trent often talks about how “family time” spent with his children is the most valuable thing in the world for him. What’s family time worth for Sarah? More than nothing, I’d guess.

    But I’m only saying this because I hate all men, apparently.

  6. Jacq says:

    #5 – it isn’t that black and white

    I’m going through that decision process and dilemma with a 2 hour daily commute that I actually don’t mind since I take public transportation. It provides an opportunity to unwind which I like (just not so much of it) since I’m a single parent and have to hit the ground running when I get home and don’t have a “semi-house-husband” like Sarah does.

    If there’s the intent for the Hamm family to move to the country within the next few years, it would be financially foolish to go through the hassle and expense of moving. It’s also possible that housing costs are higher close to her workplace – that’s definitely the case for me. Add in uprooting your kids from their school and neighbourhood and there’s no cut and dried answers.

  7. Diane says:

    #4 AndreaS – While your comment seems thoughtful and well researched, I couldn’t help but noticing you were speaking about a grown woman with a husband and two children, not, say a young college student. Now that you know that your daughter choses to use her own hard earned money to do things like “going to yard sales and errands” are you planning to micro-manage her life so that she doesn’t “waste” gasoline? Is it possible that it’s time to let go and let her stand on her own two feet? How will she ever implement the skills you’re taught her if you don’t?

  8. Gretchen says:

    We all know it’s so easy to change careers and sell houses today. This is one of those posts where I think “you have no concept of reality.”

    Johanna’s point actually makes more sense because of the infamous country house. Unless it’s further away, of course.

  9. Cathleen says:

    #7 it struck me as odd as well. Each to his/her own but I would be annoyed if my mother not only inserted herself in that way but then also posted about it in a public forum. But maybe I am just too private a person :)

  10. Johanna says:

    @Jacq: I didn’t say it was black and white. What I said was “Have you even thought about moving?” not “You need to move, and that’s that.”

    They may have good reasons for not wanting to move. But it struck me as very strange that Trent’s example of moving closer to your workplace was about moving closer to *his* old workplace, where he doesn’t work anymore, rather than moving closer to Sarah’s workplace, where she still does work.

  11. AndreaS says:

    #7. My daughter had previously invited my input on what to do about her car situation. I did the number crunching one evening after we had discussed it, and showed her what I figured out the next time we talked. Since we had co-signed on the car back when she was in college, we already had many of the numbers to do this math. I knew how many miles were on her car now, as we frequently swap vehicles for varying reasons.

    As far what to do with this information, that was entirely her choice. They decided what they could afford, what type of car they needed, and how new they wanted. They did call me from the dealership to ask me to do some online research during this process while they were negotiating. Overall I think they made a really smart choice, though it is not the one I expected.

    I wholeheartedly agree it is a good idea not to offer unsolicited advice to adult kids. It is rarely appreciated.

  12. Jacq says:

    #10 Johanna – yes, I see your point after I re-read the post. I was probably focusing too much on my own situation while reading the post and that colored my thinking. I don’t think that 35 minutes each way is too shabby though. Some people in my city spend that much time just trying to get out of gridlock downtown during rush hour.

  13. valleycat1 says:

    I’m with Johanna on this (!). Trent & Sarah are looking for a large country property to build their dream home on. It’s a good bet that isn’t going to be found a lot closer to a school she can work at.

  14. valleycat1 says:

    jacq #12 – The amount of time really isn’t the issue here, it’s the miles. A half-hour drive in a more rural setting, as where we live, is a 30-mile or more distance. I used to drive a 45-minute commute of 15 miles (yea, gridlock) – a whole lot different than a 45-minute commute of 30-45 miles with relatively little traffic.

  15. Kai says:

    Gretchen (#8),
    It’s meant as a general idea – certainly there are times when it is more or less applicable due to the markets.
    It’s pretty reasonable for anyone to consider, and that’s all I read out of the post. Not that it’s practical for everyone to quit their job or sell their house so much as that it’s a good idea to consider the commute and see what might be possible in your situation to minimize it.

    I think for a lot of people the fact of having two people commuting possibly two different ways can lower the value of trying to locate by one of the workplaces, but it can help. By happenstance, my husband and I live very close to my work, so I can walk or bike to work, while he takes the car. Luckily for us (living in a very sprawled city), his job isn’t a long drive, but being close to one job means that we only need to own one car.
    I suspect that in the country where a small commute is still a long way without a car, it might not be applicable, but that’s one benefit for city-dwelling couples.

  16. Charles Cohn says:

    I’m retired and am driving a gas guzzler — a 2008 Chevrolet Express full-size van equipped with a full-size bed for travel. A few years ago I was involved in a collision (not my fault) in an earlier Express, and the van protected me from injury. I like everything about the van except for the poor gas mileage. I realize that I should be driving a more economical car, but I hate to give up the added safety that the van provides. An auto safety expert once advised, “Buy the heaviest car you can afford, with the smallest engine.”

  17. Roberta says:

    “If you drive to work five days a week for forty-eight weeks a year” – are you assuming four weeks off a year? That much vacation time is out of the ordinary for most people, I think. One week at the end of one year’s employment is much more typical, and two weeks after that. Four weeks of vacation time seems like heaven!

  18. Johanna says:

    Roberta, are you assuming no paid holidays like Thanksgiving or Christmas? If you get 10 holidays plus two weeks paid vacation, there’s your four weeks.

  19. Maria says:

    #16 … I also feel uneasy and less safe in a small car and choose to drive a larger vehicle. I drive 38 miles to work about 3 days a week ( ..very nice county drive with no traffic). I used to drive an Expedition, but when my husbands car needed replacement about a year ago he starting driving the Expedition since he is almost fully retired and driving much less and I purchased a Honda Pilot.. that was as small I could go.
    We just adjust the budget to fit in a larger amount of fuel and reduce it somewhere else that is less important to us.
    My heart races when I ride with my daughter in her Accord.

  20. jim says:

    Americans get 3 weeks vacation average with 5 years experience. After 20 years the average is 4 weeks.
    Of course it varies by occupation and industry.

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