One of the most interesting aspects of working from home is how it altered my spending in countless little ways.
Before I made the switch, I commuted to work every day – about twelve miles each way. That would burn about a gallon and a half of gas each and every day, costing me $3 a day (based on $2 a gallon gas). This doesn’t even include oil changes (work caused an oil change every six months or so) or other maintenance expenses.
I had to dress reasonably well for work, which meant that I had to keep a minimally updated wardrobe. I would usually just hit thrift stores (looking for huge bargains) and do a bit of additional shopping during Iowa’s tax free holiday. In total, I’d spend roughly $250 a year on clothes – $5 a week or so.
On my way to work, I’d often stop at a coffee shop for a cup of coffee and a breakfast sandwich. For a long time, this was a daily occurrence, but even when I cut back to doing it just twice a week or so, it was still eating $15 a week.
While at work, I would eat leftovers for lunch roughly three days a week. During the other days, I’d usually eat lunch out with coworkers, fulfilling social obligations. This would set me back, say, $15 a week.
I’d usually eat a morning and an afternoon snack. Most of the time, I’d remember to bring bananas or something like that from home, but probably three times a week, I’d hit the vending machine. $2.50 a week, gone.
Roughly once a week after work, I’d go out with coworkers for a beer. And usually some appetizers. That would cost $5 a week.
Because I was in town, I’d usually stop at the grocery store twice a week after work to pick up a few items – and I’d often wind up with two or three items I hadn’t intended to buy when I walked in the door. This added $10 a week.
I also went on regular trips for work, three or four times a year. These trips were always loaded with little expenses, not all of which were reimbursed. I’d probably spend an extra $100 on each trip, adding up to about $8 on average per week.
The end result of all of this? I would spend $75 a week on little things that just seemed to be the normal course of my work week. I’m not even including other expenses: buying an item when a coworker’s kid is selling something, contributing to flowers and other gifts for special occasions, three or four unexpected evening dinners at expensive restaurants, and so on.
These little expenses ate up $4,000 a year in after-tax income. Ten percent of my income simply evaporated in the eyes of the extra little expenses that my job brings.
When I quit to begin working at home, I knew I would be taking a salary dip, but I also knew that there were a lot of little expenses that would change, too. All of the expenses listed above vanished, for one. I also found that, since my commute had vanished, I had more time to prepare homemade dinners from scratch for my family, which reduced our food costs in another way.
In the end, the change in jobs didn’t cause the huge impact that we expected in terms of our ability to save for the future. Our expenses dropped precipitously, so the amount we had available to save for retirement and other big expenses didn’t change much at all.
Flash forward to today. My wife has been considering a job much closer to home. She currently has a forty minute commute each way. She can potentially get a job that would reduce her commute to five minutes each way, but there would be a 15% drop in salary. Is it worth it?
My answer? Absolutely.
First, reducing the commute to five minutes would greatly reduce the cost of transportation – less gas usage, less maintenance, and less chance for major repairs.
Second, the change would save an hour in commute time each day. That time could easily be utilized in other activities that can save money or improve quality of life.
Third, the $4,000 salary loss is not actually a $4,000 drop in household income – it’s actually far closer to $3,000, depending on our exact tax rate. This is much closer to the amount saved by the commute reduction.
Sure, she might be moving to a lower salary job – but that’s not the full picture. In the end, we would actually be in better financial shape because of that change.
What’s the take-home message? Don’t judge your job opportunities solely by salary and financial benefits. Quite often, there are a lot of hidden costs involved with the job that completely change the equation.