Day 4 - Slashing Transportation & Travel Costs Like a Samurai

After turning my personal finances around by spending 60 minutes every day on small projects I decided to share everything I did to get my self in a better position when it comes to money. I will be serializing all the 60 minute projects so other people can try them so they to can get their finances together. Most of these tasks will take no more than an hour and it's those tasks that we love to put off. So join me from Day 1 to Day 13 to see if you can get yourself in a more prosperous place financially.

Day 4 - Slashing Transportation & Travel Costs Like a Samurai

Transportation and travel costs account for a significant proportion of anyone's income. This means that there is ample opportunity to make savings here. It's very easy for these transport costs to spiral out of control especially if we seek convenience and small unnoticeable perks. Most people have a car and make expensive payments every month despite having a public transport system which can easily substitute the vehicle. At one point in my life I was making insurance payments and car repayments every month while taking public transport to work! (Beat that!)

During day 4 we will look at how to cut transport and travel costs. The deeper and quicker we cut the Faster we can achieve our financial goals whatever they may be. Personally for me my financial goal was to leave the rat race and become financially independent so I could determine how I use my own time, everyone has a different motivation and you need to keep this at the front of your mind.

The first step is to get a handle on the problem. Get a clean piece of A4 paper and then list all of your transportation costs. Don't leave anything out, you need to be as open and transparent as possible, include all the following

1. Car payments
2. Fuel payments
3. Car Insurance
4. Road Tax
5. Servicing
6. Car Wash
7. Breakdown Cover
8. Engine Oil/Cleaning Products
9. Public Transport cost
10. Bus Passes
11. Season Tickets

This list is not comprehensive but it's a start. The most important thing is that you're honest and list all of the costs. If you pay for something on a quarterly or yearly basis you need to find the monthly equivalent and then add it to your running total. I tried putting this task off until I ran out of excuses, I was shocked when added up all my transport costs which accounted for more than 30% of my income, crazy!

I Want to Cut Deep and Fast

If you want to achieve your goals quickly then you will want to cut deep and fast. I'll be blunt, this will be painful and you need to take a moment to really think if you can follow this through. If you're determined then there are some steps you need to take.

Selling your car and paying off the vehicle finance is the last thing anyone wants to do. We get so attached to our material possession that we often forget our real long term goals and values. If you've got a decent public transport system then the only thing that you'll lose is convenience but then you stand to save a lot of money. A typical person who pays $250 per month in car payments, $100 of Fuel and $1000 on all other items like breakdown cover, servicing, repairs will save on average $433 per month, if that's not motivation to slash your costs I don't know what is.

Once you've sold your car your options are now limited to public transport or using other means such as cycling or walking. Go to Google maps and work out the distance between your home and work, if it's a really long distance then you'll have no choice but to use public transport. If the distance is under 10 KM then you should really consider cycling, not only will this save you money it will also improve the state of your health. You could even cancel your gym membership if you cycle to work! (I love killing two birds with one stone) If you're workplace is under 5 km then consider walking or running. I can't stress the health benefits you'll experience from cycling or walking to work. Public transport could cost anything around $500 to $2000 depending on how far you commute. You could therefore save up to $2000 and improve your health at the same time. You just have to be bold and determined and not lose focus.

Personally when I did this exercise I decided to sell my car and pay off the finance. It was such a liberating feeling to cancel my car insurance, breakdown cover and servicing fees. Not paying for fuel was a bonus. I decided to walk to work and use public transport during the weekends when we went out as a family. If we needed a car we could rent it in advance to save money. I love to calculate how much I would save and the figure I recall was in excess of £500. As I want to grow my passive income retirement pot I put this in a high interest savings account which was slowly but surely paying for my financial independence.

Travel and transportation should not account for more than 10% of your income. If it's above 10% then that's not frugal in my opinion. Hyper frugality would be to cut it to zero. By having the convenience of travelling to work by car as opposed to public transport or walking means that you denying your future self the opportunity of better and brighter things. It really boils down to whether you want to small perks now or the big reward later on, I know which one I want.