Your House or Your Car

Something I'd been suspicious about -- but didn't have the data to prove -- turns out to be true: the money you save in buying a house in the suburbs is generally "eaten up" by the costs of the longer commute.

Just after Hurricane Katrina, when the price of gas shot up, the fact of the cost of our commutes became very obvious. However, gas doesn't have to be $3 a gallon for you to be losing money because of your drive.

Most of us would think that if you save a few hundred on your mortgage payment, it certainly must be worth it. However, according to AAA, if you drive a 2006 Toyota Camry and drive it only 15,000 miles a year with gas at $2.40 a gallon, it will cost you just about $8,000 a year. That figure includes insurance, repairs, oil changes and such -- just the normal costs associated with driving (and doesn't include the cost of the time you spend in your vehicle, which is another downside).

Here's the bad news: you'd have to save more than $660 each month on your home payment in order to just break even on your increased commuting costs!

If you think you'll do better with an older car, the answer is: not necessarily. An older car is subject to more repairs, and sometimes less gas efficiency.

What this means is that you may in fact do better with a home that is closer to work, even if it is considerably more expensive than a home in the 'burbs. However, you may also have to settle for a bit less home than you might want -- and this is what keeps enticing people out of town.

Don't think that it's just your commute that is eating up your money. The suburbs tend to create a car-dependent lifestyle. Let's face it: most housing developments these days are a sea of houses. There are no facilities or amenities close by, except for the occasional park or strip mall. If you want to get groceries, you are likely driving a considerable distance to a large mall or business area. As a result, people are using cars for everything in the 'burbs, and this also adds to the cost of living there.

One interesting development that is cropping up because of this kind of car-dependent living is the "multi-use" development. I've seen these kinds of developments being promoted, where you can live, work, shop and play all in one reasonably sized area. It means that more of your life can be conducted on foot -- and in your immediate neighborhood.

Might put money and time back in your life.

Michael

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