Cheaper Home or Shorter Commute? Here's How to Decide

How much is your commuting time worth?

If you've been wracking your brain trying to choose between affordable housing or a convenient location, you're not alone. This is a dilemma that many Americans face.

Bigger cities tend to have more job opportunities. Salaries are often higher, as well. But when you go outside these population centers, you may find that rent and home prices are much lower. That allows you to get more money in your savings account while living in a home that's equal to or better than what you could get in the city, assuming you can stomach a longer commute.

It's a huge choice to make, especially if you'll be buying a home. To help you decide, we'll take a closer look at each option, followed by a method to calculate what your potential commute will cost you.

A shorter commute

The biggest and most obvious advantage of a shorter commute is the time you'll save. If you're able to trim off 30 minutes of commuting each way, that's an hour a day, which saves you 250 hours of time every year (if you work five days per week and have two weeks of vacation).

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.10% Rate info 4.10% annual percentage yield as of October 6, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info 4.10% annual percentage yield as of October 6, 2024	Min. to earn $0
Discover® Online Savings APY 4.10% Min. to earn $0 Open Account for Discover® Online Savings On Discover Bank's Secure Website. Member FDIC.	APY 4.10%	Min. to earn $0

By living closer to work, you could also have more transportation options available. Long commutes often require a car, but if you're within a few miles of the office, then walking, biking, or public transportation may be possible. If that's the case, you could cut your monthly bills by going car-free.

Even if you still end up driving to work, a shorter commute will mean using less gas, lower insurance costs, and less wear and tear on your vehicle.

Your car won't be the only thing getting less wear and tear from a short commute. Longer commutes have been linked to several health problems, including higher stress levels, hypertension, and obesity, so shortening your time on the road could have a positive impact on your wellbeing.

A cheaper home

The reason so many people have long commutes is that they can open up cheaper housing options. If you're willing to commute 30 minutes to an hour, you may find a neighborhood where homes cost half as much as those in the city.

Besides the savings in housing costs, commuting also gives you much more flexibility in terms of where you live and you'll have more neighborhoods to choose from if you decide you don't need to live close to work. That could mean a better school district or an area you enjoy living in more.

When considering a commute, it's important to think about what type of commute you'll have, as they're not all created equal. If there's public transportation, such as a train, you could read or watch shows and have a much more enjoyable commute. And if you're commuting by car, there's a big difference between a smooth, relaxing drive and bumper-to-bumper traffic the whole way.

How to calculate the cost of a commute

A smart way to gauge whether a longer commute is worth the hassle is to calculate what it will cost you. Here's how:

• Determine the value of an hour of your time. The simplest method is to use your hourly wage, but you may want to go with a higher rate.
• Multiply that rate by the number of hours you'll spend commuting per day.
• If you'll be driving, multiply the number of miles you'll be commuting by $0.58, which is the IRS's standard mileage rate for deductible wear and tear as of 2019.
• Add those time and mileage rates together, and then multiply that by the approximate number of days you work per year.
  
  

Let's say that you're thinking about living in an area that's a 20-mile, 45-minute drive to your job and you make $30 per hour. This is what that commute would cost using the method above:

• Time: $45 per day ($30 per hour for an hour and a half)
• Car costs: $23.20 per day ($0.58 per mile for 40 miles)
• Annual cost: $17,050 ($68.20 per day for 250 working days per year)

The IRS mileage rate may be a bit high, especially if you drive a car that gets excellent gas mileage and doesn't need much maintenance. But even if we cut that rate in half for a daily car cost of $11.60, your annual commuting cost would be $14,150. That's almost a quarter of your gross income.

Making your decision

Once you've calculated the cost of commuting, you can determine whether a cheaper home or a shorter commute is a better deal.

The simple option is to compare housing costs (either rent or estimated mortgage payments) both near your work and in any other neighborhoods where you're considering moving. Then you can see if the annual price difference of living near work is greater or less than what your commuting costs would be.

Although that will give you your answer from a financial perspective, there may be other factors that you need to consider. If you have or plan to have children, school districts are important. You might decide against the financially prudent option because you like another neighborhood more.

You'll need to weigh both finances and quality of life into your decision, but figuring out the financial side of it can give you a strong idea of which is the better option.