Published in: Banks | April 30, 2020
Cutting This 1 Expense in Your Budget Could Save You Thousands
By: Maurie Backman
Hint: It's something many of us have, but can possibly live without.
Chances are, there are a number of large expenses taking up lots of room in your budget. Housing could easily be one of them -- it may, in fact, be the thing you spend the most money on month after month. Healthcare can also be a big expense, especially if you're paying for a health insurance plan on your own without an employer subsidy. But while you need a roof over your head and you need health insurance to protect yourself from catastrophic bills, there may be another big expense in your budget that you can get by without: a car.
How much can you save by getting rid of a car?
AAA reports that on average, it costs $9,282 a year, or $773.50 a month, to own a vehicle. Now, if you live in rural America, having a car may be an absolute must, and there's no getting around it -- you'll need to bear that expense. But if you live someplace with reliable public transportation, being car-free is an option -- and one that could save you a lot of money.
In Washington, D.C., for example, a monthly transit pass costs $81 a month. In Baltimore, it's a modest $68. And in San Francisco, it's $91. Compare these numbers to the $773.50 a month it costs to own a vehicle, and getting rid of a car seems like a total no-brainer. Even if we pad these numbers by assuming that instead of owning a car, you'll buy a transit pass but also spend $100 a week on rideshares, there's still a substantial amount of savings to be had. And chances are, you don't need to spend $100 a week on rideshares anyway -- especially if you're a reasonably fit person with the ability to walk from place to place.
Lower your car ownership costs
Of course, getting rid of a car isn't something everyone can do. If you have an infant or young children, then a car might be a necessity. The same applies if public transportation is unreliable where you live, and not having a car could mean putting your job at risk.
But one good way to make the cost of owning a car more affordable is to buy a used model instead of a new one. The average used vehicle costs roughly $17,000 less than a new one, and seeing as how new cars lose about 20% of their value the moment they're driven off the lot, it makes little sense to spring for a new car when you can buy a certified used one instead.
What could extra money do for you?
Maybe your savings account is in sorry shape and you're eager to boost it. Or maybe you're carrying a whopping balance on your credit cards and you're looking to free up cash to pay them off. Getting rid of a car is a great way to buy yourself more financial flexibility, and if that's not an option, getting a used car may be a more economical alternative to paying a premium for a new vehicle that's likely to lose value quickly.
These savings accounts are FDIC insured and can earn you 20x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 20x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2020.