29 September 2014

Saving Money from Not Owning a Car

Cars really cost a bomb these days with the ridiculous Certificate of Entitlement price tag. It's hard to get any decent family car for anything less than $100,000.

In my past buy years ago, I was able to pay down quite a bit upfront and took up loans at about $500 per month.  I figured that it would cost about $1,000 per month after amortising in annual insurance and road tax, as well as petrol consumption and routine preventive maintenance.

Then I figured, what if I don't drive to work? I took the bus and train to work, and took cab to get home at night. Buses and trains are cheap. But cab rides are not. It costs about $25 per ride for me. Assuming I do that about 20 times a month, that works out to be $500 per month. Still cheaper than owning and operating a car. Definitely a better deal. And I get 'chauffered' home too!

However, cab rates have been on the rise. And traffic conditions haven't been great either. My ride typically took 40 minutes on a good day, and can be as long as an hour on a lousy day. Especially when it is raining, when there is an accident or road work along the way. Lots of time spent waiting for a cab too.

I came to realise that I could sometimes get home faster by taking the bus and train instead. It's also an hour's journey. Cost a lot less, and I get a bit of exercise from walking at the same time.

Come to think of it, $500 a month avoided would amount $6,000 a year saved. That's a lot when invested and compounded over 20 years. In fact, if this sum was placed into the Supplementary Retirement Scheme, that would generate further tax avoidance as well!

So, operate a car, take cab, or stick to cheap public transportation? It's all about the Maslow hierarchy of needs. For now, I will generally stick to BMW (Bus, MRT, Walk) and the occasional cab.

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