Wise Money Decisions

Fifteen years ago I had a friend that would drive across town to save 5 cents/gallon on gas.  With a 15 gallon tank, he saved 75 cents per fillup. 

With gas at $1/gallon he probably came out ahead financially, although just barely. 

When you account for his time he came out behind, even though there’s no way his time was worth more than $4.25/hour.  Trust me, I knew this guy.  $4.25 is generous.

When you get older your time becomes more valuable.  There’s an inflection point in the value of your time when driving across town for cheaper gas is no longer a wise money decision.

But today was an exception.  I saw gas for $4.99/gallon at a station in Redwood City. 

FOUR NINETY-NINE!

How can they charge $4.99 when it’s $4.35 at a station not far away?  I don’t get it.  I think the guy put up $4.99 as a joke, but people still came in.  So he left it up.

Generally it’s not worthwhile to drive to a cheaper station.  But when the discrepancy is 65 cents, and especially when you can buy en route, go for the lower price.

By the way, have I ever mentioned that Redwood City has the country’s best weather, proved conclusively by government climatologists?

Commuting is something I’m not willing to do.  I live 3.25 miles from the office.  I’m looking for something closer.

I bike to work when it’s warm and not raining.  Which, thankfully, is most of the time here. 

TANGENT ALERT: 

A couple miles up the road in Redwood City there’s a sign that says, “Climate Best by Government Test.”  Apparently the U.S. and German governments scientifically determined Redwood City to have the world’s best weather in a three-way tie with the Canary Islands and the Mediterranean Coast of North Africa.  

A colleague insists that Hitler planned to move his headquarters to Redwood City after he took over the U.S.  I haven’t found any supporting evidence.  But it makes circumstancial sense.  The government test was conducted before World War I.  Presumably Hitler could have known of the test. 

Free lifetime WMD email subscription to the first person that finds anything.

END OF TANGENT

When I drive I get 20 mpg and use a third of a gallon of gas for the round trip.  That’s $1.50 per day.  It takes less than 10 minutes.

A colleague lives 45 miles away.  He probably gets higher mileage because he’s on the highway.  I assume he gets 25 mpg.  He uses 3.6 gallons, or $16/day.  He also has higher cost of insurance, wear and tear, depreciation, etc. 

He spends at least 45 minutes each way.

Yikes — more than $16 and an hour and a half every day! 

Two thoughts come to mind:

That’s roughly the cost, in time and money, of a nice lunch.  If someone offered you free lunch every day, and did your job for you while you ate so you didn’t have to make up the time, would you take it?

The $16 is measly compared to the time.  Think of it this way.  Suppose there were a store where you could buy time.  Let’s call it the time store.  The time store sells 90 minutes for $16.  Would you buy? 

I would.  I’m long time. 

First and foremost, it’s the only way I could get back the time I watched Zoolander. 

Almost as important, I could engage in “time arbitrage” and make a profit.  Anyone clearing $11/hour after tax could do this.  Note that you can’t easily do this with a salaried job because you don’t make more by working more hours.  It takes an hourly or overtime job, or a side job.

But what would I really do?  I would spend 90 minutes not working!  There comes a point in life when time becomes more important than money.  I always figured that point would come in my 50’s.  I was wrong.  It came in my early 30’s.

I realize that there’s a commuting tradeoff.  Many people commute because housing is less expensive.  That’s certainly the case where I live.  I’m paying a housing premium to be where I’m at. 

I’ve never tried to put a number on it.  Someday I will.  I have a hunch I’ll conclude that my time is more valuable.

A couple friends needed a ride to the airport this morning.  I picked them up at 8:20 AM, dropped them at the airport at 9 AM, then headed to work.  On the way to work a radio report said there was a four car accident on the 101.  Traffic was backed up for miles.  Hopefully no one was seriously hurt. 

Traffic started to slow miles before the accident.  I heard the report just in time to zip across three lanes and exit the freeway.  A few people followed me.  Everyone else was stuck bumper to bumper on the freeway with no way off.  I took surface streets the rest of the way.

The experience reminded me of an important, eternal truth:  I don’t like commuting.

How I Learned Not to Like Commuting

When I lived on Stanford campus I worked 15 miles to the south.  I was living in an expensive neighborhood (Stanford — thank you student loans) and working in a less expensive neighborhood (Santa Clara).  If any of you have tried to buy a house in Santa Clara you know it’s not “less expensive.”  But relative to Stanford, it’s less expensive. 

Fortunately for me, my commute was better less bad because most people commuted the opposite direction from the less expensive to the more expensive neighborhood.  It also helped that traffic had thinned from the dot com days.  My commute was 20-30 minutes each way.  Commuters going the opposite direction were 45-60 minutes each way.

It didn’t take more than two weeks to realize I didn’t like commuting.  It wasn’t the financial cost.  It was the time.  I worked enough hours as it was.  I didn’t need to lose another hour driving. 

No More Commuting

When I left that job I decided I would never commute that far again.  When I got an offer in San Jose even further away, I turned it down.  I opted for a position just a few miles away from my on campus apartment. 

I now live 3.25 miles from my job.  I don’t use the freeway.  In light traffic it takes me eight minutes.  When the weather’s nice I ride my bike.  That takes a few minutes more. 

If the 101 asks about me, tell him I don’t miss him.  Not one bit.

Links

If you are a regular reader of My Money Blog you know that Jonathan recently bought a house.  He has a well thought-out post about commuting.