Political Calculations: Should You Move Closer to Work to Save Commuting Costs?

July 02, 2008

Should You Move Closer to Work to Save Commuting Costs?

The following question was asked over at Some Assembly Required:

Is there a simple formula that combines the price of gasoline, the one-way commute in miles, and per-hour wages that will let those in the exurbs (and soon, suburbs) figure out when it's time to move back to the city?

The answer, obviously, is yes! Felix Salmon was kind enough to develop the formula, which we've tweaked to create the tool below! Should you move closer to your work? Just plug in the indicated data below, and we'll find out how seriously you might consider the idea:

Rent or Mortgage Payment Data
Input Data	Values
Amount of Your Current Monthly Rent or Mortgage Payment [$USD]
Amount of Monthly Rent or Mortgage Payment at New Residence [$USD]
Commuting Data
Price of One Gallon of Gasoline [$USD per gallon]
Mileage Your Vehicle Gets During Your Commute [miles per gallon]
Number of Days You Commute to Work Each Week
Number of Weeks Your Work Each Year
Current One Way Distance for Commuting to Work [miles]
One Way Distance for New Commute to Work [miles]

Approximate Annual Commuting Costs
Calculated Results	Values
Your Current Annual Commuting Cost
Your Annual Commuting Cost from Your New Residence
Difference in Annual Costs
Difference in Commuting Costs [Positive if Higher]
Difference in Annual Rent or Mortgage Payments [Positive if Higher]
Total Difference in Annual Expenses [Positive if Higher]
The Bottom Line
Should You Move Closer to Your Work?

The tool above only provides a rough approximation of whether or not it might be beneficial to move closer to your work. If you get a positive indication, that means it's worth exploring the idea, with an eye to looking at a wider range of the difference in costs between where you live today and where you might consider living. Things like insurance expenses, food prices, or taxes should be considered before committing yourself to packing up and moving!

For instance, you wouldn't want to move closer to your work in Chicago if that meant having to drive all the way back out to the suburbs to do all your shopping and to eat out to avoid the highest sales taxes in the United States!

Update: Matthew Kahn considers another aspect of commuting cost arithmetic:

Is $5 gas a significant commute cost? This depends on your wage. Consider the following deep math;

Suppose you own a vehicle that gets 25 miles per gallon and you work 25 miles from where you work. Suppose you drive at 25 miles per hour.

Then to get to work, you need to purchase 1 gallon of gas and use 1 hour of your time.

Total One Way commute cost = price of a gallon of gas + hourly wage

Case #1: you make minimum wage = 5 + 7 = 12 and gas = 5/7 of the expenditure

Case #2: Ivy League graduate = 5 + 100 = 105 and gas = 5/105 of total expenditure

So this simple example highlights how the wage can swamp the price of gas for the high skilled but for the less educated, gas is a huge part of the commute cost.

Update 7 July 2008: Ryan Avent summarizes and extends the discussion....

Labels: gas consumption, personal finance, tool