Welcome to part three of the seven part series How to get financially independent. A series of tactics you can use to get financially independent as soon as possible. Remember it’s not about getting rich, it’s about getting free.
If you haven’t read them already hop over and read the introduction to the series which is available here. Part 1, all about moving to a new country can be found here. With part two about starting up a side hustle is here.
Seven Ways To Get Financially Independent In 2017: Part 3
Dump Your Car To Become Financially Independent
Cars are considered many things around the world including, transport, a status symbol, an asset, a liability and a drain on natural resources.
However cars are also known for making people poorer. Whichever way you look at it cars drink money like a cash hungry sponge.
If you want to get financially independent sooner, it’s time to dump your car.
Too Many Cars
There are a lot of cars in the world; most estimates put the total amount at over 1.2 billion cars. The UK has a population of around 64 million people and has around 32 million cars. 1 car for every two people.
The USA has a population of around 324 million and over 250 million cars. That’s 1 car for every 1.25 people.Even if everybody capable of driving got in their car and drove there would still be many cars left without a driver, sat in a garage
How Much Do Cars Cost?
The simple answer to this question is lots but here are six costs associated with car ownership.
Average car insurance cost in the UK as of this year was £429 ($536). There are ways to reduce this including living in a better area (costs money) being a more experienced driver (takes time) and having a good driving history (no speeding, no crashes). The key to reducing the cost is shopping around to find the best deal.
New Car Depreciation
An average new car in the UK costs around £15000. Over three years most cars will lose around 50% of their value. This varies depending on mileage and condition. Some cars depreciate less than others but this is a very difficult thing to avoid.
Fuel price will always fluctuate with the price of oil. We have been through a long period of fairly low oil prices but they are starting to rise. Driving efficiently or having an economical car will help reduce costs.
In the UK we pay road tax which varies depending on the engine emissions of your car. They vary from zero for a vary low emission car to £515 for a “gas guzzler”
On a year to year basis this can be anything from zero to thousands of pounds. Having a new car does not always protect you from needing serious maintenance work. This also includes MOT and services.
General wear and tear which depends on the amount of miles you drive each year. Varies from £40 per tire up to hundreds per tyre.
The AA offers a useful document which details the cost of owning a car depending on the miles you drive per year. The document is slightly outdated which affects some of the costs such as petrol (now cheaper) and insurance (now more expensive) .As a quick guide it works pretty well though.
Car Cost based on a brand new valued at £15000.
The estimated cost at 10000 miles per year is just over £0.50 per mile.
Total cost for one year including depreciation £5000
How To Dump Your Car
If you want to become free in as quick a time as possible then a great thing to do is get rid of your car. Many people believe this solution will not work for them. In reality if they used one (or some) of the below methods instead of having a personal car they could be thousands of pounds better off per year. The first option below is the most available to many working people who absolutely require a car.
Get a pre-owned car
Much of the depreciation is taking out of a car early on thus buying a second-hand car can be beneficial to the frugal amongst us. I personally have never bought a new car (and never will)
Not as cheap as it used to be. Claimed to be better for the environment and you are free to get other tasks done at the same time as travelling.
As recommended by numerous frugality websites out there. Great for the environment, cheap to run and keeps you to a reasonable level of fitness. What’s not to like?
I’m sure in this day and age no explanation is required. Only suitable for larger cities in the UK. Cheaper than a taxi and you don’t need to carry cash. Some of the other alternatives are a lot more frugal but when needs must.
Like biking but cheaper. The value is balanced by the time consumption. That being said walking can often beat public transport for speed over short distances. Great for seeing places from a different point of view.
Don’t leave the house, stay in your lounge wear and get things done via Skype. Seeing people in the flesh is over rated anyway.
How often do you actually need a car? Once a month? Then hiring a for one or two days could be a cheaper option.
As you can see owning and running a car is not good for your financial health. There are many alternatives to actually owning a car which can help on the road to financial independence. As a challenge over the next month see how long you can go without using your car. It’s probably easier than you think.
To receive updates on the next article in the financial Independence series sign up for the emails below.