Saving More In A High Cost of Living Area

Posted On November 15, 2020

I live 42 miles from downtown San Francisco where I’ve worked for the vast majority of my career. My commute on average is 3 hours a day. 1 hour in the morning and 2 in the afternoon. This equates to 32.5 days of commuting a year. I believe I’m being as efficient as possible with my money by choosing to live in a “cheaper” suburb, but is commuting to work really the most optimal way to live in a high cost area?

Let’s crunch some numbers and look at how much living in a suburb saves me. How much a commute of 42 miles really costs. And how to make the most of the inherently high salaries of a place like San Francisco–making 6 figures here is considered low income according to the federal government.

Super Commuter

The media has dubbed a 90 minute or more traveler for work as a Super Commuter. The Bay Area has the honor of leading the nation with Super Commuters with an estimated 120k people doing this daily.

The virus’ impact on commuting

Covid-19 has emphasized the ability of some workers to work remotely and to skip out on the commute altogether. To those that can telecommute, I tip the hat to you. Right on. But there is a whole other half of the economy, mostly middle to lower class and essential workers, that physically have to be at work–or else the job couldn’t get done. Blue-collar workers can’t work from a computer.

Maybe after this pandemic thing is all over, the freeways will free up a bit as more people work from home. This would benefit white-collar and blue-collar workers altogether–not to mention the environment. I don’t particularly believe things will stay this way though. Companies will be calling back all their telecommuters in the future…watch. After 9/11 they said nobody would ever fly again too.

The Nor-Cal economy has forced the majority of us to choose between two options:

People in the Bay Area have become accustomed to making big city kind of money but either cannot afford or choose not to pay more to live closer to work.

Option #1. Live in the City?

*Also, San Francisco—as a native son from the Mission District, I’ll always love you—so forgive me, but the city is a real shit hole. There are so many crack heads and weirdos crawling the streets that I would never want to raise my kids there. I’m talking about people running around naked, shooting up or jacking off on the sidewalk, or defecating in plain view kind of shit hole. If you don’t have kids, the city is much more palatable with fantastic restaurants and things to do.

Option #2. Live in a Suburb and Commute?

• Take public transportation. This I can do (depending on work location) and have done. Because I live away from the hub, I have to drive 20 minutes, cross a bridge, and catch the 4:30 am BART train to make it to work by 6 am. There is a heavy trade-off with waking at 3 am vs my current 4:15 am out of bedtime. There’s also this temporary Covid thing…

• Drive and deal with it (and FIRE). This is the option I choose. And sadly, it’s the option of hundreds of thousands of workers who will not FIRE and work till age 65. They’ll just give up years of their lives driving to work because it’s the normal thing to do. I am was one of them.

The cost of the commute

I’ll use my location for the example.

Distance to SF 42 miles- This is 84 miles a day/1680 miles a month/20,160 miles a year. So let’s compare mortgages as a sort of baseline of savings off the bat before we talk cost.

*Using a hypothetical mortgage on a 1.3 million dollar SF home of $4,884 vs my current mortgage of $2,385. I assumed 20% down, 3% interest, and $5K property tax on the SF house.

Housing Savings of $2,499 a month/ $29,988 a year. This is what I save by living 42 miles from SF city limits. Now the commute cost:

Driving Cost: $564 a month or $6,771 a year

Time: 3 hrs round trip daily | 780 hours a year | that’s 325 days if you did this for 10 years.

Gas: $304 monthly | $3651 annually. Avg gallon in Bay Area is $3.61 and 18 mpg due to stop and go traffic.

Bridge Tolls: $260 monthly |$3120 annually. Typical bridge-$6 and Bay Bridge-$7. I cross 2 bridges. Luckily, I don’t cross the Golden Gate with a toll of $7.70-$8.70 per crossing!

*Car Maintenance: $200 annually? This varies dramatically. Changing the oil can range from every 20k miles to 4k miles. What about tires? Brakes? Wipers? For these reasons, I excluded the car maintenance cost.

BART Cost: $545 month or $6,540 a year

Time: 3 hrs round trip. Broken down like this: 50 min BART ride, 25 min drive to/from the station, 15 min walk to work from station.

Gas: $115 monthly | $1382 annually. Yep, still gotta drive to the station. 40 miles round trip. But traffic further from SF is better, so we can assume 25 mpg.

Bridge Tolls: $6 daily | $120 monthly | $1440 annually

BART Fare: $13 round trip | $260 month | $3120 annually

BART Parking: $2.5 daily | $50 monthly
| $600 annually

BART VS Driving Winner? BART

If I had to choose one it would be taking BART. It’s cheaper and better for the environment. Even though the commute times are similar, I come home much more refreshed after BART. And I can read a book (a difficult task at home with younglings). Sadly, BART doesn’t always work for a guy in construction as job locations aren’t permanent.

Can you imagine paying all this and having a $500 monthly truck payment? Sheesh!

The Mental Cost

It’s well-chronicled that commuting is stressful and not healthy. People weren’t meant to sit in cars or get stuffed in trains for hours at a time. There’s the unpredictably of it. The inability to control the situation. Rude strangers. The lost time, as I alluded to before, and the loneliness of sitting in your car or silently standing on a train. This impacts both our psychological and physical health.

A fairly old study from 2004 compared commuting stress to that of fighter pilots, and guess what; they have the same levels of stress. According to the U.S. census bureau, 150 million Americans commute by car while 7.6 million by public transportation. I’m curious to see how this number declines post-pandemic.

I’ve been able to make the commute more tolerable by listening to podcasts. I feel as though I’ve taken educational courses on a myriad of topics ranging from investing to history to secular Buddhism. These podcasts have made me a better person.

Are the savings from a commute worth it?

I won’t disagree with anyone who decides to pay more to live in the city to get their “time” back, especially so if they have a family. The problem with this is that you’d likely have to work longer, due to the inability to properly save.

Looking at the numbers, savings for someone like me is around $23,000 a year. If I deduct the commuting cost from the mortgage savings (Housing Savings $29,988 – Commute Cost $6,771).

That’s a nice chunk of change. Throw $23k annually into the market at 7% returns for ten years and…$362,912 is possible.

So yes, I’d say the savings are definitely worth it, though there is a heavy price to pay with hours of life lost on the road.

Everything costs more…so it’s even more important to save on housing

We’ve already covered housing and driving costs, but just about everything else costs more living in an expensive metropolitan area. Prices are from Ballotpedia and food from Walmart in 2018/2019, but this gives an idea of the cost of living in California. I’ll use New Mexico as the low-cost base, simply because it’s a beautiful state with a small population.

• Dozen eggs: $2 CA | $0.98 New Mexico
• Gallon of milk: $2.69 CA | $2.09 New Mexico
• Gallon of gasoline: $3.63 CA | $2.77 New Mexico
• Car registration: $86 CA | $27 New Mexico
• State Park entrance fee: $10 CA | $5 New Mexico

Hack the High Cost of Living Area

The key is to take advantage of the high income that is possible in places like the Bay Area or New York. If I can leverage a San Francisco salary vs lower annual expenditures ie. housing, it can be like throwing gasoline on my FIRE plans.

Someone might argue: Sure, incomes are higher in the Bay Area, but so is the cost of living. What you are saving is relative to where you live. So what if the income/savings number is greater, your gonna spend more on everything else. The ratio is the same no matter where you live, so it’s equal to someone living in New Mexico, except you deal with commuting and weirdos.

I would opine: Touche. Yes, I deal with commuting and it’s rough, but it’s part of my hacking scheme. And yes, the income/savings ratio is relative to location. But the dollar value saved in the Bay Area is greater. Thus allowing me to save more and geo arbitrage to pretty much 90% of the world. Even 100 miles from SF the cost of living drops dramatically.

The super commute isn’t for everyone

Living in a high or low-cost area each comes with pros and cons, you just have to maximize the pros and squeeze the cons for juice. I’m squeezing the commute for juice. A high-cost or low-cost location is not better than the other. Commuting has robbed me of productive time and time with my family. If I had a slower life in a cheaper part of the country…well that’s what I’m after. A slower life.

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.

Winston Churchill

Do you commute to work, if so how do you cope? Has the pandemic allowed you to telecommute? Would you pay more money for housing to spend less time commuting?