I got an interesting money question from one of my good friends today, and thought it would make a good blog post. So here is the first in what will hopefully become a series of advice posts a la Dear Abby, but with less drama and more math.
I live in a resort town. My 350-square-foot studio costs $650 per month, utilities included. This translates out to roughly 1/3 of my paycheck, which is the most I’d feel comfortable paying for rent. I live three miles from work, and it takes me 10 minutes to get there. The rent in the resort town is very high. I have a friend who has a one-bedroom apartment in town, and pays $990 per month – and that doesn’t include utilities. So I’m basically getting a real good deal at $650.
My lease will be up in a month. A female acquaintance has offered me the bottom section of her lovely home in the neighboring town. She would charge me a flat rate of $250 per month for two bedrooms, a den, a laundry room, a bathroom and the option of sharing her upstairs kitchen. Here’s the catch: she lives over 15 miles from where I work.
Another important note: I can’t catch the bus to work. We have a good municipal bus system, but my job requires that I be able to respond to emergencies/incidents/etc. on short notice. I also work late in the resort town 1-2 nights per week.
I have a reliable car that gets about 20 miles per gallon. Gas is about $2.50 here, last time I checked, but we all know that’s a changing variable.
What should I do?
When I was first asked this question, my immediate response was MOVE ASAP! Saving $400/month on rent is the equivalent of a $5,000 raise, or $3/hour (remember that since you don’t get taxed on not-spending, the gross raise you’d need to make up for it is actually about 15% higher than how much you’re saving, depending on your tax bracket.)
So that’s a ton of money, especially for someone who’s working as an entry-level writer. Plus, for that much more space, it seems like there’s no question what she should do.
But let’s look at some other math here. According to AAA, the average cost of driving a sedan (and I know my friend has a larger car than that, but we’ll use this number) was $.59/mile, including gas, maintenance, insurance, etc. That means her commute right now is costing her $3.54/day for the six miles round trip. If she moves, she’ll be up to $17.70/day – and that’s assuming that the only additional driving she does is the trip to and from work each day.
$17.70/day, five days a week, is $354/month – right now she’s spending $70.80 per month, so that would be a $283 additional cost, meaning the “real” rent is closer to $533.
That’s still cheaper than she’s paying now (and she also needs to consider her insurance costs – she would likely keep the same policy, so that cost will stay the same whether she stays where she is or moves farther out), but it’s not $400 cheaper. Is an extra hour each work day of free time (plus not spewing all those toxins into the atmosphere) worth spending an additional $120/month? It might be.
If she can find a way to take the bus occasionally from where she is, or bike when the weather’s nice, the decision becomes even more of a no-brainer. The two options may well come out to cost very close to the same amount, at which point it becomes a quality of life issue. If she’s happy where she is now, I say stick it out.
What advice would you give my friend? Do you have any money conundrums of your own?