When I think of the single greatest action anyone could take right now to accelerate their journey towards personal and financial freedom, I think of how I learned to bike again. This single decision has the power to immediately increase the rate at which we build wealth.

This one decision has led to an increase in my assets of nearly $50,000 in the past 4 years of my working career.

So, you might be asking yourself,

Is Car Ownership Worth It?



If you’re thinking it is impossible to take this advice, because car ownership is a MUST in your life, then skip ahead, but first, I’ll clarify how I arrived at such a large number.

The average cost of owning a car today is approximately $8,698 per year.

An argument could be made that a frugal person can buy a beat up, used vehicle to save on money, but I’ll counter that point with an offset cost associated with keeping a car in an expensive city. My hometown of Chicago means parking can run anywhere from $1,500 to $2,500 a year.

Instead of spending $8,698 on a vehicle each year, I’ve invested that same cash flow into my 401(k), which is pre-tax. Assuming a tax rate of 30%, that means I would have needed to earn $49,703 to have paid $8,698 each year.

Of course, there are tax implications on the tail end of my, “savings,” If you’re looking for ways on how to access retirement funds early, without penalty and in a tax efficient manner, then I recommend checking Brandon’s Mad FIentist post. Definitely a good read for anyone interested in early retirement or pursuing less income later in life after having reached financial independence.

As for me, after factoring in the cost of biking or taking public transit instead of driving, I can comfortably  say I’ve come out ahead by more than $45,000.

Public transit in Chicago used to cost $100 per month for both my girlfriend and I before we moved within walking distance of work. At $1200 per year (since commuter costs have been a pre-tax benefit at my jobs), that means I’ve spent about $3,000. I’ll venture to say owning a bike would be far less expensive if it wasn’t for the fact I use my bike to compete in triathlons as well.

Is car ownership a MUST in your life?



Take a moment to consider what we NEED a car for. Don’t think of this as  a question about if we need a luxury car or if we would be just as happy with a Honda Civic. This is an overall question on car ownership in general.

Is it possible to move closer to work so we can walk or bike instead? Is it possible to hop on public transport?

Are there short trips from our home where we can use a bike instead of driving the 1 or 2 miles?

Is it possible to consolidate from two cars to one in a household?

These have all been questions my girlfriend and I have asked over our time in Chicago, and we continously value building wealth higher than the benefits of car ownership.

Of course we have been massively inconvenienced at times by having to rent a car. It is a pain to have to wake up an extra twenty minutes to walk a mile to pick up a car, but that type of inconvenience is worth it to us.

From my perspective, I can tell you eliminating car ownership would NEVER have happened in my household growing up. Each of my parents demanded their independence and viewed their vehicle as an extension of their freedom.

I want to add that they worked at the same building and often car pooled together to and from work.

I’ve taken a different approach than my parents, because I saw their financial habits mimicked many of those struggling to fund their own retirement. As I’ve mentioned before, part of my FI calculations include a portion of my future income being utilized to help support my parents in retirement because they will not be financially prepared for it. .

Many of us get sucked into buying what we think we can “afford”. If we maintain that approach throughout our working career, we’ll always spend the maximum we can, without leaving room to let our money work for us.

As Bobby, from the Millennial Money Man put it on Twitter:

M$M Car Ownership
That is sagely advice if we’re serious about pursuing financial freedom.

Final Note

The last thing I’ll add is that I believe car ownership is a dying business model. Following the boldness from a recent guest post’s stock market prediction, I’ll put myself out there and say the future business model will be car fleets being owned and operated as a public utility.

Currently, the average car owner utilizes their vehicle 5-10% of the day. The remaining portion of the day, the car sits and depreciates. This creates a large economic incentive for companies to put those cars to work.

Autonomous driving technology is constantly improving as more than 3 million autonomous miles are logged every day at Tesla alone. It wouldn’t surprise me to see a future where trusting a 16 year-old to drive a multi-ton vehicle on their own is considered reckless parenting.

The cost of insurance to cover an individual driving their own vehicle will also skyrocket as the safety of autonomous vehicles far surpasses human capabilities.

Think of it this way; people still ride horses, but it is an expensive hobby as opposed to an effective way to travel.

With the rate technology improves today, I wouldn’t trust those resale values on cars in ten years.

Do you enjoy the financial and personal benefits of biking to work? Is car ownership worth it to you or is it something you wish you didn’t need to put up with? Is there a factor or two that needs to change in your life before you think biking or walking makes sense?

-Matt
Master Distiller

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