Living Car Free - Money without a car

According to the AAA, the average car costs some $8400.00 per year. In order
to compare fairly with using a bicycle, use the saved amount as $8000.00 per
year since the bicycle has some expenses. $400.00 per year can cover periodic
bike replacement and occasional public tranportation expenses.

If you save the extra $8000.00 per year in some conservative vehicle like
bonds paying 4%, a decade of not using one car produces a value of about
$8000.00 * (12) = $96,000.00. After 20 years the 4% factor is about 30
resulting in a future value of about $240,000.00. This isn't enough to fully
fund a retirement.

If a person entering the workforce can live car free for 20 years, invest
the savings more wisely than bonds, but not wildly speculative, say at 8%
return, the 8% future value factor is about 46. This gives a future value
of $368,000.00 for forgoing the use of a single car.

To many people the $8000.00 per year doesn't look like $96,000.00 in ten
years, because they don't save. It looks like $666.00 per month
or $20.00 per day. Either the rewards of reducing car use are more than
monetary or we who have voluntarily dumped our cars are acting irrationally.
A minimum wage earner can work less than 4 hours per day to acquire an AAA
"average" car.

When you look at it that way--I sure would spend more than $400 a year on bikes! In fact, I think I'll start spending my surplus now. :)

It's the difference between student loans or not for me. Now that I'm getting a little more money and might need to make 80 mile round trips there might be a motorcycle in my future, but I don't see a car for quite a while.

I wouldn't spend 8K a year on a car even if I had it in the bank, so it's not a fair calculation for me.

If you save the extra $8000.00 per year in some conservative vehicle like
bonds paying 4%, a decade of not using one car produces a value of about
$8000.00 * (12) = $96,000.00. After 20 years the 4% factor is about 30
resulting in a future value of about $240,000.00. This isn't enough to fully
fund a retirement.

If a person entering the workforce can live car free for 20 years, invest
the savings more wisely than bonds, but not wildly speculative, say at 8%
return, the 8% future value factor is about 46. This gives a future value
of $368,000.00 for forgoing the use of a single car.


According to Money Magazine, the average 401K plan has less than 65k set for retirement. If you manage to save 240K for retirement, you've done excellant by any one's measure. Most people like my father will not be able to retire and will work until the last days of their of their lives. I'm among the many who have no where near 240K and I'm sure the majority of people on this forum are in the same boat. Dont feel so sad because 240K in the year 2040 will probably be about 75K in todays dollar. Correct me if I'm wrong, but that's about two or three years (or less for some people) of salary saved up and then you'll have to get out of retirement and head back to the office. Some Retirement.

In case you haven't noticed, everyone's 401K plan (including mine) is anywhere between 20 - 40 percent less than what it was five years ago. So forget speculating that you're going to make 8% a year unless you're one of the lucky ones who went cash before the great dot com crash. When all the baby boomers retire and start taking all their cash out of the market, we'll all be lucky if we break even because the market just might crash again! Bottom line. You better hope there's Social Security around because you're going to need that check and Medicare! If both are gone, you better start Medicade planning 10 years before retirement because you won't be able to afford health insurance 40 years from now. I almost forgot. Medicade may not be around either! If that's the case we'll all be headed for Canada to retire!

Here's the good news.

Motor car ownership will be even more expensive than it is today and you'll have an inexpensive alternative. The bicycle.

If you save the extra $8000.00 per year in some conservative vehicle like
bonds paying 4%, a decade of not using one car produces a value of about
$8000.00 * (12) = $96,000.00. After 20 years the 4% factor is about 30
resulting in a future value of about $240,000.00. This isn't enough to fully
fund a retirement.

Don't forget that, without auto expenses, retirement itself costs less. On the average you need $25 in retirement capital to generate every $1 of annual income. Then you have to pay taxes on that income (say 20%?). Not requiring a car in retirement is about the same as having an extra quarter million dollars in your retirement fund!

So if you can bank your savings for 20 years and not need a car in retirement, you're halfway there. Add in Social Security around age 65, do a few wise things like paying off a house or setting up a garden variety 401K plan , and you'll be set, at least for a basic retirement.

take your lunch to work too and earn yourself half a million dollars
http://www.hellodollar.com/archives/2005/07/brown-bag_it_to.html

So forget speculating that you're going to make 8% a year unless you're one of the lucky ones who went cash before the great dot com crash. When all the baby boomers retire and start taking all their cash out of the market, we'll all be lucky if we break even because the market just might crash again! Bottom line. You better hope there's Social Security around because you're going to need that check and Medicare!

Yes, I get what you're saying. But investing your car free extra cash doesn't have to be in financial
instruments. For me it is funding additional education. For someone else the extra cash could be
used to start a business. If a hypothetical low wage worker dumps the car- maybe not an average car but still saves a few thousand per year, the extra cash could pay for job training which would return much
much more than 8%.

what about using the extra cash to buy a killer bicycle? That's my plan in the coming few months!

Don't worry about retirement in the distant (10 or more years) in the future. One of the things bike ownership has taught me is that you can live comfortably now and let the future take care of itself. I no longer plan to retire. I no longer plan more than 6 months to 2 years in the future since the future is not a set promise written in stone. My life and health has improved so much since I have eliminated much of the "worry stress" of what if? in my personal life.