Commuting Probably Costs More Than You Think

My wife and I currently live on the northeast side of Indianapolis and work near downtown Indianapolis. We have been discussing whether we would like to move, and if so, where. For the past year or so, these talks really haven’t had much energy. We’d decide to look into moving, and then not really do anything about it. Currently we’re in a month-to-month rental with some nice landlords. However, it’s pretty far from where we work.

Last weekend I decided to quantify the costs of commuting. I figured this would give us something to work with and if it was surprising, would motivate us to take action. In typical fashion, I made a spreadsheet.

The spreadsheet shows what we are currently paying per month in total housing costs (rent, utilities) and commuting expenses. By extension, it also shows what we should be rationally willing to spend per month in total housing costs (based on our current costs of housing and work transportation.) For example, if every month of commuting costs us $300 and we are spending $1000 in rent each month, spending $1300 on a place with zero commute would be theoretically equivalent.

Here is the commuting breakdown spreadsheet that I came up with.

What surprised me

Overall, I was surprised by the amount that we should be willing to pay. I expected it to be high, but not 50% more than we are currently paying. Part of the surprise was probably due to the fact that two people’s commutes would be lowered.

After doing this analysis, I would definitely question any commute to see how it could be reduced. All things being equal, we would prefer to pay less than more, but this figure gives a nice bounds considering we think our current rent is acceptable.

General breakdown

I thought that there would generally be two quantities to figure out. First, what is the mileage that we would save by commuting less? Second, what is the time that we would save by commuting less?

Valuing mileage

Mileage covers fuel costs and vehicle maintenance. I calculated this by taking the average of the 2016 IRS standard mileage rates for business expenses (54 cents) and the lowest cost per mile that seemed reasonable (17 cents). Since both of our ten-year-old cars are paid off, have decent gas mileage (around 30 MPG) and have routine maintenance done to them, I figured this seemed reasonable.

Then I took what Google Maps says as the miles one way to our places of work from home. I took the very best case (not adding on detours.) From there:

  • multiplying by two to get round-trip miles per day
  • multiplying by how many days per week we go into work
  • multiplying by how many weeks we work each year

We have roughly $5100 in car and fuel costs per year as a result solely of our commutes.

How do you value your time?

The other factor that I thought was relevant was how much time we were spending in the car. If you drive an hour each day, how much is that costing you in terms of other things that you could be doing like leisure, working, or learning?

Calculating the time spent was fairly straightforward. I took what Google Maps said was the time during the evening and said that it was the one-way time trip. This was the most optimistic I could be, since generally traffic at other times is worse. Increases of 25%-50% can happen during rush hour, and who knows, you might get stuck in traffic for days. But still, best case I am spending the equivalent of about four working weeks in the car just driving to and from work!

Appropriately valuing our time was the most difficult part of this exercise. Initially I put $20 for value of time since I thought that was conservative. I figured if I could spend $20 to save an hour of driving in a potentially dangerous, potentially stressful environment, that would be worth it to me. I would without hesitation pay someone $20 to mow the lawn, even if I could do it myself and listen to educational material at the same time. So I figured that was in the right ballpark.

Monica felt that figure was too high. She wanted to put $0, because (paraphrasing):

Since you are working at a salaried job, it is unlikely that you would be earning more as a result of having that extra time. You can’t just spend that money on rent since it is not really coming from anywhere (just opportunity cost.)

I could see the rationale of this argument, but I wanted some way of capturing the fact that living much closer to work would be a significant quality of life difference. Basically, I wanted to take time and money and compress them both into money for analysis purposes. We ended up compromising by choosing $5, although I could see $10 being even better. I figured that some of the time I was listening to podcasts or the radio otherwise making good use of the time. There is definitely value in being free from needing to be in the car.

I found an interesting site for exploring valuing your time, although it was kind of hard to reason through. You can tell it was made by academic people with questions about things like how much would someone need to pay you for an hour of “neutral” work (work you neither like nor dislike.) It was hard to think of things that I neither liked nor disliked. I ended up getting a super-high number for how I valued my time, which might have been unreasonable. However, I really liked a lot of the things that they tried to capture.

Anyway, even with the low value of time ($5 / hour), we should rationally be willing to spend up to $1700 more per year just to live closer to work.1


First, move closer to where you commonly go. If it’s not possible to change your work, change lodging. If it’s not possible to change lodging, change where you work or work remotely. When you add up the costs over years or decades (with interest!), they certainly add up.

Second, we are lucky that we can consider moving and that we have careers that are in demand and flexible enough to consider remote work.

Last, valuing time is hard. We often pay people to do things for us, but it’s hard to know when it is worth it. I think establishing a decent value for your time is something worth doing. It lets you stop doing things that aren’t worth doing, lets you delegate things that are, and lets you focus more on your core economic values.

If anyone has good ways of valuing their time (or is willing to give a number with justification), I would love to hear it. I think that I have generally underdelegated in the past and it is something that I would like to get better at.2

If you liked this post and want more math applications to financial things, I wrote a post about how I saved $1400 by using a prepaid phone plan. This was before unlocked / no contract plans were in vogue, but some of the concepts still apply (especially when thinking about breaking a contract with a price to break it.)

  1. I did take into account that we would not be right next to work, since our offices are some distance apart from each other. I figured that I could walk or bike to work since my office is closer to nicer areas. So I didn’t take that mileage at all. However, I calculate Monica’s new cost as the cost of my work to her work, since the housing should be somewhere in the middle. 

  2. It certainly seems like having a good value / justification for what you would be doing with the time saved would help. If I outsource something and spend the time writing, working, socializing, or other high value activities, then outsourcing something is probably worth it. If I spend it looking at cat pictures online, probably should have just done it myself. Likewise, a factor is how much you want to do the work. But maybe this is a digression that should be split into its own post. 

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