Include the transportation to and from work in the calculation of ‘total cost of housing’.
I have been reading the Mr Money Moustache blog again and came across something someone said in a comment. Intrigued, the following are my thoughts on it.
What does this mean?
Naturally, cost of rent closer to the city/CBD will be higher than places further out, but if you include costs of transportation to work e.g. trains, then it will provide a truer cost of housing. Also, you can include time as a separate cost and see whether you are happy to set aside 1, 2, 3 hours a day travelling to and from work.
I have never really put much thought into this before, always assuming where I am is the right place to be for me.
Right now I am paying $155/wk ($8060/yr) on rent in a western Sydney suburb. A train fare to work in the CBD would cost about $43/wk. So in total I am paying roughly $200/wk.
Of course, this is helped greatly because Jared and I have a house mate. If the housemate left and we had this 2-br apartment to ourselves, my rent would be $265/wk instead, and $308/wk including transport to work.
A quick look on Domain.com.au shows that the cheapest 2-br apartment in Surry Hills is a minimum of $550/wk ($275/wk for me) but that is followed by listings of $650/wk then $700+. Ultimo and Darlinghurst listings start in earnest around the $650/wk mark, Pyrmont at $700/wk. And of course, these are all prices at which the listings start. I am a huge fan of the “sort by lowest price” button.
Let’s take as a hypothetical that a realistic price point is $650/wk for a 2-br apartment around the city somewhere. This means it would cost me $325/wk, plus walking or maybe a couple train stops to wherever it is I may work.
Moving to the CBD, or within walking distance, would cost even at best, or what I suspect to be a lot more than what we currently have here. Finding the right place, with enough space so Jared can work from home and we don’t want to kill each other, assuming that these places have NBN, would be really hard and probably even more expensive that the starting point of $650/wk. I also have a feeling that being much closer to all the nice little cafes and restaurants, and generally everything else the city has to offer, would induce me to spend even more money.
On the flipside, from where we are now it would take a 25-35 minute train into the city, then walking to each train station. It could easily take a full hour to get to work each way, but I am paying that price with a much lower price of housing, bigger and newer housing (you should see the size of my bedroom alone), great NBN. I love my little suburb even though it is not perfect. It is close enough to the city, while still being close to my family, relatives and friends – I am sort of in the middle. I guess I am so used to the commute that one hour each way does not phase me much, especially if most of it is spent on a train where I can read or listen to music.
Okay, so clearly I have established that a bit of a commute is more than welcome for paying less rent (travel included), for more space, for NBN, for being closer to friends and family.
What would turn the tables a little is moving somewhere with a much different scenery, like being close to the beach. Moving to the city or inner suburbs lack appeal to me because there isn’t much of a change, no huge wow factor except for a substitution of money for time. But moving to the beach? That’s a real lifestyle changer for me, even if it isn’t for everyone.
So let’s make a few more calculations.
A beach suburb requires at least a bus to get to the city. So there’s already transport costs. Rental listings start from $600/wk for Coogee and Bondi Beaches, much more for listings closer to the beach. But if I let myself move all the way to a beach suburb it would have to be closer to the beach, so let’s assume it would be in the realm of $750/wk for a decent place at either of those beaches plus travel into the city. If you’re lucky, maybe you can find work closer to where you are. Could I justify spending that much on housing? That’s $375/wk for me, almost $20,000 on housing alone. Contrast that to my current situation and it is almost double!
On one hand, it would be amazing to live close to the beach. For me personally, I find it is immensely calming to relax on the beach with our little beach tent blocking those harmful UV rays. Bring a beer or two, buy a takeaway pizza nearby, a nice book to read, and it is almost better than most holidays I can imagine.
In the last year or two I have always factored in a sum for holidays and other large expenses. I wonder if I would be willing to place that sum of money into this lifestyle instead.
The disadvantages, other than the clear money sink on rent, would be being much further away from family and friends, and still needing to travel a bit to get to work. I think this kind of lifestyle is hard to swallow right now due to the income we’re both on. [aside note: I still think like I am employed sometimes]
I would like to be on at least $75k/year salary before I was comfortable allowing myself to live this lifestyle. But who knows, that might come sooner than I think! Cross your fingers for me.