A Pay Cut That Pays Off
If You're On the Financial Brink,
Here's a Drastic Move to Consider

Are you working to support yourself and your family? Or working to support your car? Looking at how much after-tax income gets eaten up by transportation expenses each month, raises some interesting questions. Is it worth it to take a pay cut to work close to home and get rid of your car?

First, consider that the average American household devotes almost 20 percent of its spending to transportation expenses, mainly car-related expenses. For low-income households, that figure rises to as much as 40 percent! So it's a vicious cycle: We need a car to get to work, but much of the time at work is spent earning money to pay for the car. It's almost worth just staying at home!

Well, not quite … But it may indeed be worth working near home if doing so means you can get rid of your car — even if that means taking a pay cut. That's because even most economy cars cost an average of at least $500 per month to own, between payments for a newer car or repairs on an older car, routine maintenance, insurance, gas, vehicle registration fees, tolls, parking and other expenses.

Even in a low tax bracket, you need to earn about $650 to take home that $500 each month. That's $7,800 in salary, or $3.75 an hour if you're an hourly worker. So if you can find a job close enough to home that you can walk or bike there and sell your car, it might be worth taking a pay cut for something less than those amounts. Of course, you might not need to take a pay cut at all if you can find a comparably-paying job closer to home. The point is that car expenses are so significant that you shouldn't decline a nearby job just because it pays less.

But, life without a car?

Giving up your car might sound like a big sacrifice and, frankly, for many of us with kids and a busy lifestyle it's unrealistic. But for those of us who live in a neighborhood near work and near groceries, it can be quite easy — and quite healthy with the added walking or pedaling. The first step is to try using your car as little as possible. Between walking, biking and your local bus system, how easily can you get everything done? For errands that truly require a car, can those things be handled one day a month? In that case, you could rent a car for a day.

And sometimes one good decision leads to other benefits. For one thing, no more traffic jams! A shorter commute might mean you won't have to leave for work as early in the morning or arrive home as late at night, and so you might be more likely to have time to pack your lunch — and less likely to order delivery for dinner because you don't have the time or energy to cook. Giving yourself a raise by taking a pay cut might sound counterintuitive, but most people who become financially secure get that way by not thinking with the crowd and instead thinking creatively.