The MMM Show - Episode 5 - Why Gas Is Really $42 Per Gallon! 

I live in the Netherlands. We have such good bicycle roads, good public transportation and very short distances compared to the US. Still a lot of people drive to work every day. Even though the cost of fuel and taxes is way higher in the Netherlands than the numbers you show. I'm almost 30 years old and I've never owned a car, I'm going to try to see how long I can do it without a car. Imagine a world without cars in the cities, that is my utopia.

SO HAPPY YOU'RE ON RU-vid FOR REAL! It's my favorite platform. Been subscribed for a while, and frankly wished you would upload more.

Parking is MASSIVE. I had coworkers that paid $14/day for parking while I biked to work. Insane. (Not only that, but they could park for free at the city lot 2 blocks away.)

Breaking down the numbers is a huge help. Almost everyone doesn't do this for their first car.

Yep. 20 years living car-free has been great for health, happiness, and finances. We make choices to live where there is good public transit and walking distance to daily needs, but this one choice has so many cascading benefits. My kids get a nice opportunity to learn public manners on transit, we can play games or read together when we go farther away places, we always get exercise and fresh air without needing to schedule it, we never ever waste time thinking about or finding parking, we shop local and more regularly because it's what we can carry which means less food waste and fresher food.

Absolutely awesome! Living 4 years in Boston with no car was the coolest years ever! Texas is very different, but the tiny 2001 Toyota Echo has been absolutely amazing :-)

I just wanted to say I'm one of those Toyota Corolla owners and I still use my bike over my car whenever I can.

I ride my bike to work everyday. It helps save so much yearly.

Your forgot the best part of peddling to work... Huge macho points from your co-workers, on cold rainy snowing days on bike, clacking around on your bike shoes on the office tile, bike over your shoulder (for some reason). Throwing your bike down like you just finished tied for 3rd at tough mudder. Walk over and pour yourself a nice big cup of joe and wait for question from the fans. Ahhh the feeling of ecstasy.

I was wondering when you'd do a cost of commuting episode! I love this because not only are you saving people a lot of money, but you're also helping the environment so much by reducing the number of "clown cars" (I love that term, MMM!) on the road. For those of you who say there's no option not to drive because you live in an area in which there are no alternatives to getting to work, just remember this video when you're making future choices about where to live, which job to accept, which activities to enroll your children in, etc.

Great video! I definitely agree we cannot value our time at 0. If the gas station down the block told most people, "Hey, want to come work here for $1 an hour?" they'd be like "Hell no!" Yet many of us happily accept an unpaid, unpleasant job fighting traffic. And then we get to pay the other costs you mentioned also. I'm glad I ditched my car 4.5 yrs ago.

This is really eye opening. Thank you for sharing. Love the visual exclamation points fireballs effect - makes me smile each time.

I absolutely love how low tech these videos are. Top notch (no sarcasm). I bike commute 15 miles every day in a midwestern city where it's "'impossible" to get around without a car. I wish more people thought about their car use and purchases rationally!

The fire punches are getting more powerful! 1:32

Even if you can't make yourself go car-free, shortening your commute to a few miles lets you get away with buying a few years old high mileage used car for 1/2 to 1/3rd the cost of new and driving it until it rusts out. It would help if cities that could be great for car-free living wouldn't make it so difficult to build density that allows for car-free living. Why doesn't anyone build new cities anymore?

The trouble with these kinds of stretches with statistics is that they actually undermine your overall message because they are too easy to poke holes through. Thus, they are akin to preaching to the choir. They make people who already do what you want them to do feel good about it without moving the needle on others. For an accurate comparison, you need to compare two alternatives and get away from converting this to dollars per gallon which is just a gimmick that mixes fixed and variable costs. You can tell its a gimmick, because the way you have calculated it, it would actually go down the more someone drove. The cost of the other alternatives is certainly lower, but is not zero. You would have to price the bike(s) and riding gear along with everything else. Further, you would need to completely eliminate (or add in both columns) those costs that are paid anyway, such as local taxes. I get the point and like it, but this sort of presentation is not persuasive to anyone on the fence.

Big picture math! I walked to work for years, it was great - definitely adds up over time. Helped me save a ton of money, and buy my first rental property, start house hacking, and reach FI through rental property cashflow! Decisions like this are especially important early on in one's investing journey.

My ride into work is generally the best part of my day.

Another great vid. Thanks MMM. I did similar math a couple of years ago and promptly left my commute behind.

Solid video! Makes me think twice about taking the scenic route home from work

One other cost: 20-30% increase in cost because you had to pay fed/sate/FICA income taxes on the money you had to make in order to pay these car expenses. $1 spent on car expenses equivalent to $1.25~ extra invested into a 401k or HSA.

Best intro yet!!! If you stick with one of them I vote this one!

Great video!! Thank you for helping us to see the bigger picture

The problem I have with this style of math is that it assumes you would totally get rid of your vehicle if you started walking or biking to work. Statistics show you would still keep one or two vehicles in the house so most of the fixed costs of the ownership, registration and insurance would remain even if you drove less to work. I'm not implying it's cheap, I just think you cannot reasonably assume that everyone will sell their vehicles since they are so useful in so many situations besides commuting. I think this is especially true for MMM as he just made a video about how much he loves road trips. Sell your car, no road trips without hundreds of dollars added on for rental fees each time. So yeah, that's my beef.

I haven't "done the math" at all. I bought a car I like - in cash- and I drive it 15 min. each way to work. When the tank gets low, I fill it up and when it needs maintenance, I pay for maintenance.

Thank you for such superb insightful analysis.

It is so hard for me to explain this to the people I work with! I hear so many complaints about money all day from co-workers who drive 30-60 minutes one way and eat out at lunch every day! I hope I can spread this Big Picture Math to some folks I care about and potentially save them some wasted time and money. Long-time fan on the path to FI. Thanks MMM and 2L&L

Well, I liked the video because it creates awareness for people that had not considered these factors before. I understand though that the examples given are quite specific and do not apply to a lot of people. Even though I am a car enthusiast I would like to not use a car to commute, but it just isn't possible unfortunately. I am in Europe and with an old diesel car and being smart you can average 3500 USD for 15500 miles/year - so about 22,5 cents/mile - all included (depreciation, fuel, taxes, maintenance, parking, toll roads, etc), and although the GDP here is much, much smaller than in the US, this cost does not have the same impact as the 250K/decade MMM states for the US citizen. Guaranteed, not everyone uses an old 1,4 diesel, but it just goes to show that you can optimize your spending to a level that you are comfortable with.

Also factor in the cab fares that you might be able to save if you own a car. Therefore the $43 /gallon might come down a bit

A downside of cycling is overuse injuries. I’ve commuted 20 miles each way for over 4 years but now have an overuse knee injury which makes cycling almost impossible... and I’m someone who after breaking his collar bone on the way to work stil ride the thing home again and only took one day off the bike before making a full recovery. I’m reluctantly on the bus... but I have ran/walked it in the mid-winter snow as I cannot stand the bus!

When my wife and I lived in the DC area for a few years, we chose to pay higher rent to live right by the Beltway to avoid as much car clown commuting as possible (between biking and Metro-ing, I drove to work six times in 3 years). The rent premium was definitely cheaper than being car dependent. Boston is similar, and when I visit my brother in Brighton, I'm astounded that people even bother with cars in the City proper, but as a native New Englander, we think 10 miles is quite an undertaking. Last summer I tried out one their bike share kiosks and found it to be safe, fast, and convenient as it seems that even the notoriously aggressive Mass. drivers have adapted to things like bike lanes and basic traffic rules.

Big picture spending.. Thank you for helping me think this way. Much appreciated

I drive a used Nissan Leaf to work, get to charge for free there and receive a $20 a month incentive for being a part of our company’s carbon reduction program.

Drive 2013 pruis for commute in business. So mileage deduction helps along with 50 mpg in winter and summer avg 65 mpg. Keep tire inflated 42.

The shirt choice in this episode is the best one so far! 😆

MATH (big picture of course) ... I LOVE IT!

Hey man liked the video and feel this is a nice addition to the classic commuting article. However the PowerPoint was very hard to view on the video, especially the last slide. Looking forward to more content!

Great video. Is it possible to upload the slides to your website? Thanks.

I'm realising I might be a closet Mustachian! I've resisted owning a car my entire working life (20 years) and imagined that if I ever did get one, it would be an EV. I'm renting a place 20 minutes' walk from work and would be reluctant to give up on the convenience and exercise. A couple of years ago my partner felt she needed a gasoline car to be able to drive to visit family in other cities, and she paid for the car (a used 1.5 L Japanese import) herself, and I've taken on the role of in-house DIY mechanic as much as possible. :) She currently lives and works overseas for much of the year, and I tend to use the car once a week for combined errands and visits and to give it some exercise. With my rental coming up for sale, I figure the time is right to step onto the property ladder. I have no debt, savings for a deposit, and have been crunching numbers on what might be a serviceable mortgage. I'm hesitant to blow all my savings on the deposit, but I think it makes sense (the deposit is too small to buy somewhere outright). I've lowered my expectations greatly and am leaning toward somewhere very modest but still close to work, that can be paid off in a few years. However, Spousal Acceptance Factor may be an issue! I would also consider a much longer mortgage term if we found somewhere closer to ideal (more space, better insulation, etc.), even if it meant commuting across town, but current housing prices make me think that anywhere that ticks all the boxes would be unaffordable. Driving from a more distant residence would be tempting, but I would be leaning toward public transport or cycling (though I'm much more comfortable walking - it's popular here to hate on cyclists and the introduction of bike lanes). Any thoughts on my musings and prospects?

Must be nice to have a job at the same place every day. I work construction as an electrician and I might work three different job sites in a week. I also live outside of Seattle so if I moved closer these jobs I would be spending an extra $1k or more a month in mortgage costs. Love the videos! I found this lifestyle late in life (33), and I'm applying everything possible but some things just aren't feasible for everyone.

Great video and something to consider. However, opportunity cost of not owning a car is not shown here. Lets be a mustachian and buy the cheapest car...over here in UK something like 1500 to 2000 pounds... The alternative is go via bus...which takes far longer (2 times longer usually), so Count cost of your time. Count cost of travel by bus/train Count cost of not being able to go to places with your friends/partner (whenever you feel like it) So in short buy a car (not the most expensive one) because not buying it is costing you a lot more. P.S from someone who has not bought a car for a long time (upwards of 4 years during the PhD) and ofcourse regret missing out on many experiences due to not having a car.

I'd love to live car-free, but I live in a rural area and the closest town is 8 miles away. On top of that, I live on the Gulf Coast. Riding a bike home from the grocery store for 20 minutes in 100-degree weather with 100% humidity would make for some rank milk and other perishables.

Thanks for this video I figured some of these items were on the video but nowhere near half of them. These videos should have more views.

Great! More like this.

Hi, I was wondering about your view on the Pension Funds. I live in the Netherlands, and here it’s quite common for many employers to have arrangements with the Pension Funds and invest say 5% from the employer side to the total amount an employee sets off for his/her pension. What is your view on this topic - is it better to skip the Pension Fund deal and just e.g. invest in the index fund? Thanks a lot for your work, and it’s exciting to see you on RU-vid. Cheers

Started reading the blog in the early days. Big picture math basically convinced me to pass up on a number of experiences in my late twenties. Regrets.

Cold water on some of the calculations. If you move into the inner city, your home costs will increase significantly, and wipe out much of those savings. The letter alluded to this, but it wasn't factored in to the bottom line cost/benefit. Furthermore, if you switch from a car to public transportation, your commuting time will increase, and that time factor will switch to worsened, rather than improved, costs. I still believe in the calculations, it is just that the amount of savings is not as much as is indicated.

I would love to live closer to my job. However, not enough that I'm willing to live in the city I enjoy the woods and the river far to much.

Hi MMM - We're moving to your state of residence, Colorado, from rural/suburban Connecticut (where we are not set up well for getting our needs met locally). I am hoping to improve this situation with the move. I am taking a job that requires less driving (I own my own business doing in-home private dog training right now). I will be working in Broomfield, at a facility mostly, with some driving to reach my service dog clients (my clients are sometimes not able to drive so I must meet them at their homes). I have limited my driving radius for my clients in CT but hope to do much less driving in Colorado (any tips for those who work in other's homes as their main source of income is also appreciated!). So, my question is: how do you go about finding the right location for housing? We're selling our house here and will be looking for an apartment (my first!) out there with the higher real estate prices in CO. What type of research should I do in advance of picking an apartment, aside from just googling the proximity of the nearest grocery store? My husband doesn't have a job out there yet, but I will be encouraging him to look locally so that he may be able to walk/bike to work as well! (he's not as much a mustachian ... yet!) Thanks for your time! I've been binging on your blog and am excited to start this new phase of our life with zero debt once the house is sold, some serious cash in our pocket, and the goal of saving one of our two incomes. Best, Laura

Great Video! Just FYI the font on the slide show didn't always show up well due to the contrast of the background. ANYWAY, I was wondering if you had a link to the info about the "cost of other people's money per gallon of gas you burn" I would love to share that info with some friends who don't think about how much fuel they burn.

Ahhhhh I almost didn’t click it because I knew this truth bomb 💣 would hit home hard for me. I was right! It did. 😩😩

This is helpful but I tend to agree with Frank Vasquez as below when you do "big picture math." In most cities of the U.S. bike paths are under-developed and therefore, you have to bike at least some portions on the road and bike with automobiles. And if you do that, there is a much HIGHER risk of loss of life or limb and the relative benefit of biking decreases significantly. If you look at injury statistics of commuting bikers at major U.S. cities, the risk of injury or death far outweighs that of driving a car. And what else is more important than life and health? This calculus is also excluding the risk of injuries from sheer biking, the opportunity cost of time you spend on riding a bike, costs of buying a bike and maintaining it, and the difficulty in hauling cargo in a bike.

This is the best intro song

I live in northern nj and found these estimates on the low side. I pay four times that much on insurance. Plus if you drive to your desk job all that ass sitting will catch up with you.

Another common situation is two working partners in the same house with jobs in different locations. The closer you move to one job, the further you move from the other. Likely the ideal solution is to move so close to one job that you can get by with one vehicle. This gets more difficult if you live in a location with extreme winter temperatures. Also this puts more risk if one car breaks or has something happen to it, then you're put in a bind since one person cannot get to work. Throw a kid into the mix and then two cars becomes more likely.

I work from home but do have a 15 year old Toyota 4Runner as our family car for our family of 3. I agree that biking is a great option, people seem to think that moving homes is some huge hard decision, not realizing they are losing money, time and happiness each day/week/month they choose not to jump the hurdle.

Great video and better analysis. If retired, do my income streams equate the value of my time currently? For example, if my streams produce $100K, my time per hour would be approximately $11.41? Do agree with flying or RV?

Great breakdown Pete. I don't agree with all of your assumptions, but what you presented is enough to get a person thinking. I did some rough math on my wife's 2003 Focus (purchased in 2005) and adding purchase price, registration, fuel, oil changes, repairs, tires, and insurance it comes out to roughly $.35/mile. My 2008 Prius (purchased in 2015) is currently at $.46/mile due to its larger amortized purchase price and a couple repairs. I expect the costs to even out the longer I own it. The last couple years she's worked from home so her car is rarely used and I drive mine for 30 mins/day round trip. I could bike my commute most of the year, but I admit it's due to laziness and not wanting to ride in 120 degree heat in the summer.

My vehicle expenses come out far less. With my Yaris I get at least 40 miles/gallon, and maintenance cost is pretty much oil every 20k miles and a set of tires every 80-90k. I also enjoy driving, but only drive for work (not to work, that is walking distance) or to visit family 400 miles away.

I live in North Dakota (-7/-41 with the wind chill today), but I've started biking to work May through September and I save a couple hundred dollars per month.

THANK-YOU

Very important cost missed: the capital cost of the money you didn’t invest because it’s sitting in your 20k car. (19k interest over 10 years at 7% per year return)

I have a house hack and a car. My car uses up more of my cash flow than my house and that is before considering the balance sheet effects. The car goes down in value and the house goes up.

it pays to think these things through. however, I am afraid of a world where all the engineers quit working.

$1.75 per mile seems like way too much and even your own article didn't account for the miscellaneous/health category and I don't think it is actually nearly that expensive in practice. Really the only item in that category worth considering is overall health and risk of injury which I agree are items to consider but not $0.25/mile worth. Maybe $0.10. It's difficult if not impossible to estimate the cost of a driveway or garage since those are not only standard items but you're comparing apples to oranges in terms of a city center apartment and a suburb. And then there's the fact that most people are not going car-free. Also a $20k car is not worth $0 after 20k miles. Tires can be had for cheaper...maintenance can be done far cheaper...etc. And finally your time can be used productively outside of a car but if you're honest with yourself and know you're just going to sleep more (which I guess could be considered productive in some ways) then I think the $1/mile again is too high of an estimate. Regardless, even at $0.60 a mile, the person in your example is spending $720 a month commuting. So he could in theory pay $720 more a month in rent and not have to drive.

Now with working from home, I gas up, once a month with regular gas. No parking, no toll roads.

where i live I also pay annual taxes on the cars value. Easily $200-$300 extra per year

dont forget opportunity cost or cost of capital. the investment return rate you can get for the 20k you bought the car with or interest rate you pay if you borrowed it. I suggest 4 percent

Can you please share how to transition to a car free life? I have a very old car ($1000 kbb value) plus insurance and registration is super low. I always wondered if I give up the car occasional rental car expenses might be more than my current cost. Any tips for transitioning to care free life would be great help.

Even worse in the UK - here gas is $6.70 per us gallon 😰

I think cars will be rented on an as you need basis in the near future. After all that car is in its space outside your job or outside your house 90% of the time, depreciating all the time.

Completely aware of this math, but still forced to keep a car because public transport just doesn't cut it for us here in Toronto. I can take the TTC to one store, but as soon as you have to hop stores, you're just wasting way too much time waiting for buses. If you have to go somewhere just outside TTC limits, you're once again stuck.

Mr. Money Mustache You make some great points on the true cost of driving a vehicle. What is your take on driving for Uber or Lyft for extra side income?

The first thing to consider is if you plan on owning a car regardless of whether you decide to take alternative means of travel. If the answer is yes then you would likely be able scratch a lot of the costs associated with recurring expenses in that calculation. Additionally you would also need to decide if you actually enjoy driving, as some people actually do and then you could subtract the hourly wages from the calculation. the calculations are awesome to put into public awareness but i think the finally tally is a little over reaching. Good video.

Hey MMM I really appreciated your show! But I was wondering how you actually came up with the price per gallon for the car and truck. My estimation is that you took your price per mile and multiplied it by MPG. Well I did the calculations for my big truck vs. a Co Workers smaller econo car and I actually came out to less operating cost per gallon because I get less mileage per gallon. Please correct me if I am wrong. As the MPG approaches 1 the cost per mile = cost per gallon by your calculations. So we believe that the price per gallon calculation is a poor choice for comparison but I do believe your price per mile is a great way to estimate cost!

In the UK it rains very badly everyday, and I have to come into work in a suit. How do you recommend getting around this when the rent inside town is unaffordable on a monthly cashflow basis compared to the outskirts where I live now? Hope someone can help

Is the spreadsheet available?

Buy a good quality used car for about $5-8k, and ride it for 10 years + . Have 5 star insurance. So not having crash values. Actually Randal Otoole, gives better big picture calls in his books, and better data.

My mortgage is about $600 including utils but to move close to job (downtown chicago) would be about $2k monthly. I drive a few blocks and park take express bus, but commute is about 1hr. But sometimes I do drive and parking is $21 bucks...

Watching this while trying to sleep. I make less than minimum wage from driving Uber and Lyft in weekend to upset some of the cost associated with commuting to my full time job and full time college. It’s 30 Miles to college and 14 miles commute to work. In Western Massachusetts, public transit is not so great. Must have a car for reliable transportation. I quess your ideas of saving money is feasible if I live in Boston and make 101k per year to afford an apartment.

Another cost, drivers license watching this while my car is getting repaired wondering what the ludicrous bill will be..

I went over this with my wife, saying that I should get a job closer even if it pays a bit less, and she thought it was absolute bullshit. She's now my ex-wife.

Still cheaper than rent for those of us who are living in a car, though for me it's a truck.

I just added up the actual costs that make sense to me because I don't think some of your points are completely fair in my case. Still with car payment, car insurance, gas cost, car property taxes and car maintenance, I'm paying over $500/month to drive my car. Like holy shit, I never looked at it that way. Just the 212 car payment and gas just never seemed like that much lol.

There is a death risk for someone who rides their bike on the road. And this is coming from someone who bikes to work almost everyday ;)

Lol I just love how every intro is different

For me I eliminate the following from my per mile calculation: -Crashes and tickets (I am a defensive/ speed limit abiding goody too shoes) -Insurance (I have to have liability insurance even if I drive 1000 in one whole year and I will not go carless in Houston) - Registration (Similar to insurance I have to legally do this yearly for the "privilege" of operating my car on the public streets any way) So... I get 20 cents per mile

To me, this is comparing the cost of commuting vs the cost of having no car at all, which is not feasible for like 70% of Americans. If you have to have a car anyway, the cost of commuting vs not commuting suddenly looks a lot different.

and I thought I was doing good on ~9500mi a year total driving and a 5 mile drive to work!

Yes and count 20 hours one month. People use to say time is priceless.

That’s why Uber’ing and Uber Pool is a thing now!

I wonder if owning a car would work for me? I drive a Honda that gets 29 mpg and I drive 29 miles each way to work (so 58 miles/day). Gas is about $2.70 right now where I am. The big thing is I live in an inherited house so I only pay property taxes (about $11,000/year). My fam inherited it but I don’t own it so I can’t sell. I pay all utilities. Moving closer to work so I could bike to work would cost me more in rent or a mortgage if I buy. I have no car payments. I only pay for insurance, maintenance, tires, registration, etc. I hike or workout after work so sitting in a car isn’t completely destroying my health. I also walk a lot at work.

The IRS knows how to do math 😉

Or, if you can do most repairs yourself, have really cheap insurance thanks to a perfect driving record, and you start with a cheap used car---- It's more like 5 to 6 bucks a gallon total cost. Aside from people who are mechanics and can do everything themselves that is probably the lowest you can get

I literally drive a Toyota Corolla, lol. The not funny part is that I can't move any closer to work (20 miles) and I freakin *love* my job. My wife and I live about 2 miles from her job (and my old job), and we own a home in this area. I used to bike to work, my wife still does. She very strongly does not want to move out to where I work, and I can't blame her. I just listen to audiobooks (currently listening to "Rich Dad Poor Dad") but what else can I do? Anyone have some ideas?

Time is valuable commodity.....money comes and goes....true you should be doing it cheaper, but it's not realistic to walk for one hour to work to save yourself self $9 a day.

Good message and content, but just to give a counter-perspective... It cost way more to fuel my human body on a bike than it does to fuel a car... on a per mile basis. However, I still prefer riding.

This is one of the biggest reasons I’d live in another country

Did I miss it or you didn't even include the cost of vehicle depreciation?? Or loan interest for those driving a financed vehicle.

I am almost 40 and I have never had a car, am I abnormal? (living in a big city)