When discussing the pros and cons of telecommuting, one of the tangible benefits is the cost savings of working at home.
With fuel prices reaching new highs, more and more people are striving to work from home and many claim they would even be willing to take a pay cut to telecommute.
But how much can you really save by telecommuting?
There are a variety of factors that will influence how much you can personally save by telecommuting but I thought it would be interesting to use my current situation as an example.
The first thing we need to do is look at how much it costs to commute each day. For now we will only be looking at the immediate costs of commuting such as fuel and tolls. Other costs to consider are the wear and tear on your vehicle, such as replacing tires and routine oil changes.
My cost to commute to work each day breaks down as follows:
- Distance: 130 mile round trip commute
- Fuel Economy: 31.5 miles per gallon
- Fuel Consumption: 4.13 gallons per day
- Fuel Cost: $4.23 per gallon (price paid this morning)
- Tolls: $2.50 per day (six tolls, thank you Illinois Tollway Authority)
- Total Cost: $19.97 per day
At a cost of $19.97 per day, commuting to work is not cheap and adds up quickly – $99.85 per week or $4992.50 per year assuming a 50-week working year.
In order to get a flavor for how much we can actually save by working from home, lets assume that we are able to telecommute only one day per week. Using our 50-week assumption, we can save $998.50 over the course of a year just by telecommuting once each week.
How much would that translate to if we saved that money?
After punching a few numbers into a financial calculator, we see that saving $998.50 per year could result in a nest egg of approximately $35,000 after 30 years assuming a somewhat conservative (historically) 6.00% savings rate.
Telecommute two days per week…$70,155 in savings!
Telecommute five days per week…$175,387 in savings!
When you bump the savings rate up to a slightly more aggressive 8.00% you would have over $215,000 in savings if you were to telecommute every day of the week. Add in the savings realized as a result of fewer oil changes and fewer tire purchases and you will soon be pushing $250,000 in savings.
That is a nice chunk of change!
At first glance, taking a pay cut in order to telecommute sounds like a silly idea and you might be wondering whether or not you can afford to take a pay cut.
After running the numbers, can you afford not to take a pay cut?