Cash Rich, Time Poor or Are You? Find a Job Closer to Home

First Capital Connect Bedford by Stephen Craven

I’m lucky these days, the daily commute takes all of about ten seconds and crosses a few feet between bedroom and backroom office, it’s one of the greatest benefits of working from home.  However, this hasn’t always been a reality for me, I’ve tried every model of the work life arrangement from renting a room and travelling home at weekends to a 100 mile a day round trip between home and office.  At the time I thought this left me cash rich, time poor but on reflection it made me just plain poor.

Why do People Commute?

Despite falling out of love with the commuter model, it’s hardly a rare lifestyle choice especially in metropolitan and other high cost of living areas such as London and the Southeast in the UK or NYC in the US.  The fact is, many people living in such areas spend a significant amount of time and effort getting from home to work and back again.  The obvious reason of course being that people can often earn more money working in a place other than where they live.  The question is, is it worth it?

This is something I’d spent four years doing in one form or another and true to form I earned more than most of the people I graduated with who lived and worked locally.  However, the reality is I probably spent much more on the travelling and living away from my home than the extra I was making.

How Much Extra Do I Need to Commute or Live Away From Home?

Aside from the fact that travelling to work for any more than a short distance is an expensive operation, the extra amount needed to break even may be more than you think.  Consider the scenarios below:

·         Option A – Salary £20k annual travel cost £0

·         Option B – Salary £23k annual travel cost £3k

Ignoring travel time and the impact this has on a person’s lifestyle, it would appear at first that both options lead to the same result, £20k leftover after the cost of getting to work is taken into account.  However, this doesn’t take into account the effects of tax and other deductions, for simplicity apply a 20% tax rate and one can see the effects below:

·         Option A – Salary £20k, Tax £4k, Travel £0 Net £16k

·         Option B – Salary £23k, Tax £4.6K, Travel £3k, Net £15.4k

In other words, in order to breakeven, a gross salary must increase not only to cover the increased cost of travel but also to cover the additional deductions associated with the salary rise.  Such deductions can be considerable when considering all the elements including, the basic rate of tax, national insurance the possibility of student loans and higher rate tax deductions and this doesn’t even factor in any personal value added for the time loss.

In short, while commuting or working away from home can lead to opportunities and a higher salary, when considering whether or not such an option is worth the effort, a much higher premium may be required to justify the decision than just recouping the costs of travel.  On the other hand, even a small reduction in costs resulting from a job closer to home can result in a considerable increase in lifestyle as every pound saved goes straight onto the bottom line assuming you manage to maintain the same salary.