My Personal Bus 11

Transportation is one of the unavoidable living costs of modern Singapore. The cost of private transportation takes up an inordinate amount of money and resources.

Why aren't more taking public transport?
So why aren't more of us taking up public transportation instead so that we can achieve financial freedom faster?

A typical Singaporean has a few choices for transport:
1) Public transport: Bus, MRT, LRT, Taxis
2) Private conveyance: Car, commercial vehicles, Motorbike, scooter

One of the great personal finance tragedies of modern Singapore is our love affair for cars! When I started working, I too was ensnared by the idea of the 5Cs being benchmarks for success in Singapore. One of the 5Cs was owning a car. However, in land-scarce Singapore, owing a car generally doesn't make sense if your transport patterns are fairly predictable, i.e. most of us salary workers do the following:

Typical Weekday: Home ==> Office ==> Home

Occasional weeknight:
Home ==> Office ==> in-laws/parents ==> Home
Home ==> Office ==> recreation ==> Home

Weekends:
Home ==> parents/in-laws ==> recreation ==> Home
Home ==> recreation/social activities ==> Home

Cars: need or want?
Individual travel patterns may vary but in general, unless you are in sales or need to service customers directly, most of us do not NEED a car. We WANT it but we do NOT NEED IT. It's great to have the convenience of zipping around without worrying about what bus / train / feeder bus to take or to worry about not being able to catch a taxi during peak hours, BUT there is a catch.

When we own a car, we own all the associated costs of ownership in return for the benefits. By relying more on public transport, we actually outsource our transportation costs and only pay a relatively small share of the infrastructure that is required to run it since taxation funds some of the infrastructure such as the land that the MRT sits on, road infrastructure etc.

When you own a car, you need to pay for its associated costs even when you are not using it. This is over and above the cost of the car and its COE. While your car is parked at your office carpark or at home, you are still paying parking and insurance and road taxes.

When you use your car, you pay for ERP, petrol, maintenance costs etc.

And if one gets into a road accident, you again pay and pay!

So why aren't we taking public transport as well as walking (personal bus 11!) from location A to location B?

Is it because the MRT trains are packed like sardines during peak hours?
Is it because the connectivity of MRT/buses are not seamless?
Is it because the frequency of buses drives one to buying a car?
Is it because your neighbourhood is insufficiently served by bus/MRT/LRT?

It could be one, some, all or none of the above.

Cars are a financial liability
To achieve financial freedom, one needs to realise that for most of us, the car ownership and maintenance costs result in a big liability up front! Imagine what you can do with $50,000 up front instead of plonking it with the dealer while you walk away with the latest Japanese/Korean/European 1.3litre car.

Put $50,000 in a fixed deposit and let it roll for 10 years at a conservative rate of 2% per annum. This will result in future value of $50,000 at 2% per annum compounded annually
= $50,000 x 1.219 (FV of $1 at 2% for 10 yrs)
= $60,950
Return of $10,950 or 21.9% of initial investment of $50,000.

The interest one gets from investing that $50,000 helps to defray our transport costs too. :-)

Many people take up car loans to finance their purchase of cars. So they will end up paying interest for the mobility they have.

You decide if the car is worth it
Don't get me wrong, it's not about whether buying a car is right or wrong. It is about knowing how much you are paying for that car and whether the decision is in line with one's wish for financial freedom. Of course, if one's income is more than sufficient to pay for the car and to provide a decent standard of living and yet achieve one's retirement objectives, by all means.

I am not here to tell you what you should or should not do but rather to share with you that every financial decision you make about your lifestyle affects your goals for financial freedom. Don't complain about your low pay for not being able to be financially free by 45 or 55 or 62. Blame it on your own choices. The choice of buying a car has serious implications for your personal finance and a car is a LIABILITY. It is not an asset unless you can get cash flows out of it e.g. car rental business or commercial goods delivering products/services for business.

Walk more and take public transport
Invest in your two legs - personal bus 11 and supplement it with public transport. You will find that your dollar stretches more and allows you to save more for your retirement.

Be well and prosper!