I know this sounds hyperbolic, but I’m being completely serious: selling our second vehicle, and becoming a one-car family, has changed our lives in ways we never expected. (Mostly in terms of financial freedom we never believed possible on our tiny income.)
Here’s the story.
Our Financial History
Like many young people of our generation, Ben and I have always struggled with money. Not because we’re bad with money, but because we just can’t make any.
We got married when I was still in university. For the first four years of our marriage, I was in school full-time. Ben went from working shift-work at a factory to working for my carpenter dad to starting his own carpentry business. We eventually had kids and I put my degrees to work by becoming a stay-at-home mom. (That’s what liberal arts degrees are for, right?)
So our household income has always been low. But we have always been frugal. We were raised by frugal Mennonites. We shop at thrift stores, buy used vehicles, cook from scratch, and DIY all our home renovations. Our idea of a fun, indulgent night out involves going to a local bookstore to flip through (but never buy) some books and share a venti frappuccino.
Despite our frugal lifestyle, though, we could never get ahead. We never got into debt, apart from our mortgage, but we could never make a savings, either. Our bank account always hovered around the zero mark.
We had no safety net in case of financial emergency, and absolutely nothing set aside for retirement. I felt constantly anxious and we fought about money often.
Month after month, year after year, we would look through our budget and wonder, where on earth can we cut back? We were already spending the minimum possible amount on everything. We almost never ate out; we didn’t go to the movies; we didn’t have satellite for our TV or data for our used smartphones. We biked instead of driving whenever we could. We didn’t buy each other Christmas gifts. All of our technology was outdated. We didn’t go on trips or buy new clothes. What else could we possibly do?
(I am leaving out the year we lived in the hospital with our son and were financially supported solely by our wonderful government and absolutely incredible community.)
We owned two used vehicles, both for which we’d paid less than $10,000 (in cash). Ben needed a truck and trailer for his carpentry business, for picking up materials and for bringing cabinets to his installation sites. We needed a family vehicle for everything else. So we owned a 2003 Ford F150 and a 2003 Dodge Caravan.
But it felt like we were constantly pouring money into these vehicles. Repairs, gas, insurance, license plate stickers, maintenance . . . it never stopped. These inexpensive, used vehicles were sucking our bank account dry. They were like black holes for money.
But we thought that was just how it had to be. We needed the two vehicles.
Or did we?
Last summer we came across the blog Mr. Money Mustache. He promotes a frugal lifestyle similar to the one we were living, and writes about it in an engaging way. He calls it “baddasity,” and we thought it sounded exciting and life-enriching. But he had one interesting, new idea: ditch the second vehicle. Even more interesting: ditch the work truck, even if you run a business like Ben’s.
After reading this fantastic article, Ben approached me with this shocking idea: what if he sold his truck and started using the family van as his work vehicle? The van would in fact work double-duty.
He only rarely needed to pull a trailer — less than once a week. The van could handle that. Most of the time, he could probably load his materials into the back of the van. The rest of the time, he was working from home.
And since I stayed home with the kids, I only rarely needed the van, too. There were usually two vehicles sitting in the driveway, sucking up money just by existing. Even with one vehicle between us, our transportation needs would rarely conflict. And when they did, one of us could bike.
Losing the Work Truck
Within a matter of weeks Ben had sold his truck. And suddenly we had an extra $5200 in our bank account. For the first time, our bank account was well in the black, with no reason to go down any time soon.
And the money kept piling up. We got a $1200 refund on car insurance for the year. We saved about $1000 on fuel and $500 on maintenance by not using a truck. Ben had planned to replace the tires that year, which would have cost another $1500.
That first year, we earned/saved $9000 by not owning and operating a work truck.
It was mildly inconvenient for Ben to do all his work with the family minivan, but definitely not $9000 worth of inconvenience.
What To Do With All This Money?
It was thrilling, for once, to have extra money. What should we do with it??
The first thing we did was create an emergency fund. We’re not big fans of Dave Ramsey in general, but we felt this was a first good step. It lifted a huge burden from my mind to know that money was there in case of emergency.
And beyond that, we knew we ought to invest some of our money. But how?
Investment planning is not our forte. There are likely better ways to invest extra money than the route we chose. But one thing felt like a safe bet: to use it towards our mortgage.
The amount of money you can save in interest by putting cash towards your mortgage is mind-blowing.
We figured out that by putting down an extra $8000 on our mortgage, we would be saving almost double that in the long run on interest (i.e. close to $16,000.) (The savings on extra mortgage payments for you will, of course, vary depending on your interest rate, amortization and size of mortgage. But for some, it could mean doubling your money, as it did for us.)
Another bonus? The sooner our mortgage is paid off, the sooner all of our income becomes pure spending money, with which we can do whatever we want — from investing and saving to just plain old spending on things we want (including donating to good causes). We estimate that our first extra payment alone shaved off almost two years from that goal. We are eager to enjoy that freedom as soon as possible!
In addition to putting down all that money towards our mortgage, in the second year we were also able to do the following:
- buy some good used bikes and a bike trailer for getting around town
- visit the dentist without guilt or worry (first time in six years!)
- experience general freedom to purchase things we needed, and get the best quality
- start saving up for our next mortgage payment!
We plan to continue putting extra money down on our mortgage every year — ideally at least $5000 — until it’s paid off in full. In doing this we hope to shave off more interest and more years to reach financial independence.
All that freedom from getting rid of the work truck that we thought we “needed.”
So, basically, a $5000 clunker we were maintaining to mostly sit in our driveway had the potential to suck up $20,000 of our hard earned money and life energy over the years. Once we got rid of it, all that money slowly trickled back into our lives to go towards smarter things.
We feel more relaxed about our financial situation and we have more freedom to choose where our money goes.
We’re not promising we’ll never buy a second vehicle, but the benefits of going without for a few years have already been enormous.
If you have more than one vehicle, maybe you’d benefit from giving one up, too? Just something to consider!