Working From Home and Personal Finance
Before last year and the advent of covid, working remotely had been steadily increasing as a trend — the number of people who work from home as freelancers, self-employed or small business owners, had increased by 140 percent since 2005. Seven million people in the United States (pre-2020) didn’t commute to work every day. But in a post-pandemic world, that seven million number has risen exponentially.
Global Workforce Analytics estimates that up to 30 percent of the workforce will become a remote workforce after Covid. That means 30 percent of 157.5 Million – which is 47.25 Million. That’s an increase of around 40 million people working from home. Obviously, that means that a lot of Americans will have a different way of living, and therefore a different approach to personal finances.
Richard Eden, Senior Vice President of David Lerner Associates, puts it this way, “The biggest difference is the cost factor. It costs less to work from home, as opposed to commuting to work every day.” Savings come in the form of gas, wear and tear, and other vehicular and travel expenses, not to mention savings on food and eating out since groceries are available a few feet away in the kitchen instead of you having to go to the local cafe or deli for lunch.
On average, gas savings alone per year are about $1,100. If you work from home full-time, you immediately eliminate any costs associated with your commute, whether from driving to work or paying for public transportation. Even if you would normally walk or ride a bike to work, you’ll end up with lower bike maintenance costs and fewer pairs of shoes to buy.
The average U.S. worker commutes 30 miles and 60 minutes round-trip every day, according to the U.S. Census Bureau and the Department of Labor. If the average gallon of gas costs $3.59 (in some states that cost is much higher — California is over $5 per gallon now) and you average 25 MPG, by not commuting to work, you will save $1,120 on gas every year.
Some other major areas of savings if you work from home:
Laundry / Dry Cleaning: If you aren’t in an office all day, you will end up saving close to $1,000 on average by not having to maintain a professional wardrobe. The average professional spends between $600 and $1,000 each year on dry cleaning, but you can eliminate this entirely by working remotely because your clothes will be mostly more casual and less delicate.
Taxes: If you work from home, you may be able to claim several home office deductions that office-bound workers wouldn’t have as an option. These include deductions for your home office space, property taxes, office decor, and maintenance and business expenses. Even if you’re a full-time employee (and not a freelancer or contractor), you can still claim these deductions and expenses as a telecommuter. Depending on your home office set-up, these deductions can vary widely, but the IRS estimates that the average home office deduction is $3,000 which lowers a typical tax obligation by $750.
Time: Even though this is less of a tangible saving, it still matters. If the average worker commutes 30 minutes each way to work, it adds up to an extra 60 minutes every day. By saving that 60 minutes every day, the average full-time telecommuter will work 260 fewer hours, or 32.5 fewer eight-hour work days (11 24-hour days) each year. Not having to commute to work equals a lot more free time.
All told, if we tally up the tangible savings of working from home, the average remote worker can save about $4,000 each year. This doesn’t include the cost savings from more vacation time, time overall, lowered stress, and overall happiness. And who among us wouldn’t be happy with an extra $4,000 in our savings accounts every year?
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
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These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any