How to Make a Million

Most people know that a bicycle can improve your sex life and help save the planet. But aside from the health and environmental benefits, a bike can also make you rich.

Forgoing four wheels for two on your daily commute can easily rack up $1 million over the course of a career. And even if you can’t give up the car-based life completely, replacing car miles with bike miles can save you hundreds of thousands of dollars. That can go directly to easing college tuition bills for your children or boosting your retirement plan. Whether your post-career ideal involves rewarding but less remunerative work for a good cause or retreating to a warm beach with umbrellas in your drink, a bike will get you there faster than a car.

Before we start going through the numbers on how to unlock your inner millionaire by pedaling, a few notes on who this column is geared toward: I’m assuming you make enough money to have a choice about whether to drive or bike to work and some choice in how close to work you live. I’m assuming you’re in good enough health to operate a bicycle on a regular basis. And I’m assuming you live in Santa Barbara, where the weather and geography are amenable to year-round biking.

If you meet all three criteria, you are truly lucky and enjoy an enormous degree of privilege compared with 99.9 percent of the world. My job here is to help you count not only your blessings but also your Benjamins.

To understand the financial power of the bicycle, you must first understand the staggering true financial cost of car ownership. Economists and financial news outlets fixate on car sales because, aside from a house, a car is the biggest purchase that most Americans will make. And it’s hard to find any kind of a purchase where the consumer gets screwed harder.

Before the recession hit, the average consumer bought 13 new cars over the course of a lifetime, a figure that dipped with the downturn but is likely on the rise again. So let’s look at what that might cost for a modest, plain-vanilla vehicle, the good old Honda Accord.

The base price for a 2014 Honda Accord is $21,955. Sales taxes and registration add $1,968. If you get a five-year loan at 3 percent interest, that leaves a monthly payment of $423.47.

That’s just the start. Because that car is financed, you’ll need full-coverage car insurance. At one prominent online-only insurer that begins with a “P,” I got a quote for $92 a month for a male, 30-year-old driver. The monthly cost of owning a car just went up: $515.47.

Now, gas. The U.S. EPA estimates that the average car is driven 11,318 miles per year. (That number dipped during the recession, but again, historical data suggest that it will rise once wages and employment recover.) The Honda Accord LX with an automatic transmission gets a combined city-highway fuel economy of 30 miles per gallon. Over a year, that’s 377.3 gallons of gasoline. At the average gas price of $4.09 (at the time of writing), that’s $1,543.02 per year, an average monthly cost of $128.59. The monthly cost of owning a car just went up again: $644.06.

So over the course of five years, that “modest” Honda Accord actually cost $38,643.60 in total. (I’m excluding DMV registration fees here because some people write off a portion of them during tax season.)

The average consumer who goes through this ridiculous rigmarole 13 times will end up shelling out $502,366.80 in 2014 dollars. That’s half-a-million dollars of your money that are working against your wallet, working against the planet, and working against your derriere by coddling it all the way to work every day. That’s half-a-million dollars you’re sending to an environmentally destructive manufacturing industry and the Wall Street banks. Let’s see what happens if you bike to work instead and put that money to work for you.

If you took the $644 a month you pay for a car and put into an investment vehicle that earns a modest 5.5 percent interest compounded yearly, after 40 years you’d have $1 million. And 5.5 percent interest is relatively modest. You might hear people yelling about 11 and 12 percent returns on CNBC, and it’s true that you should be skeptical — the talking heads are leaving out a lot of asterisks. But even with all the necessary handicaps, the inflation-adjusted, annualized compound annual growth rate of the S&P 500 over the past 40 years has been about 6.7 percent.

Now let’s be more realistic. If you go car free, you’re still going to have some costs. Let’s factor in $200 a year for bicycle tune-ups at one of our great local bike shops. And let’s factor in $300 a year of cab rides or rental cars for those times you just can’t escape the need for four wheels. Over a 40-year period, you’ll still earn $986,847. Perhaps your workplace has no showers and you need to rent a locker and shower at a gym nearby for $50 a month? You’re still $904,884 in the black.

Now let’s say that you can’t give up your car and can’t get around financing a car. If you can use your bike to keep each car twice as long over a 40-year period, then you can still make a cool $493,428 by retirement age.

Now let’s get really realistic. Say you can’t avoid buying a car, and say you’ve got kids. Well, if you can save a modest $200 a month in your family by riding bikes, that adds up to $70,757 over the course of 18 years. That’s a free college education. And saving $200 a month – which is practically just gas savings alone – over just 10 years will net you $30,902. For many people, that equals retiring a year early.

After ditching your car, your biggest problem will be how to invest all the money you’re saving. Perhaps becoming a millionaire through the stock market isn’t your style. No problem: There are a range of alternative investments, from peer-to-peer lending to microloans to the developing world. Or you could donate to your favorite cause. The idea is to divert your monthly dollars away from the big automakers and the Wall Street banks and put it to work however you choose. All it takes is a bike.