The price of gasoline in the U.S. dropped for 97 days straight beginning in late September 2014. According to the American Automobile Association, the gas we buy today costs an average $1.11 per gallon less than this time last year. Averages are great liars, of course. The average cost of gas in Anchorage, Alaska, right now is $2.87 while folks in Columbia, Missouri, are filling up at $1.80 per.
How this all shakes down for you depends on the length of your commute (five miles each way or 50?) and/or the rigidity of your current budget, as well as how long prices stay at these levels. But an article in Business Insider notes that if gas prices remain low, the average American household should save about $42 per month in 2015.
The savings might be considerably higher if your household's driving habits add up to mucho miles. (Hello, Californians!) Yet even that “average” $42 per month could do your budget some good as, say, seed money for an emergency fund savings account.
But only if you know where it is. If you're a driver, ask yourself:
- What did I pay for gas in 2013? In 2014?
- How much did I save?
- Where is that money now?
How often do prices go DOWN?
It's easy to lose track of (relatively) small savings. Maybe the rising costs of other items like food and insurance siphoned those extra dollars from your budget. Or maybe lifestyle creep came a-callin'. A little wiggle room in your budget over the past year meant you could take a fitness class, hit a couple of ballgames with friends, buy slightly nicer holiday gifts, really blow it out on New Year's Eve.
But how often do the prices of any essentials actually go down? This is a golden opportunity to coax extra dollars from your budget over the coming year.
(Hint: Can you name everything you got for Christmas 2013? The folks you treated to big doings in 2014 probably won't be able to remember, either.)
As my daughter (also a blogger) always says, “Save your savings.” Last year she and her husband squirreled away more than $2,200 in this fashion.
Saving the money is only one option for the temporary price break, however. You might also:
- Pay down any credit card debt
- Start a college fund for your baby
- Deposit a little more into retirement (easier now than scrambling to find money at the end of the tax year)
- Make additional payments against student/auto/mortgage loans
- Schedule needed maintenance for your car
For more forward-thinking ideas, see “20 ways to spend $20.”
Consider the opportunity cost
It is so tempting to think “Maybe I could go to that concert with my buds” or even “It's been ages since I had a vacation.”
Champagne tastes and a tap-water budget are a frustrating combo. It can be particularly maddening when you are young and longing to experience everything life has to offer, only to have some personal finance buzz-killer drone on about saving for retirement and paying down student loans.
Myself, I think you can have it both ways. But you can't always have everything you want as soon as you want it.
So think about the opportunity cost of that $42 (or whatever it comes to for you) per month. Then make it your business to be intentional when it comes to sinking fuel costs, as well as any other temporary price breaks you are fortunate enough to encounter.
Personal finance author Liz Weston has a great idea about windfalls: Spend 10 percent on something you really want and put the rest toward something more lasting. So check last year's budget to see how many gallons of gas you bought last year, then estimate your possible savings over the next 12 months.
Feel free to spend 10 percent of that. Divide the rest by 12 and automate that amount each month toward a longer-term goal, whether that's a Roth IRA or a pay-cash-for-my-next-car fund.
Just make sure it's a fuel-efficient car. Gas won't stay cheap forever.
Do you have a plan for how to capitalize on lower gas prices? How much do you think you could save?
Donna Freedman is currently a staff writer at Money Talks News, freelances for a number of magazines and PF sites, and blogs about money and midlife at DonnaFreedman.com.