It’s about time! A few years back I wrote about how historical gas price increases outpace inflation by quite a bit, which really put into perspective how expensive gas has become in recent years. I’m old enough to recall paying less than $1 per gallon of gas, around 20 years ago. (Side note: Dang….I really am getting older!)
Anyway, I’ve noticed recently that gas prices have been relatively low by standards of the last few years. This has been corroborated by a recent article from MSN which detailed some news regarding Energy Department forecasts on gas prices. They noted that in 2015, gas prices are projected to be under $3.00 per gallon, which is quite a bit lower than a prediction not that long ago.
So if gas prices do in fact stay low, how would that impact your spending and overall finances?
The thinking among some people is that with lower gas prices, people will have more money to spend on other things. Thus, if more consumer goods are purchased, this could be good for the economy!
Perhaps. But on an individual level, what would you do if your gas expenses were considerably lower on a regular basis? That’s the question I come back to.
I think that it’s probably true that with less money spent on gas, people will have more money available to spend. Math would dictate that. I also agree that with that additional money available to spend, people will generally do just that: spend it.
So basically, this means that the average person out there will not do the prudent thing from a personal finance standpoint. Which would be this: take the extra money that you’re saving on gas, and squirrel it way.
For example, if you were spending $120 per month on gas, but then that dropped to $90 based on price decreases, you could use the $30 to buy other things, or you could increase your monthly investments by that $30.
That small amount adds up! $30 per month equals $360 for a year, and invested over time that could result in quite a bit more.
So I’d like to see Americans take the savings from cheaper gas, and boost their savings instead of spending it. Here’s to responsible personal finance!
My Questions for You
What do you think about where gas prices have gone recently?
When you save money due to regular expenses being reduced, do you offset that by spending more on other things, or do you consciously try to save more money?