Thursday, September 11

WWMHD?

For those of you who haven't heard, OPEC suffered a serious setback today. It planned to cut production to keep oil prices from falling any further. Saudi Arabia walked out. Literally.


The delegates say their country will keep producing at current levels.


Whether or not this has a permanent effect on oil prices, I can't predict. But this move will probably make fuel costs drop in the short-term.


SO:

WWMHD? (What would Mary Hunt do?)


For those of you not familiar with this fabulous lady, she has been running a newsletter, Cheapskate Monthly for years (and years... I remember that my mom was a subscriber back when I was still living at home). Of course, she got with the times at some point and created her website Debt-Proof Living.


(For you die-hard Dave Ramsey followers, you can change it to WWDRD.)


The point is, I'd like everyone to take a moment and consider what you'll do with the extra money.


You probably think I'm being grandiose about a few cents. But it adds up.


According to CNN Money the nationwide price of gas had fallen 44 cents in since July (it was written in late-August). Of course, prices vary by region, but everyone seems to have seen a significant price drop in their area.


So, consider this:

  • At its height, the average gas price was over $4/gallon
  • It's now $3.67
  • Unless you have a very fluid budget, you have set aside enough for $4/gallon
  • What do you do with what's left over?
  • Do you even notice that you have leftover money? Or does it just disappear with a pack of gum here, a soda there, etc?


Let's do the math. Assume that you have a sedan with, say, a 13-gallon tank. For the last two weeks, you've been saving 44 cents per gallon. Even assuming you only fill up once a week, that's $5.72/week. That means you should, by now, have saved almost $15. (And that's not counting the money you saved as prices fell July 17 - August 26!)


So... where's the $15?


Chances are that it got spent without your even noticing. Maybe you get a soda when you go in to pay for the gas. Maybe, now that prices are dropping, you're not being as careful about limiting your driving.


A lot of personal finance bloggers distinguish between saving money and just spending less. Saving money means actually putting it aside somewhere, so that it won't be spent. Spending less means just that: Spending less money than you normally would. If you don't put it aside, it simply gets spent on something else.



Currently, people are spending less on gas. But you have an opportunity to save that money. Yes, it's "just" $5 a week. But that's $20 a month. And you have the opportunity to save it until the price goes back up. (It may, in fact, be quite handy when the prices do climb again.)


And what if Saudi Arabia's actions cause another 5 or 10 cent drop? That would means up to $7 a week, or $28 a month.

That's $28 extra dollars to throw at debt. Or $28 more to earn interest in your account. Or, you can spend it on four meals at a fast food franchise.


Which is more memorable and more rewarding?


I suggest starting a "gas savings" container. Figure out how much you've saved in the past two weeks and put that much in. If you pay with plastic, write a check for the difference. (Since you won't be immediately cashing the checks, this will also be a nice way to pad your account to avoid overdrafts.)


How much will you save in a month? Where would you put that money?

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5 Comments:

Blogger Shtinkykat said...

The gas saving jar is a GREAT idea! I've budgeted $130 and I think I'll save $14 this month. I'll roll that into my EF. Awesome post.

September 12, 2008 at 4:37 AM

 
Blogger Bonochick said...

They said on the news this morning that because of the hurricanes, gas is expected to rise 20 to 40 cents a gallon as soon as today. So much for gas prices dropping!

Higher gas prices for me means that I am saving less money. More of my paychecks were being spent, which meant less was being saved. I am looking forward to gas prices going down to further aid in helping to build my savings back up. I had very expensive car repairs in the spring that almost cleaned out my savings. Not a nice feeling!!!

September 12, 2008 at 5:51 AM

 
Blogger Abby said...

Bonochick:

I'm sorry to hear about the effects of the hurricane. And yet people insist variety is the spice of life... Personally, I look forward to some good old fashioned boredom.
On the bright side, I did go ahead and give you another entry in the drawing.

Shtinkykat: Thanks for the kudos. I'm glad not everyone is being messed up by hurricanes. I gave you an entry to the giveaway, too.

September 12, 2008 at 10:38 AM

 
Blogger Brian said...

Prices just went up in my area (Birmingham, AL) about 60 cents from this morning (it's now about 7pm) back to $4/gal, and forecast to get up to $5.25/gal by Monday. I'm screwed!

September 12, 2008 at 5:00 PM

 
Blogger Rachel said...

We have kind of a weird budgeting system. Each category gets assigned a specific amount, and in the two non-set categories (gasoline and groceries/household), any leftover goes either straight into general savings or into home improvement money. Putting it into our general savings (not our emergency savings) means that if we're short a month, hopefully we'll have somewhere to pull it from.
The only other non-set category (as opposed to the mortgage, power bill, insurance, etc. that are the same every month) is our pets line item. Any money left over there goes into our pets' savings account for future bills (license tags, shots, etc.).
I like the idea of putting the gas money into a jar, though, but knowing our bad habits, I'd save it up and then raid it for something fun but useless. ;o)

September 13, 2008 at 10:49 AM

 

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