With crude oil hovering at $130 a barrel, almost every personal finance article I’ve read has been about how you can conserve gas usage or save money on gas prices. Granted, it’s fun to jump on the bandwagon with whatever todays “hot topics” are. But when you really break down your gas spending each month, it’s not really as big of a deal as everyone is making it out to be.
I’d like to preface this by saying that I realize that gas price increases have many implications to product prices and consumer confidence etc. But that’s not the issue at hand. People are so intent on stretching out their tank of gas from 300 miles to 310 miles. Or searching and searching for that gas station that’s 2 cents cheaper. I think we need to transform the way we think and look to other places within our finance that are far more inefficient with room to save.
So let’s get a little perspective. Most people fill up a tank of gas once every week or two. Let’s say I’m filling up my 12 gallon 2005 Acura RSX once a week, or four times a month. One year ago, when gas was priced at $2.90 a gallon (Virginia), I would have spent $139 a month on gas. Today, with gas priced at $3.80 a gallon, I spend about $182 a month on gas. Now this is only an increase of $43 a month on gas. Is it really worth all that time and effort to save $43 a month? For some of us, that might be considerable amount to spend extra each month but for others, it’ll barely put a dent in their finances.
Some easier ways to save $43 a month:
* Stop eating out so much. Cook at home instead (it’s probably healthier too)
* Buy in bulk. There are certain items you KNOW you’re going to need in the future (toilet paper, shampoo etc). Why not save money by buying in bulk (And save an extra trip to the store while you’re at it).
* Stop impulse buying. I guarantee for most of us, impulse buys amount to way more than $43 a month.
There’s a term in personal finance when a person is so intent on saving pennies here or there while not capitalizing on savings opportunities when buying large dollar items. For example, Linda will shop around for the best prices on eggs and milk and groceries to save a few dollars here and there whenever grocery shopping. But when it comes time to purchase a new car, Linda does not want to hassle with negotiations and ends up paying $2000 more than necessary. The term is “inefficient consumer” and it’s a trap we all fall into from time to time.
The bottom line, I am a believer that we should cut out our unneccessary spending and save as much as possible. But really, is all this hoopla really necessary?
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10 responses so far ↓
1 Bryce @ SaveAndConquer // Jun 18, 2008 at 11:52 am
I completely agree with you about being an efficient consumer. We need to know how to haggle and squeeze that last dollar out of large ticket purchases, along with saving on day-to-day purchases. But high fuel costs are affecting more than just gasoline, as you noted above. Airfare costs are up, shipping is up, food costs are up, and on and on.
Using your example of an added $43 expense per month, which is low for much of the country, that is an extra $516 per year of after tax income. By putting 4% Virginia state tax and 25% Fed tax back onto that amount you have an extra cost of $727 from your income per year. If you earn the Virginia median of $60k (from payscale.com) then you are paying 1.2% of your annual salary just to higher gasoline cost. (Of course I am taking liberties with “your” salary.)
To me that would be a substantial part of my salary just for the increased price of gas. We are all feeling it. That is why conservation is also an important part of being an efficient consumer. If we can carpool, ride bicycles, take public transportation, and drive more slowly, we may be able to get that 1.2% back.
2 beechin // Jun 18, 2008 at 12:37 pm
Bryce,
Thanks for the comment! I couldn’t agree with you more. The increase of oil prices are raising prices in so many other aspects of our lives! I wanted to take an extreme view of this issue to outline that: 1) there are many other areas we can cut back on 2) that gas prices aren’t the only thing to be concerned about. In the big picture, gas prices are just a small variable of a larger equation (consumer goods, travel, consumer confidence, environment etc).
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4 Funny about Money // Jun 22, 2008 at 1:15 pm
Good, sane perspective. It’s refreshing to hear something other than worries that the sky is falling.
However, I’d disagree with the premise that high gas prices are not affecting our finances. For example:
My vehicle gets about 19 mpg. Coincidentally, I live about 19 miles from the campus of the Great Desert University, where I currently work. At $4.05 a gallon, the round trip costs me $8.10 a day. In my universe, that’s a wallop. Yesterday three-quarters of a tank cost $55 at Costco, and that amount of gas powered my car for exactly 14 days. This means gasoline now costs me $110 a month, assuming I telecommute twice a week and patronize ONLY stores that are on the way to and from work. In June of 2007, I paid $83.47 and I did not plan every trip or try to “hypermile,” as I have this month.
Not much difference, but quite enough given that I have $29 of play in my monthly budget. That budget will be affected by price increases across the board–food, clothing, services, anything that depends on transportation to get to us.
The big issue, though, has to do with the value of the 2000 Toyota Sienna I’m driving. It plummets as the panic over gasoline heightens. I have $15,000 saved to buy a new car. I do not buy vehicles on time. I’d planned to trade in the minivan on a Prius in 2010, but thanks to the gas “crisis,” as we scribble the Sienna is no longer worth enough to get me into a Prius. So indeed the gasoline flap is affecting my finances and my quality of living: either I will have to buy a smaller, cheaper car with worse gas mileage, or I will have to try to put still MORE money aside each month–out of a paycheck that is fast shrinking in the face of soaring food and utility costs.
I’m already following all the advice you offer, and then some. Frankly, I’m frugaled out. There’s a limit to how much you can do and still maintain something resembling a middle-class lifestyle.
BTW, studies show that Linda has to pay more at the car dealer for no other reason than that she’s female. For example, check out http://islandia.law.yale.edu/ayers/fairdriv.htm
If Linda were Lyn, a black male, he also would pay more for his car than a comparably savvy white male.
5 beechin // Jun 22, 2008 at 9:17 pm
Funny about Money,
Thanks for the comment! You bring a great perspective to the issue and some really interesting points. I definitely agree with you that the spike in oil prices are affecting everyone to some degree or another. Also, thanks for the link (an interesting read)…
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