Budgeting strategies to deal with rising gas prices apply elsewhere
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5/21/2008 - 5/22/08
The Department of Energy has projected that gas prices could cross $4 a gallon this summer, a consequence of the family vacation, political instability in oil-producing nations and increased demand from emerging economies such as India and China.
A survey of AAA members in the Chicago area showed that 76 percent are consolidating their shopping trips, 31 percent are performing more routine maintenance, such as ensuring their tires are properly inflated, and an astounding 24 percent revised or canceled their summer vacations.
"The consolidating of shopping trips seems like it wouldn't be that big a deal, but if on a weekend you're leaving for a family event, a sports game or church, people are also picking up their dry-cleaning and going to the grocery store," said AAA spokeswoman Nicole Niemi. "It is a part of their consciousness now."
And families on vacation are now bypassing the turnpike fast-food restaurants in favor of munching on homemade peanut-butter-and-jelly sandwiches, Niemi said.
Some are seeking the lowest gas prices in their community. Mapquest Gas Prices, a Web site, charts the best deals. But, as should be no surprise, prices for Santa Fe range from about average to just above, and the list is far from comprehensive.
But the obstacle with these services is that few people have the foresight to plot their commutes based on gas prices. Most drivers simply pull into the nearest station when the needle reaches "E," said Ohio State University economics professor Matthew Lewis.
While consumers have made slight adjustments thus far, Lewis expects that, with each passing day, more of them will replace their cars with more fuel-efficient vehicles, as they did in the 1970s.
"Going forward, you're going to see a longer-run impact on car choices," said Lewis. "We're right at the point now where everyone is changing their forecast of what this market is going to look like."
Live within your means
Financial planner Stacy Francis, president of Francis Financial Inc. in New York, says frugal living requires that you minimize your spending, maximize your income and set achievable savings goals. Some strategies:
• "The most important thing people can do is sit down, bring out their calculator and discover exactly where their money is going," Francis said. That requires looking at your checkbook, debit-card and ATM receipts and creditcard statements.
• Next, "evaluate whether your spending reflects your values," she said. Is too much going for premium coffees every day, and not enough to your house down-payment fund?
• Are there places you can cut back that don't reduce your happiness?
• How frugal a family has to become depends on its current balance sheet. "If you've been frugal all along and created an emergency fund with three to six months of living expenses, then a job loss won't hit you nearly as hard as the people who have been spending more than they're actually making," she said.
• What about accumulated debt? Get rid of it as quickly as possible. Families in trouble can defer some debts, like student-loan payments, if lenders agree, she said. But families shouldn't take chances with their mortgage debt, she added. "Paying a mortgage has to be your No. 1 priority because it's covering your home," Francis said. — The Associated Press
Remember the four-cylinder?
Hybrid technology might be the poster boy for change in the auto industry, but a cash-strapped public is leaning far more heavily on little four-cylinder engines to ease their fiscal pain, Standard & Poor's reports.
The credit-ratings agency said customer enthusiasm for pricier gas/electric hybrids has been underwhelming, with the nationwide housing slump and severe credit crunch making for the "worst year in 15 years for the automobile industry." Despite the popularity of the Prius — whose sales, Toyota announced last week, have passed 1 million worldwide — hybrids made up only 3 percent of the new-car market last year. The sales gap between the relatively new technology and the smallest conventional engines is actually growing.
"For now, the easiest, cheapest way for new-car shoppers to get better mileage is to choose a model with a conventional four-cylinder engine. And they are," said J.D. Power and Associates' Jason Rothkop.
He added that it's getting more difficult for hybrids to command a premium of up to $5,000 when customers are counting every penny. — MarketWatch