Unfortunately, the under $2 a gallon price isn’t widespread, although it is becoming more common. AAA has the average price for a gallon of gas a $2.43 across the nation, down 15 cents from a week ago ($2.58) and down a whopping 42 cents from a month ago ($2.85). Even better, prices are predicted to continue to fall as much as much as 7 cents a gallon by Christmas Day as oil prices remain low..
While this is great news for consumers’ wallets, it depends a lot on how you decide to use this unexpected windfall which will determine how your budget looks when gas prices inevitably begin to rise again. Far too many people are likely to spend the extra money rather than save it.
In fact, lower gas prices provide a great opportunity to build an emergency fund, something that’s often at the top of many people’s New Year’s resolutions. A wonderful way to do this is to set your gas price at $3 a gallon and deposit the savings into y0ur emergency fund. For example, if you buy 10 gallons of gas for $2.50 a gallon, you would subtract that from $3 ($3 – $2.50) and them multiply it by the 10 gallons to deposit $5 into your emergency fund ($3 – $2.50 = $0.50 x 10 = $5).
While this might not seem like a lot in itself, it can dramatically add up over time. If you fill your car once a week, that $5 will turn into $260 for your emergency fund. It could be even more if you can find gas for less than $2.50 a gallon.
The real payoff, however, comes as gas prices rise. Since you have been used to paying $3 a gallon (whatever the price of gas with the difference going to your emergency fund), you won’t find your budget squeezed as gas prices rise again (you will just be putting less into the emergency fund). This can be an easy way to build an emergency fund if you have never had one before, and take advantage of the lower gas prices in a way that will truly benefit you in the long run.
(Photo Courtesy of bdunnette)