With gas prices less than half of what they were in 2014, you have the opportunity to do something more with your windfall than frittering it away on extra Big Macs.
Filling up our cars costs less these days, and the gas savings is fueling our visits to restaurants where we fill up our tummies, analysts say.
However, we could do ourselves a financial favor if we drove those savings more strategically.
Pumping 16 gallons of gas into your tank at $4 a gallon cost $64 in 2014; at $1.70, it’s just $27.20, that’s a difference of $37.80 that you could put to other uses. Compared with 2014, the typical household will save about $1,000 on gas this year, experts say. A credit card analysis indicates many of us are spending more at restaurants as we spend less at the gas station.
The savings, according to restaurant menus, equals about 175 Big Mac meals, 75 Mix-and-Match Fajitas at Chili’s or a one-night bash for your party of 10 at McCormick & Schmick’s, where guests order crab tower appetizers, fresh salmon or filet mignon entrées, sides like lobster mashed potatoes and wine.
Not too shabby.
But Money Talks News financial expert Stacy Johnson and others offer eight smarter ways to spend that $80-plus a month you no longer shell out for gas.
1. Destroy some debt
If you’re paying 15 percent interest on your debt, eliminating some of it is like earning 15 percent, risk free and tax-free, Johnson says. Or look at it this way: A $1,000 credit card balance at that rate paid off over five years would cost you nearly $24 a month, or more than $1,400. In short, you can leverage gas savings for greater savings by paying down your debt.
2. Boost retirement savings
Increasing your 401(k), IRA or other retirement plan contribution provides an increased tax write-offs and provides you with more money in your golden years. If you put away $1,000 in an account that earns just 4 percent interest compounded annually, you will double your money in 18 years.
3. Create an emergency fund
If a financial calamity like a layoff or illness hit you today, would you be ready? Use your gas savings to start or add to an emergency savings account. Just 52 percent of Americans have more emergency savings than credit card debt, according to a recent Bankrate.com survey. The most painless fix: Set up automatic paycheck withdrawals to match your average gas savings, about $40 per paycheck for those paid once every two weeks. You’ll never miss the money, Johnson says. Even those making minimum wage can save.
4. Pay down your mortgage
If you have an adequate emergency savings fund and your mortgage is your only debt, add your gas savings to your mortgage payment, designating it as additional principal. You’ll save on interest payments as you pay off your home loan sooner. Just check first that you can’t earn more interest in savings than you’re paying on the mortgage after you take into account tax savings.
5. Invest in yourself
Take an online class every month, Johnson advises. In one year, you’ll be a different person. Advancing your education also may pay off in higher income later. Plus, you might benefit from federal income tax credits for education expenses, as shown in IRS Publication 970. Or even take a culinary class so you’ll spend your savings on better food experiences.
6. Invest in your home
For millions of Americans, their homes are the largest investments of their lives. So, when you get a windfall, it might be time make improvements that will enhance your home’s value. You don’t need a lot of cash to make small home improvements that upgrade your quality of life. From painting to decluttering, here are 23 ways, each under $50.
7. Catch up on maintenance
If you’ve been putting off an oil change or tune-up for your car, changing your furnace filters, repairing appliances or even getting a physical for yourself because you thought you couldn’t afford it, well, now maybe you can. These kinds of expenses can “blossom into costly repairs if not taken care of,” Kathleen Campbell, the founder of Campbell Financial Partners in Fort Myers, Florida, recently told MarketWatch.
8. Get away
Instead of nibbling away at your gas savings by eating out more often, take a trip. Blow the bucks on a memorable experience, or maybe a couple of weekends away. Your $1,000 in savings will buy more than 580 gallons of gas at $1.70 a gallon, enough to take a car getting the average 25.4 miles per gallon more than 14,000 miles. It’s also good for four Chicago-Miami or three New-York-Los Angeles roundtrip tickets. Got kids? Take them somewhere that will create memories that will last a lifetime while you bond over the experience. Average gas savings are also equal to about the price of two-day admissions to Disneyland and Disney World for four people age 10 and up. Also, look for ways to travel cheaply.
The point is — be strategic with your savings! Have one fritter to celebrate the low cost of fuel, but don’t fritter away your savings on a year’s worth of fritters.
How will you use your gas savings? Share with us in comments or on our Facebook page.