During most of the time I’ve been writing for The Simple Dollar, gas prices have stayed somewhere well north of $3 per gallon, jumping regularly to levels as high as $4 per gallon locally and approaching $5 per gallon at various places in the United States.
That’s an expense that really adds up. Let’s start off with a real world example that demonstrates the pain of $4 per gallon gas.
My wife’s total commute is about 60 miles per day and she commutes, on average, about 200 days per year. That commute alone adds up to 12,000 miles per year, so let’s use that as a baseline. According to the Department of Transportation, the average passenger car in the United States gets 36 miles per gallon. So, over the course of a year, if she commuted in an average car, she would use 333.33 gallons of gas. (She actually drives a Prius, so her mileage is a bit better than that.)
When gas is $4 per gallon, keeping her car fueled just for the commute in a year costs $1,333. At current gas prices, the cost is $667 per year. The current low gas prices are saving our family $666 per year just on my wife’s commute.
With those kinds of savings already flowing through our life due to the sudden return of $2 gas, we can’t help but look for other opportunities to save while gas prices remain low. Here are some of our plans (and things we would do if we were in a slightly different situation).
Drive Instead of Flying
As we’re situated right in the middle of the United States, we find ourselves within driving distance of lots of major cities. We’re about three hours from Minneapolis and Kansas City, five hours or so from Chicago and Saint Louis, about eight hours from Oklahoma City, and about ten hours from Detroit, Denver, and Dallas.
On some of those longer destinations, particularly Detroit, Denver, and Dallas, we would typically consider flying instead of driving, particularly when fuel costs are high. For example, to fly to Dallas from Des Moines takes about five hours and a round trip ticket would cost about $400. Given the expense of driving there – about 1,400 miles round trip, the fuel cost in a 25 mile per gallon vehicle at $4 per gallon adds up to $224. However, with gas prices at the $2 per gallon level, it’s only $112.
Given maintenance costs on the car and the time savings, we might have leaned toward flying in the past. However, with the cheaper gas triggering more than $100 in fuel savings on the trip and the added flexibility of driving, we would today lean more toward driving for trips in the six to ten hour range. We might lose a couple of hours each way, sure, but given the additional time of dealing with airport security and hassles and the risk of flight delays plus that reduced flexibility, the fuel savings really does swing the balance toward driving from, say, Des Moines to Dallas as long as fuel stays around $2 per gallon.
Top Off Your Fuel-Powered Equipment
Right now is a great time to top off any fuel-powered equipment that you keep in your garage. The next time you fill up, take a gas can along with you, then top off your lawnmower, snowblower, weed cutter, or any other gas-powered devices you have in your garage. The next time you go to the gas station after that, fill up your gas can to the brim again for storage.
Even if you have a three gallon gas can, filling it up twice equals six gallons, and when gas is at $2 a gallon versus $4 per gallon, you’re going to save $12 by being smart now rather than waiting around.
Over the course of the next month or two, we’ll use that fuel, so any concerns about old gas aren’t really a problem. Our logic is that we’ll either be using the snowblower or the lawnmower, so there’s going to be a use for the gas either way.
Plan a Road Trip Vacation
Unless something drastically changes with fuel prices, we’re planning a road trip vacation this summer in which we camp in several places around the upper Midwest and visit some more interesting locations in northern Minnesota and Wisconsin.
In previous years, all of the driving – probably adding up to 1,500 miles or more – might have pushed us to stay closer to home, but with cheaper gas, we now have an opportunity to explore a greater distance and still save money on gas. This opens us up to things like exploring the northern woods of Wisconsin and the north shore of Lake Superior as a family instead of sticking to Iowa locales like Honey Creek.
This is probably the best summer to take advantage of a road trip vacation because of the fuel costs, so we’re penciling it in this summer. In other years, when fuel costs may be higher, we can always do things closer to home or investigate other plans for family vacations.
Buy a Fuel-Efficient Car
This might seem a bit counterintuitive, but right now is actually a great time to buy a highly fuel-efficient car. Why? Not many people are buying them at the moment due to the low gas prices.
If you look at what people are actually buying right now, they’re throwing money at SUVs because of the cheap fuel and leaving hybrids on the lot, resulting in manufacturers starting to offer discounts on the fuel-efficient models.
If you’re looking to replace your car right now, it might be tempting to look at less fuel efficient cars that perhaps provide other amenities, but right now, those are the ones that are in demand. Instead, keep an eye on the fuel efficient cars that are receiving some discounts from dealers and manufacturers. Fuel prices won’t stay this low forever and if you can snag a fuel efficient car now with a dealer discount, you’ll also enjoy gas savings later on when prices inevitably rebound.
For us, we’ve actually considered making this kind of move if the right discounts appear on a car for my wife’s commute. She really does rack up the miles on her commute and if this provides a window of opportunity to get a fuel efficient car at a nice discount, we may just be hopping on board here.
Save for the Future
Let’s say you’re in a situation like us where the reduction in gas prices is saving you $100 a month (or more) compared to where gas prices were a year or two ago.
That’s extra money in your checking account each month. Why not just do something smart with it?
Build an emergency fund. $100 a month straight into your checking builds up to a nice little emergency fund in a few months. You’ll find that incredibly useful the next time you have brake problems or your furnace has problems or you suddenly need to go to Tallahassee for a funeral.
Pay down debt. Take that $100 a month and apply it as an extra payment toward your debt with the highest interest rate. As your balance drops, so will your monthly interest payment on that bill. Your $100 thus saves you quite a bit more in reduced interest payments, plus when the debt is gone, you’ll have more money to go around.
Save for retirement. If you’re not currently saving for retirement, take that $100 a month and use it to open up a Roth IRA. You’ll be able to contribute $1,200 a year, which will really help down the road when you actually reach retirement age and have a little nest egg waiting for you.
Save for a down payment. If you’re thinking of owning a home someday, add that $100 a month to your down payment savings. Every dime helps to move you closer to the day when you can own a home of your very own.
Save for a car replacement. If you own a car, at some point you’re going to have to replace that car. If you can put aside $100 a month for that replacement, it might mean a much smaller car loan – or even the possibility of avoiding a car loan entirely.
Save for college. If you have children, some sort of educational opportunity likely looms for them after high school, and it’s likely that it will be an expensive opportunity. Take advantage of low gas prices and open up a 529 college savings plan for them, contributing $100 a month. If your child is a baby and you stick with that $100 a month, they’ll have tens of thousands of dollars waiting on graduation day.
Here’s the truth: low gas prices are an opportunity. You can use that money you save to get a financial start or take advantage of cheaper fuel to do things in a less expensive fashion, leaving money behind in your pocket. Good luck.