Are You Ready For $5 Per Gallon?
Three dollars per gallon is a reality; $4 or even $5 per gallon is certainly a possibility. Maybe even a likely possibility.Are you prepared for that if it should happen?
Many of us (probably most of us) are not.
But we're foolish not to at least take the prospect of $4 gas (or higher) seriously - and plan accordingly. Here are a few things to think about in the way of hedging your bets and insulating yourself and your family from the economic shocks that could very well be just around the corner:
* Evaluate your fleet
If you currently drive a larger, less efficient vehicle the time to consider replacing it with a more efficient one is before larger, less efficient vehicles become virtually worthless overnight - as would happen if gas prices head south of $4 per. The car market is like the real estate market - sometimes bearish, sometimes bullish. People who are driving 17 mpg SUVs and pick-ups when gas prices suddenly spike will be left holding the keys to vehicles no one else wants, either. Meanwhile, it'll be a seller's market for fuel-efficient cars. Those who don't have one will pay top dollar to get one. Act pre-emptively and you'll come out on top. Fail to act and you'll be stuck with a vehicle that may cost $100 to fill-up that isn't worth a third of what you paid for it. If you absolutely must have a truck because of the work that you do or the area where you live, consider buying a diesel-powered pick-up to replace your gas-burning one. It's true diesels cost more to buy - and the fuel is (right now, anyhow) often more expensive than gas. But at $4 or $5 per, the economics of diesel tuck that gets 30 mpg vs. a gas truck that's in the teens change dramatically. Plus, a diesel-powered vehicle can last two or three times as long as an otherwise similar gas-powered vehicle. If you only have to buy a new vehicle once every ten or 12 years vs. once every eight or so, that'll save you some bucks, too.
* Pare down your fleet
Many families have more vehicles than people. That's fine, provided you can easily afford all those vehicles - and the cost of feeding them. But if not, the time to think about scaling back is now - in order to avoid being stuck with a couple of unusable cars on cinder blocks sitting in your driveway (or yard). If you can get by with two cars instead of three - or one car instead of two - the savings now can be considerable. And they'll be even more so in a world of $4 gasoline. Another savvy move is to cash out the equity you may have in excess vehicles. By selling off a surplus car or two, you can sock away several thousand dollars - which could come in very handy on the day that fuel prices rocket to a buck (or three) more per gallon than they are right now. Investing in a low-bucks used economy car is another smart move. The glitter surrounding a new hybrid may be dazzling - but it'll take years to work off the cost of buying one, even at $4 per gallon. A $4,000 used Corolla, on the other hand, could ease the pinch of $50 fill-ups considerably.
* Evaluate your job/where you work
Many of us spend two hours (or more) every workday getting from home to our jobs. We bought into this because of the math. The lower cost of a home farther outside the city easily offsets the cost of fuel spent commuting, etc. But the equation changes when gas prices go up significantly. All of a sudden, instead of spending $40 per week for fuel, you might be spending $80. For many families, the additional unexpected expense might be the straw that breaks the camel's back. And there's a double-whammy involved. Once gas prices sail past $4 per gallon, those far-flung suburban homes become less and less desirable - and their value falls. To an extent, this is already happening. But if we get to $4 or $5 fuel, the downturn in the housing market could become a crash. Few people can afford a big mortgage - and $400 per month for gas on top of it. So if you're already close to the edge, money-wise, and know that a significant increase in your commuting costs could put extreme stress on your budget - begin thinking about options now, before a theoretical risk becomes an immediate crisis. Ask about tele-commuting (if possible). Discuss ride-sharing with co-workers and friends. Maybe even consider moving closer to where you work. Remember: Once we get to $4 or $5 gas, your options will not be nearly as good as they are now.
* Save elsewhere
None of us can control the cost of fuel; if the sign says $4 per gallon and we need to fill up, that's what we'll pay. However, we do have control over other expenses. And we can compensate for increased energy costs by reducing what we spend on other things. Many of us, for example, could easily get by without things like video cell phones and PDAs. Yes, electronic gadgets are fun - even handy. But the question should be: Are they necessary? And if the answer is "no" then the next question ought to be: Do I prefer having some money in the bank to cushion against possible upticks in energy costs (which can't be evaded) or am I willing to risk being strapped for money if that happens in order to have the gadgets want but don't really need? Same goes for expensive new vehicles and other consumer goods. Nice to have? Sure. But as nice as not having to worry about money? Seems like an easy question to answer.
