Archive

Archive for the ‘Saving Money’ Category

Should You Save for College or Retirement First?

November 15, 2014 Comments off

college savingsIf you’re like most people who have children, you’re probably doing all you can to save for their college education. Due to the current cost of a college eduction along with the fact that the cost is escalating at a pace much higher than inflation, and likely higher than the growth of your income, it can seem like a daunting task.

While you’re working hard and saving for college, there’s still the nagging question in the back of your mind, “Am I saving enough for retirement, too?” Some folks are lucky and have an income level that makes it possible to save adequate amounts to ensure both a top-notch education for your kids, and the retirement lifestyle you’ve always dreamed of.  If you don’t fit into this lucky group you’re probably wondering which side you’ll have to sacrifice.

As parents, our natural instincts are to provide for our children first, and ourselves later.  After all, if there was only enough food in your house and you had to decide who went hungry, you know it would be you…and you wouldn’t even think about it for a second.

However, in this particular case, it makes better financial sense to over-ride this natural inclination, and think of yourself first. From a purely financial perspective, if you have to choose between saving for college and saving for retirement, you should save for retirement. There are a couple of reasons for this, but the most important one is you can finance a college education, you can’t finance a retirement.

The other aspects of this to consider are the fact that you will need a considerable amount more money for retirement than college, therefore starting to save earlier will be important for hitting your goal. Finally, you will gain more current tax advantages by saving for retirement than you will saving for college.

It goes against your parental instincts, but if you HAVE to make a choice, choose to save for retirement.

The Relationship Between Oil and Gas Prices

August 2, 2012 Comments off

As a consumer of gasoline it can be frustrating to watch the price of oil go up and down, yet the price of gas doesn’t move in step.  Why does the price of oil drop, but the price of gas at the pump doesn’t?  Why does the price gas seem to go up faster and higher than the price of oil?

The natural inclination of most consumers is to assume their local gas station is gouging them to make a higher profit.  Actually, this isn’t the case at all.  Most gas retailers make a very thin profit margin on the gasoline they sell.  That’s why most gas stations also have a convenience store.  It’s virtually impossible for a gas station to sell enough gas to make enough of a profit to even keep the doors open.  They make a much higher profit margin selling food and drinks inside.  They actually use the gas pumps as a means to get customers into their convenience store.  So, don’t view it as a gas station that has a store, it’s really a store that has gas pumps.

Interestingly enough, when the price of gas goes up, the retailers margins actually get squeezed even worse.  They actually make more profit when the price of gas falls.  So, don’t get angry with your local gas station owner.  They’re on your side!

What Makes up the Price of a Gallon of Gas?

Oil

The pump price is not based on the cost of the fuel that is currently in a station’s underground tanks.  Instead,  the price is set by how much it will cost to buy the next delivery.  This cost is influenced by local conditions, pipeline fees, distribution costs, refinery margins and crude oil prices.  That’s a lot of variables affecting the cost of your fill-up.

The biggest piece of the pricing pie is the cost of crude oil.  While crude oil is a commodity that’s traded on exchanges around the world, it’s not traders and speculators that cause the price to rise and fall, but supply and demand…or more accurately, perceived supply and demand in the near future.

As large nations with emerging economies, such as China, India, Russia, etc., grow, their demand for crude grows with it.  This puts far more pressure on the demand side than anything the happens in the US.

From a supply point of view, geopolitical tensions can create major disruptions to supply.  OPEC and other oil producing organizations can also restrict production in order to maintain what they believe is a fair price for their product.

Taxes

oil and gasThe next biggest component in the price of your gallon of gas is taxes.  Gasoline is taxed at the Federal, State, and local levels to provide money for highways and other transportation infrastructure needs.  This is the one area where the government can help.

There is much news made over how much drilling should or shouldn’t be done in the US and coastal waters.  However, historical statistics have show that the amount of new oil drilling in the US has little to no affect on the cost of your gallon of gas.  First of all, it takes a long time for a new oil well to start producing oil.  Secondly, the new supply offers little impact as compared to the world-wide supply.  I’m not saying we should avoid new exploration and drilling, but keep in mind that won’t ease your pain at the pump.  However, lower gas taxes would!

The drawback to lower fuel taxes is this could only be done for a short period of time before the transportation infrastructure in our Country would start to deteriorate at a pace that’s even quicker than it is today.  In other words, that’s not a long term solution, either.

There are other ways the government car help the issue from a demand point of view, such as requiring higher fuel mileage ratings for new cars, modernizing fleets of government vehicles, and most of all, lessening military actions.

The Bottom Line

Oil and gas prices will never run in lock step because of the number of variables that make up the price of a gallon of gas.  The only way to lower the price of gas of any significance for any period of time is to increase oil production while simultaneously cutting the consumption of oil.  In today’s world, neither of those are very likely.  We should probably get used to the idea of high gas prices and adjust our personal usage and household budgets accordingly.

Categories: Saving Money Tags: , , , ,

Seven Ways to Save Money Without Giving Up the Lifestyle You Enjoy

February 28, 2012 Comments off

Saving money is easy…but it does require sacrifices. The reason so many Americans are in debt in the first place is that they want to have a certain lifestyle, and this lifestyle often requires living beyond their means. So if you’re going to start saving money rather than scrambling to pay the bills every month, you’re going to need to give up some stuff, right? Well, maybe! There are a few tricks that can help you continue to live the lifestyle you want while also spending less money every month.

Tip #1: Rent instead of buying.

Owning a home is expensive. A mortgage payment might not be much more than a rent payment, but you’ll also have to pay for homeowners insurance, maintenance, utilities, homeowners association membership, and repairs. A posh rental in an area you love might be a better choice than buying a home until you’re ready to deal with the cost.

Tip #2: Drink water or soda between every cocktail.

You don’t have to give up going out with your friends – just be smarter about your drink choices. If you order something non-alcoholic between every cocktail, your bill will be substantially lower at the end of the night.

Tip #3: Head to the pound.

That adorable pup you own may be a purebred that cost hundreds of dollars, but when it comes time to get a new pet, head to the ASPCA or another local animal shelter instead. Cute critters – often nearly purebred – are dropped off and left homeless every day. No one will know the difference at the dog park, but you’ll spend less than $100 for a dog that is already fixed and is up to date on shots.

Tip #4: Clip coupons.

You don’t need to be an extreme couponer like they show on television to rack up the savings at the grocery store. You can get coupons from Sunday papers, savings websites, and even manufacturer social media profiles, and these coupons are good on everything from shampoo to frozen foods. Pair them with sales for every more savings without resorting to purchasing generic brands.

Tip #5: Get your hair done at beauty schools.

It might be a little nerve-wracking to allow a student to work on your hair, but for basic cuts and color applications, heading to a local beauty school is a great option. Schools with working salons offer all sorts of services, including waxing, manicures, and facials, for just a fraction of the cost you’d pay at the boutique salon down the street. If all you need is your roots touched up, this is a great option.

Tip #6: Becoming a Groupon/Daily Deals/Living Social/etc. addict.

Email savings newsletters like Groupon are amazing for saving a ton of money at local restaurants, bars, spas, and so forth. Don’t use these deals as an excuse to do things you wouldn’t normally do or you’ll end up spending more…but if you like to have dinner at a nice restaurant once or twice a week or don’t want to give up your monthly massage, these deals can save you a ton of money.

Tip #7: Stock up when items are on sale.

Lastly, just play it smart and stock up on your favorite items when they’re on sale. This means dishing out a little extra money up front, but you’ll save in the long term. For example, last week, my favorite wine was on sale for $8.99 (regularly over $15) and one of the stores in my area was offering 30% off on all alcoholic products PLUS and addition 10% savings on purchases of 6 bottles of wine or more. I spent over $100 on wine, but I won’t have to purchase it again for several months and I saved over $150 compared to what I would have spent had I bought bottles here and there over the next several months.