Gas Prices Keep On Dropping

Seems gas prices keep dropping.

Today they are at 103.9 cents per litre. That's a huge difference from a few months ago when gas was over 140 cents. In some parts of the country, gas prices are under a loonie a litre. Analysts expect gas prices to continue to drop.

So what does this mean? News reports are talking about the extra money in our pockets. Which is very true. The price difference equates to approximately 25% less money to fill the tanks.

Of course, the media being the media, what's the first thing they discuss when it means more money in our pockets? Spending it.

The media is not encouraging us to put it away for a rainy day or setting the money aside for retirement. They are definitely not advocating the average Canadian get out of debt or getting a leg up on living paycheque to paycheque. Of course, they are not saying buy more. But what they are saying is that means more money in our pocket for Christmas shopping!

I feel it's the same message, but packaged a different way.

Is it really that much more money? Let's assume you fill up every week. Before it cost you $60. Now, with the 25% discount, it will cost $45. That's a savings of $15. Assuming 2 weeks until Christmas, that's $30. For the sake of argument, let's say prices were for the last two months. Assuming 8 weeks at $15 of savings a week, that's $120.

Hmmm... okay. I'm not sure about you, but $120 can't fund a shopping spree. Maybe you can get one or two more presents, but it's not like you made one or two more friends the past two months to warrant additional Christmas gifts, right?

If you're like me, the money you're spending on Christmas gifts has been set aside. Which means the money you're saving on gas can go to better things like an investment account or bank account (if you believe in holding cash for rainy days).

Another thing to keep in mind, with the dropping price of gas, that means oil prices are dropping as well. With the Toronto Stock Exchange focused on oil*, that means dropping share prices. This means your money will go further if you buy more shares of the index ETFs/Mutual funds. In fact, the TSX dropped over 300 points yesterday. It was hard not to notice as it was one of the top stories on the radio and mobile alerts were being sent by all sorts of news organizations to my iPod Touch.

In short, just avoid buying more consumer goods. We're not saving that much money with dropping gas prices. Stick with paying down your debt, saving for a rainy day, or just go nuts with the extra money in your investment account.

*Oil, financial institutions, and raw materials are the main drivers of the TSX. In recent weeks, all three sectors have plummeted as profits were not up to analyst expectations. That's good news for the index investor!


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