In September, Americans saved about $350 million per day on gasoline, compared to what they were spending last year, according to the latest monthly fuel prices report from AAA. Nationwide, drivers are benefiting from gas prices that are $1.05 per gallon less than they were in September 2014 — so where are they putting those savings?
A new report from Chase indicates consumers are just spending more on other things, rather than putting away money they used to spend on gas. The report details an analysis of more than 57 million credit and debit card users in the U.S. and what they bought during times when gas prices were high (between December 2013 and February 2014) and when they were low (between December 2014 and February 2015). In the period of high gas prices, the median monthly fuel spending amounted to $101 per person. A year later, people were spending $22 less on gas per month. That’s $264 a year in extra cash in your wallet.
What would you do with an extra $22 a month? Perhaps it doesn’t seem like much, but given that gas prices have continued to remain lower than they were last year, it’s possible you’ve saved a few hundred dollars on gas this year (though that depends on where you live and how consistent your driving habits have been). You can do a lot with that kind of savings, like put money in a retirement fund and watch it grow, or make progress toward getting out of debt.
A more likely scenario — based on Chase’s research — is that you’ve spent it already. According to Chase’s analysis of people’s credit and debit card activity, consumers spent 80% of their gas savings on other everyday things, like groceries, dining out, entertainment and shopping.
That’s not to say everything people bought with gas savings qualifies as frivolous spending, but this analysis shows how easy it is to miss out on savings, rather than capitalize on them. A common term for this is lifestyle inflation — when you start making more money or cut an expense from your budget, you use those funds to feed a higher standard of living, rather than maintaining your spending habits and putting the extra money toward goals like paying off debt or buying a house. (You can calculate how much faster it would help you get out of credit card debt, for example, using this credit card payoff calculator.) Tracking your spending can help you avoid lifestyle inflation, make progress toward your financial goals and, perhaps most important, keep you from overspending your way into debt. You can see how your spending is impacting your credit scores for free on Credit.com.
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