Why Higher Gas Prices are Bad for Your Household?

On the weekdays, I check the future prices of oil and unleaded gas; I would not be surprised if some of you do the same.  Unfortunately, prices of unleaded gas and oil could continue to rise this year.  Can you imagine your savings rate if we have to pay four to five dollars for gasoline?

I am sure you have completed your financial budget for 2011.  You have allocated a certain amount of money for emergencies.  Also, you have predicted what your monthly bills will be, how much you plan to contribute to charities, and how much you plan to spend at the gas pump, the dry cleaner, and the grocery store.

Sometimes, we overestimate or underestimate our yearly expenses.   Fortunately, if we overestimate our expenses, we can allocate the extra cash to current savings or retirement accounts, for example, an IRA.  On the other hand, if we underestimate our expenses, we may not only save fewer dollars , but also we may be forced to take money out of our savings.  Without adequate savings to cover unanticipated expenses, we may be forced to borrow or pay late fees on current debts; this financial situation is dangerous in any economy.

Yes, higher gas prices could be disastrous in 2011.  Companies may become afraid to hire more workers or give merit raises to current employees.  Therefore, some people will continue to be unemployed unless they create their own jobs.  Also, currently, some individuals are barely managing to pay their bills on time.  If gas prices go any higher, they might find themselves sinking into more debt in 2011.  Unfortunately, I do not possess a crystal ball that tells me how high gas prices will go!   However, if gas prices go any higher, we will probably see higher airline ticket prices, food and shipping costs, etc.  Because of rising gasoline prices, our savings rate in 2011 may fall short of our expectations, and we may spend fewer dollars at the stores.  If we are small business owners, we may be forced to let some of our employees go or reduce employee benefits to maintain current profit margins.  Yes, many of us will be hurt by increasing gasoline prices.