Transcripts

"Money File" -Gas Budgeting

SUSIE GHARIB: Tonight's "Money File" guest says with gas over $4 a gallon, now's the time to adjust the rest of your spending. Here's Chuck Jaffe, senior columnist at "Marketwatch."

CHUCK JAFFE, SENIOR COLUMNIST, MARKETWATCH: I recently found the ledger from my late father-in-law's first car, purchased right after his wedding in 1950. The most he paid for a tank of gasoline that year was $4.25, roughly what I paid for one single gallon while driving to his upstate New York home. There was an interesting lesson buried in those spending records from a half-century ago. When he spent more for gasoline, it was noted in the records and paid for by other budget cuts. The $30 fund my in-laws established as newlyweds -- roughly a dollar of daily savings set aside for discretionary fun -- well, it paid the price whenever a tank of gas cost $4. That's a great model for modern consumers, who appear to miss the point. A study released last week by Access America said that roughly three-quarters of Americans will change their driving habits when fuel costs hit the $4 per gallon level. Since that price has been breached in many parts of the country, it can be assumed that a majority of Americans are cutting back on non-essential driving, consolidating or reducing their errands, buying more fuel-economic cars and so on. That's great, but the response missing from the study was the second step, meshing driving habits with spending habits. If you can't hold the budgeted gasoline dollars steady and still drive all of the miles necessary in your life, then you need to cut back someplace else. Gas prices are more than 10 times higher than they were in the '50s, but some things, like sound budgeting and thrift, never change. I'm Chuck Jaffe.