What to do with all that money?

What to do with all that money?

According to the U.S. Energy Information Administration (EIA), retail prices for gasoline in New England continue to decline. Compared with a high of $3.72 per gallon of regular gas in 2012, consumers now are paying $2.06 – a savings of $1.66 per gallon. For passenger car drivers averaging 36 miles per gallon during 12,000 miles of travel, that means an annual savings of about $553.

For those people heating with oil, EIA projects average savings of $459 per household “reflecting retail prices that are 47 cents/gal (15%) lower and consumption that is 11% lower.” That said, last January, the cost of a gallon of heating oil hit an all-time high of $4.15 in New England. The current average price in the region is $2.15. In Maine, oil heating costs have dropped to $1.83 per gallon! Also, the National Oceanic and Atmospheric Administration (NOAA) forecasts that average temperatures in the Northeast will be 13 percent warmer than last year.

Bottom line: two-car households heating their homes with oil should have more than an extra $2,000 to spend in the year ahead.

How might you put that money to work? You could.

  • pay down your debts (e.g. credit cards, mortgage, car payments, etc.)
  • put it in your savings account (average interest rates are less than 1 percent)
  • invest it in the stock market (average compound annual growth rate over the last ten years has been 7.93%)
  • turn up the heat instead of adding layers and blankets to your winter evenings
  • buy insulation for your attic, foundation and walls
  • blow it in lottery tickets (not recommended unless you don’t need the money)
  • take a brief vacation somewhere warmer
  • buy any one of the following insurance products:
  • $200,000 in term life insurance (about $41 per month for twenty years for a healthy 40 year old)
  • $1 million of umbrella liability coverage (about $200 per year for a homeowner with two cars and no unusual exposures)
  • Increase your contribution to your health savings account by $1,000 each if you and your spouse are over age 55

In order of priority, here’s what I would do:

  • Pay down credit card debt. The national average interest rate charged for credit card balances is about 15%.
  • The second priority would be to protect my assets with an umbrella liability insurance policy. At such a low annual cost, it’s worth protecting everything I’ve worked for and cherish.
  • The third priority would be to put the money to work where I’ll realize a return. Heating costs won’t remain low forever so insulating and weather-proofing my home will begin to pay as soon as prices begin to rise. I’ll also feel more comfortable during the heating months.
  • Begin or increase my investment in the stock market. Two thousand dollars invested today would grow to $4,289 in ten years based on 7.93% annual rate of return.

After making one or more of the choices above, you might also want to treat yourself to a nice evening out to celebrate your wise decisions. Here’s to a Happy New Year and many high-yield returns!

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