Sunday, November 18, 2007

Don’t Get Stuck In The Cold-Plan Now For High Heating Costs!

As the price of crude oil approaches $100 per barrel, millions of Americans are facing the prospect of a difficult home heating season. The national average for a gallon of heating oil is currently $3.11, seventy-three cents higher than this time last year, and many analysts anticipate that the price will go much higher. As a result, many families may be forced to make some difficult last-minute decisions as they try to keep their homes warm this winter. According to budgeting experts, it doesn’t have to be that way – if consumers plan for increased prices now.

This will be a costly winter, especially for residents of the northern states. In order to deal with the increased demand on their budgets, it’s important for consumers to create a spending plan that incorporates the rising costs of heating oil and natural gas. Taking the time to design such a plan is often cited as an essential part of any money management strategy. Unfortunately, with all of the demands on their time, many consumers fail to prioritize their expenses or to plan far enough in advance for significant expenditures like this winter’s heating bills.

A spending plan helps individuals analyze their spending throughout the various categories of their expenses and identify areas that could be trimmed. Almost all of us have some form of overspending that can be put to better use. By adopting a longer view, consumers can adjust their budgets in advance and accommodate increases more easily.

Your daily cup of coffee can help demonstrate the benefits of the spending plan process. If you were to purchase two cups of coffee every day, each costing $2.10, you’d spend $29.40 in the course of a week. Over a one-month period, your coffee would cost $117.60, and your total expense for the year would come to a surprising $1,411.20. Most of us would balk at the thought of paying nearly $1,500 for coffee, but until we adopt a larger perspective, it doesn’t resonate with us. We’re only focused on the incremental expense, the $2.10 per cup.

Looking at incremental expenses in relation to annual costs can have a profound effect on your plan, because it forces you to weigh the importance of each element in relation to the others. In the example above, an individual could decide to reduce their annual expense for coffee to $260 a year by making their own at home. In that scenario, they would have $1,151.20 to allocate to more important areas of their spending plan – a good start toward meeting their home heating needs.

To learn more about the proper steps to take in developing a spending plan that is appropriate to your family’s needs, call your local credit counseling agency. If you’re interested in receiving a free budget analysis from Cambridge, contact the company directly at 1-800-CAMBRIDGE.

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