One ingredient that helps the economy run like a well-oiled machine is...well, oil. So when oil prices go up, it can affect a lot more than how much you pay at the pump. Here’s what else it means for your bottom line.
The deets that matter for your wallet: Get ready to pay more for everything from flights to food. Because a lot of businesses rely on planes, trains, autos, and other machinery that require oil to get the job done. When oil prices rise, some pass those higher costs onto consumers. Think: more expensive utility bills, plane tickets, furniture shipped cross-country, and even food harvested with gas-powered tractors.
Your investments may also hit some turbulence. When the cost of doing business goes up, bottom lines can take a hit. Meaning stock prices for companies that rely on oil (hi, airlines and cruise lines) could go down. But it’s not all bad. Oil and gas stocks tend to have really good days when oil prices jump.
Your move: You can’t control the price of oil, but you can prep your finances for when it goes up. Here are some ideas.
Budget for rising prices: The price tags on everyday items (think: chicken, diapers, rental cars, plastics, palm oil, tampons) have already been on the rise thanks to inflation. A jump in oil prices hasn’t helped. That means comparison shopping is more important than ever. And if there aren’t any easy swaps for the products you need, look for other regular monthly expenses that you can downgrade or cut completely.
Look for ways to save when you fill up: Now that many workers are returning to the office, driving less might not be an option. To avoid sticker shock at the pump, use a free app like GasBuddy to find the cheapest stations near you. And for added savings, fill up using a rewards card that earns points or cash back on gas purchases.
Diversify your investments: AKA don’t put your financial eggs in one basket. Spreading your money across many different investment types, sectors, etc. will prevent your portfolio from taking a big hit when one area of the market slips.
A big jump in oil prices could affect what you pay for a lot of necessities. Plus, (temporarily) shake up your investments. So power up your personal savings where you can by looking for easy ways to save on utility, gas, and food bills. And weather a volatile stock market by building a well-diversified portfolio.
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Skimm'd by: Casey Bond, Ivana Pino, Stacy Rapacon, and Elyse Steinhaus