LIKE MILLIONS of other Americans, I’m experiencing serious sticker shock when I gas up the car.
Last week, I was filling up my 2019 Ford F-150 and, for the first time ever, the bill topped $100. That was 21 gallons of regular unleaded at $4.85 a gallon.
Shelling out that kind of cash for a tankful of gas is hard enough for working folks. But for those of us who are retired and living on a set income, sky-high gas prices—along with the soaring cost of groceries, electricity and other necessities—are causing us to revisit our budget and make painful spending cuts.
The economic term for this is demand destruction. Just like it sounds, it means people buy less of something that’s become too expensive. I’m seeing it play out in my own budgeting.
Before I retired from the corporate world last year at age 61 to pursue a second act career as an author and storyteller, I created a detailed, line-by-line spreadsheet of my expenses for the next few years until I start taking Social Security. The goal was—and still is—to live off a modest pot of taxable savings without dipping into my retirement funds. I intend to stretch out those savings for as long as possible.
But my best-laid plans have run into the hard realities of rampant inflation. The calculus on the transportation line of my budget is particularly ugly.
I own a cabin in the Endless Mountains of Pennsylvania, just south of the Elk Mountain ski area. I regularly make the drive there from my girlfriend’s house two hours to the south, near Harleysville, Pennsylvania. It’s a 120-mile drive one way, and I average between 18 and 20 miles per gallon in my 2.7L EcoBoost F-150—meaning I burn about six and a half gallons of fuel each way.
At $4.85 per gallon, that amounts to roughly $30 each way, or $60 roundtrip. I typically make the trip once a week, so we’re talking about $250 per month in fuel costs just to go back and forth to the cabin. Add in the other local driving I do, and I’m spending about $400 on gas in a typical month.
My retirement budget—put together at a time when gas prices were two-thirds of what they are now—called for spending about $250 a month on fuel. So right there, I’m over budget by about $150 a month.
The pain of higher gas prices also extends to the entertainment line of my retirement budget. Last year, I bought a 30-foot Keystone ultra-lite travel trailer for the traveling that Rachael and I plan to do in this new phase of our lives. When I have that trailer attached to the truck, my gas mileage plummets to a horrid 10 miles per gallon.
We typically drive about 200 miles roundtrip on a given camping trip, except for trips out west, when the calculus changes dramatically. At nearly $5 a gallon, an average 200-mile roundtrip drive with the trailer attached will cost me upwards of $100.
If we take two trips a month during the summer, as we’d planned, we’re talking $200 a month just to tow the trailer back and forth from camping spots. That’s compared to the $120 per month I’d budgeted for vacation-related gas purchases when I built the spreadsheet. At that time, gas cost about $3 per gallon.
Between everyday driving and fuel for the trailer, I’m at least $230 over my monthly budget because of higher gas prices. That may not sound like much, but when you’re on a fixed income and also paying dramatically higher food and utility costs—not to mention your medical insurance—it makes it that much harder to stick to the plan.
What’s an early retiree to do? It’s a zero-sum game, after all. There’s only so much to go around. The options, as I see them, are to dip more into my savings, or go back to work in some fashion, or further cut expenses in a budget that’s already trimmed to the bone. I really don’t like the first two options, so I’m going the belt-tightening route. Practically speaking, this means:
Is this not demand destruction at work? If millions of others are doing the same, it must eventually cool the economy, and inflation along with it. The question is, will it cause the economy to tip into a recession? That’s the big issue the financial markets are grappling with these days. No one knows. But I suspect the answer lies with the collective spending decisions of consumers like you and me.
James Kerr led global communications, public relations and social media for a number of Fortune 500 technology firms before leaving the corporate world to pursue his passion for writing and storytelling. His debut book, “The Long Walk Home: How I Lost My Job as a Corporate Remora Fish and Rediscovered My Life’s Purpose,” was published in 2022 by Blydyn Square Books. Jim blogs at PeaceableMan.com. Follow him on Twitter @JamesBKerr and check out his previous articles.
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My goal has always been to live a “beer budget life” on “champagne resources.” Now I wonder if that will even work. Of course, I lived through the 1970s and survived even worse inflation, but I was working and got raises that somewhat offset the increased costs. Today when I need something I check prices at local stores, including big box operations, and check the miles to the store and add that expense (I use 50 cents a mile because it’s easy to multiply) and then check Amazon pricing and see if it’s cheaper with free delivery than local prices. Such is the inflation-cost-cutting mentality at our household.
with real estate prices like they are, if you are feeling severely squeezed, another option might be to sell the cabin. You could pocket the profit, cut back on travel (gas), expenses, decrease your stress level, and have more to invest as outlined in your other article all in one fail swoop.
When I retired in 2000 on a non-COLAed pension, gas was around $1/gallon. Inflation has always been a big concern for me, which is why I delayed Social Security until I turned 70. I became concerned both about gas prices and about climate change way back in the 2000s, and I bought a Camry Hybrid in 2007 which I am still driving. I expect to replace it with a plug-in hybrid in the next couple of years.
I took early retirement so I could travel before I became too decrepit, but I did most of my traveling in countries with good (and cheap) public transport. Admittedly I had to fly to reach them, but I amortized the flight over several months on the ground. We can’t control inflation, but we can make choices with it in mind.
Nice post. The only thing I might push back on is that the author said “it’s a zero sum game”. I disagree. The best way to combat inflation in my opinion is to delay Social Security as long as possible. This is an individual choice and it’s not a zero sum game (except taxpayers have to fund it). The author mentioned delaying “a few years” until SS and is currently age 61. Delay until 70 and the next COLA (7%, 8%, more?) awarded will apply to the larger base for the rest of his life (and perhaps his spouse’s life). Gas prices might go down in the future, but your COLA increase you experience for the year 2023 won’t. Future COLAs compound over what your benefit will be in 2023 and beyond. Do we want it to apply to a smaller base amount or a higher one?
I just paid nearly $80 to fill my 2014 Accord!! Higher gas prices, however, are a fine incentive to walk and ride my bike as often as possible – helping to meet one my 2022 goals f improving my fitness and health. We are lucky to live in a town where biking and walking are common, and stores are close enough to make this a reasonable choice. In our former PA suburban home, not much was walkable, and biclyling on the narrow, crowded roads was pretty scary.
We paid $0 today to fill up our Fiat 500e from our solar panels and PowerWall. Panels were installed while we were still working; PowerWall was free courtesy of PG & E. My advice to anyone planning to retire is to do what you can while still working to reduce your fixed expenses in retirement – it leaves more money available for the fun stuff…….
I paid the same to fill my Ford Fusion. Fortunately I’m able to use public transit so a tank of gas lasts me more than a month.
In your companion article today you stated that you were “putting together a shopping list” of stocks that you think are on sale, while in this article you described the sacrifices you are making in response to inflation, especially rising gas prices. How do you plan on funding your equity purchases?
I was wondering the same thing — a pair of seemingly discordant articles from this author on the same day.
I suspect Jim is doing what I hope every HumbleDollar reader is doing right now — moving money from bonds and cash investments to stocks. Investing more in stocks during a down market and keeping a close eye on spending seem like sensible practices, and hardly inconsistent with one another.
Are you recommending “good” market timing?
As a matter of rebalancing, investors should be moving money from bonds and cash to stocks, given what’s happened in the financial markets. Should folks go a step further and potentially overweight stocks at this juncture? Some would consider that an investment sin. I’m less judgmental.
Thanks for clarifying. But if you follow the principle of rebalancing annually and otherwise staying the course (which I try to do), waiting seems more prudent. Maybe sale prices will go lower, maybe prices will recover before time to rebalance.
I follow the principle of rebalancing and annually for most folks is just fine. BUT, when the market gets really out of whack, then I see nothing wrong with rebalancing even if it hasn’t been a year. Maybe a guide of 5% – 10% points out of one’s appropriate asset allocation is enough to then rebalance but I don’t consider that market timing.
That makes sense, although your advice would be more clear-cut if bonds and cash weren’t also being touted as good buys. While your advice is a good option for those with a long time horizon, I question whether most retirees should be making moves beyond rebalancing.
I took a meager early retirement incentive to leave my poorly paid job in late 2020 because my SS and state pension would equal my take-home pay. I was in a position irrelevant to my skills and education and feared Covid. But now inflation is making it way more difficult to get by. Fortunately, I chose a fuel-efficient vehicle when I went to buy a new, used car last summer. My 2020 Honda Fit has been getting close to 40 MPG on recent road trips to visit my kids in Atlanta and Orlando. But groceries are killing my budget!
I suggest you raise your consulting rates. I am self employed and just raised my rates significantly. The increase was accepted without question.
I can’t help but wonder, not only now with gas prices so high, why the largest selling vehicles in the US are pickup trucks which the vast majority of owners do not need to get from A to B and generally are more costly to operate.
I never thought I’d be driving a truck, but I needed one to tow the trailer, which I wanted to be able to travel more. The truck has also been extremely valuable in hauling stuff up to my mountain house. If I didn’t have it, I would have had to rent. I did get the most fuel-efficient F150 I could find, however.
We feel very fortunate to live in a part of our town where everything is walking distance. Add to that I work from home and have a sailboat with no engine so the high gas prices have barely impacted us.