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!