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How the Economy will Affect Your Finances



If you have been following what has been happening with the economy in the last few months, you may wonder what effect some of these different events have on your life.


A good question many people have is why did the price of gas go down so much? This is a pretty difficult question to answer but here is a simple answer for the fall. It has to do with supply and demand. With the world going through a global recession, it causes the demand for gas to go down. This has caused the price of a barrel of gas to drop from a high of $147 down to its current level of roughly $45. OPEC has struggled with this as witnessed by this story: The price of a barrel of gas has dropped so rapidly that it led to prices dropping a record 1.7% in October. It blew away the previous record of 1%. This can help you since you have to pay less for the goods you buy every month.


With the economy also struggling, the Federal Reserve has also lowered the prime rate down to .25%:  As a result, interest rates have gone down. This will lower the interest rate on your home equity line or any line of credit if you are tied to the prime rate. This does not have as much effect potentially on mortgage rates for first mortgages because those are tied to the performance of mortgage bonds.


How does this then affect you? Price of gas will probably go up at some point. If you are thinking about a truck, you may want to look at the following article: The price of gas may increase some, especially when you consider that they are dropping so much and production is being dropped. With interest rates on home equity lines going down, you can expect to pay less interest every month on the money you have borrowed. Understanding some of these facts can help you make more informed choices when you are making major purchases.

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