Little Man Syndrome is a term Dave Ramsey uses to describe people that believe that someone/something else is in control of your life. Often mixed in is the hope that Washington will somehow fix it.
This syndrome is often irritated by the news, which picks out hot button topics and fans the flame. Perhaps one of the hottest topics is gas prices. I hate paying it, you hate paying it, but it is one of those expenses we really can't live without.
But, the same newscast with stories about higher gas prices wrecking people's budgets also has stories about people lining up to buy "Grand Theft Auto 4" (cost - $59.99) and see Iron Man ($150,652,108.00 opening box office weekend). Hmmm. So, there is still some room in the budget, right?
The New York Times has an interactive chart of the parts that make up the Consumer Price Index. It shows that gasoline makes of 5.2% of the spending nationwide and is up 26% from the previous year.
To put this into perspective, the average American making $40,000 a year, and will spend 5.2% of that budget on gasoline ($2080.00). That is up 26% from last year, so if this year they are spending $2080.00, last year they spent $1, 539.20.
I like to look at how this affects my paycheck.
I get paid bi-weekly, which simply means I get 26 paychecks a year. If I budget based on the CPI, I would divide what I anticipate on spending in gas this year by 26. Using our example, I need to budget $80.00 a month for gasoline ($2080.00/26). If I had done this for the previous year, I would have budgeted $59.20 for gasoline ($1539.20 /26).
So far, the net impact of gas prices on me is that I am paying $20.80 more per paycheck on gasoline (or $540.80 more per year; or 1.35% (540.80/40000) increase over the previous year).
Should a 1.35% change blow a budget based on 40k? I hope not. I can't remember taking my family out to the movies for $21.00, or buying a new game for that much.
So, the point is. the Government isn't going to fix your budget.