Your Very Own Hedge Fund

Last May when gas prices were at their highest in Los Angeles, I paid $4.26 a gallon—$102 to fill my Chevy Silverado.

Paying For Gas

As I write, at just $2.29 a gallon, the cost for a full tank of regular grade gasoline for my truck has plummeted by half to $55.

Regardless where you live, it’s likely that you’re experiencing and enjoying the same thing—cheap gas. You’re saving a ton off the peak prices of last summer.

It’s so easy to ignore it though and let that “saved” money stay in your checking account, where it will inevitably be spent on something useless. Or just evaporate unnoticed the way money in a checking account has a way of doing.

However, the truth remains: Because fuel prices have dropped dramatically, all of us are spending a lot less on gasoline compared to what we were spending a few months ago.

Now is the time, before you get too comfortable with the cheap prices, to create an automatic transfer of the money you’re not spending on gas, into a special account to protect you when the prices go higher. You cannot predict what prices will do, but you can get prepared.

Call it your hedge fund—a term that describes an investment position intended to offset potential losses/gains in the future. That’s what big shot investors do, they hedge against future losses. So can you.

Here’s a painless way to do it:

1. Set up an online savings account at SmartyPig (my favorite) or Capital One 360 Savings. You want an online account that has no fees, no minimums, is FDIC insured and allows you to set up automatic transfers.

2. Figure out how much you are saving each week on gasoline, over the highest price you experienced in your area. If you’re lazy, just go with my $2 a gallon.

3. Create an automatic transfer from your regular checking account into your new Hedge Fund for the amount you determined in Step 2 that you are not spending each week on gas.

Do this by locating the “transfer money” option in your online account. You will see a place to fill in the exact amount you want transferred, the frequency that you want this to happen (weekly) and when to start (how about today?).

4. Set a reminder on your smartphone or other calendar, to re-evaluate in three months. If gasoline prices have changed—up or down—adjust your hedge fund automatic transfer amount accordingly.

You can apply this tactic to anything you buy that fluctuates in price. There’s a lot you can do with this tip. Just add subaccounts or new “goals” to your online savings account at SmartyPig or CapitalOne360. That’s what makes these accounts especially useful. Fun, too.

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10 replies
  1. Harlean Greathouse
    Harlean Greathouse says:

    I have found another way to save on my gas. My local Kroger store has a gas points program. For every dollar that I spend for groceries, I get a point for gas. For every hundred points, I get 10¢ per gallon off. And they also have another way to save additional money. From time to time, they have a 4X the points for gift cards which means if I buy a gift card for $25, I get an extra 100 points on my gas. I do an online survey once each 7 days that takes only a few minutes of my time and gives me 50 gas points. Some months I have earned 60¢ a gallon discount, and that is “nothing to sneeze at”. The discount is for one fill-up. It is worth the time to check this out.

    Reply
  2. Travis Fisher
    Travis Fisher says:

    A while back we created our own “gas card” We opened a new checking account with a debit card and set up $120 direct deposit from each pay check. That was just enough back when gas was $3/gallon. Right now with gas under $2/gallon our “Gas card” account is just sitting and growing. We just let it grow. Gas should already be covered for our vacation this summer.

    Reply
  3. Petoskey
    Petoskey says:

    We take out cash weekly for our groceries, gas allowance, and miscellaneous. We budget $40.00 a week for gas for our minivan; whatever is left over is put in an envelope as extra savings for something car related, or maybe a family outing where extra gas for the vehicle is needed. I paid $1.79/gallon for gas today, just north of Detroit, and even stashed away $9.00! We already have a Capital One 360 (formerly ING) on-line savings account, with several sub-accounts, and we transfer weekly into the various accounts – Christmas, a Christmas gift for our church, travel/vacation, saving for some new appliances, and summer grad parties. It adds up quickly, and helps tremendously.

    Reply
  4. Kiki
    Kiki says:

    I’ve done this for years. I bought a new car 18 months ago – a Prius (paid cash for new). I budget $140 a month for gas.
    I run a small business doing home and pet sitting in addition to working a full time job so this budgeted amount must be used for all driving – personal and business. Most months I an under even when I am busy with client visits so all the extra gets swept into my savings account for maintenance costs. Only one month did I go over the budget amount – July 2014 – when I drove for a vacation. The extra $60 came from my vacation fund.
    I filled up yesterday for 8.5 gallons for $2.29 a gallon. It was $19.50. I hope this continues although it is causing problems with the global economy!

    Reply
  5. Emily Booth
    Emily Booth says:

    Thx for the Smartypig rec, Mary! I will check it out.

    I take out cash every Friday for food, gas and “miscellaneous” (like lunch or dinner out w/ friends). It’s a regular weekly amount. My goal is to always spend under. Any savings at the end of the week goes into a jar. There are always 4 extra Fridays every year (I’m paid monthly). My savings go towards that 5th week. I’m good for the 1st 2 Fridays for this year and I’m working on the 3rd.

    Reply
  6. Cherie
    Cherie says:

    This idea sounds good in theory, but alas, the money I am saving at the pump has been quickly consumed by the rate increase seen in my most recent electric bill, comcast internet bill and local turnpike tolls. Sad.

    Reply

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