Gasoline

Your Very Own Hedge Fund

/9 Comments/in /by Mary Hunt

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

As I write, at $1.97 a gallon, the cost for a full tank of regular-grade gasoline for my truck has plummeted by half to $48. 

Regardless of 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 past summers.

Price and Gasoline

It’s so easy to ignore it though and let that “saved” money stay in your bank 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 year 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... Click to Tweet

1. Open account

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

2. Determine the amount

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. Or a flat $5. Just start somewhere!

3. Automatic transfer

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 to be transferred, the frequency that you want this to happen (weekly), and when to start (how about today?). 

4. Create reminder

Set a reminder on your smartphone or another 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 hedge-fund 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—SmartyPig  or Capital One 360 Performance Savings. That’s what makes these accounts especially useful. Fun, too.

 

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9 replies
  1. Don says:

    I have a Sam’s Club Plus credit card that earns a 5% rebate on gasoline purchases. That’s 5% of the total cost, not just 5 cents per gallon. Costco’s credit card pays a 4% rebate on gas. Both cards rebate 3% on restaurants, including fast food. I also have a Citi Double Cash Back card that pays 2% on every purchase. These rebates are for every single day of the year. No hassles, like Discover card’s 5% specials.

    Also, as someone else pointed out, gasoline is cheaper now, but the groceries cost considerably more.

    Reply
    • Don says:

      I just got an email from Big Lots with a 20% off coupon enclosed. The coupon is good for just about everything they sell. If there’s a Big Lots in your area, sign up for their rewards card. They offer these coupons regularly. They sell a good selection of groceries, including bottled water, plus detergent and other cleaning product, and housewares. You can’t hardly go wrong when you buy anything there for 20% off.

      Reply
  2. Patti T says:

    I did something similar, when I paid my 2007 Honda Fit off, I continued to “make a car payment” into a savings account, then when I purchased my 2015 RAV4 in October 2015, I had $9,000 to put down and it was zero % interest. I would never have been able to afford that car any other way.

    Reply
  3. Alice says:

    Yes, to both John Smith and Birgit. It’s true that I am rarely using my car to go anywhere at this point, and I have filled my gas tank only twice since March 15th, at a cost of $1.62 and $1.83. It would be lovely if that low price were available when I am driving regularly, but I have still saved money! And, like Birgit, I budget $100 a month on gas. The amount that I haven’t spent on gas each month is transferred into my savings account. In the end I have a net gain. You can use this idea of a hedge fund in other areas of your spending, also.

    Reply
  6. Birgit says:

    I have a credit card at a local gas station that saves me an additional 8 cents a gallon. I have a set amount ($80) that I set aside each paycheck just for paying off that card. I now have almost $1450 in that savings account for when prices go up or we take a trip somewhere once the travel restrictions are lifted. It is nice knowing that I have that buffer. Thank you for changing the way I look at money and finances.

    Reply

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