Yes, I took this horrible picture! It’s hard to see, but it shows 30 gallons of gasoline pumped for 0.00.
I’m no Mr. Money Mustache.
I tried living with extreme frugality and absolutely hated it. I drive an older Jeep Wrangler and absolutely love it. I’m sure if Mr. Mustache saw me driving my gas-guzzling Jeep, he would have a few unkind words for me!
Sorry, Mustache Man.
The
cool part is I’m not too worried about ole’ Mustache. I’m living my
life, and I honestly don’t care too much about what anyone thinks. It’s
awesome in the snow and it’s a blast in the summer with the top and
doors off, too.
There’s a lesson in what I just shared. Hopefully you see it.
One
of the reasons I choose to keep my gas-guzzling Jeep is that I rarely
pay for gasoline. Actually, we rarely pay for gasoline for any of our
four family cars. If I had to guess, I would estimate that we save
between $3,000 and $4,000 a year on gasoline-related expenses using what
I’m going to share with you.
In our area, and many other areas, grocery stores have started offering incentives you can use to earn “fuel perks.” We have Giant Eagle here in Ohio, and any time you buy $50 worth of any gift cards at Giant Eagle, they’ll give you free gas equal to 10 cents off per gallon up to a maximum of 30 gallons.
As an
example, if we buy $1,000 in various gift cards at Giant Eagle, we’ll
earn $2.00 off per gallon of gasoline up to 30 gallons ($1,000 divided
by 50 equals 20. 20 times 10 cents = $2.00). On the surface this may not
seem like a lot, but it blossoms into $60 in gasoline savings (30
gallons of gas times $2.00 off per gallon)!
Three
or four times throughout the year, Giant Eagle will offer double fuel
perks on gift cards purchased at their stores. During these special
offers, the same $1,000 in gift cards will save $4.00 off of 30 gallons.
This means the same $1,000 spent on gift cards saves $120 in gasoline,
which works out to be around a 12% discount on the price of the gift
cards. We simply wait until they offer double fuel perks, and then we
buy several thousand dollars worth of gift cards.
Now I realize this plan is around spending, which isn’t the best thing to focus on; however, we try to be very strategic with the actual gift cards we purchase.
We also use
gift cards to prepay for future family vacations. If we’re planning a
trip with a stay in an Airbnb property, we’ll buy Airbnb gift cards.
Last summer, we went to Paris, London and Dublin. In each city, we
stayed in an Airbnb home. Before booking each stay, we purchased Airbnb
gift cards at Giant Eagle. We do the same for airfare. We check the
rates to fly and then go buy gift cards to pay for the flights. We’ve
also been to Disney several times. We buy Disney gift cards and use
these to pay for resorts, park tickets and food.
The main idea is not to increase your spending, but to run as much of your normal spending through gift cards as possible.
In
fact, the fuel perks program allows us to prepay for the majority of
our upcoming vacation expenses. This means we’re not charging these
costs to a credit card. This is extremely valuable in and of itself
without considering what we save on gasoline.
As
you might imagine, we use this little system for birthday presents,
Christmas presents and Apple products (iPhones/ Macs). Instead of buying
presents and Apple products directly, we buy Amazon and Apple gift
cards. We also buy gift cards for restaurants we go to frequently, too.
All
of this requires a little bit of work and some planning but it offers a
significant savings. Let’s say you copy this plan for your family and
you start saving around $2,500 each year in gasoline costs. This annual
savings compounds into $12,500 in five years and $25,000 over 10 years.
Is it worth it now?
Most
people don’t see this. They see 10 cents off and think… it’s not worth
my time. These same people also don’t have enough saved for retirement
and are buried in debt. 🙁
If you were to use this plan to save $2,500 a year in the cost of gasoline, this savings would be approximately $200 per month. What do you think you might be able to do with this $200 a month you’ve saved?? How about using this $200 of monthly savings to make additional principal payments on your mortgage?
This hypothetical amortization schedule may be hard to read; however, 77% of the borrower’s payments are applied to interest during the first year.
I realize this doesn’t seem possible, but it’s actually what happens.
We
all know that the majority of our mortgage payment is applied to
interest, but we don’t really “see” the magnitude of what’s happening
within a given year.
If
you were to make additional monthly principal payments of $200, would
you be saving 77% in interest? No, we’d actually be saving more.
If
we look at the first year’s payments, we’ll notice that only around
$120 of each payment is applied to the principal. An additional payment
of $200 each month would eliminate one additional monthly mortgage
payment.
When one month’s
payment is eliminated, we save $416 in interest for that month. Our
$200 additional principal payment in the first month saves us over $416
in interest.
What is the return on this investment?
Is the return 108%?
By golly, I think it is! In essence, we’ve layered two investments on top of each other.
Our gas savings + our interest savings.
The
borrower in this simple mortgage is paying massive amounts of interest.
We’re paying massive amounts of interest on our debt – far more than we
realize.
Do not listen to what anyone else says about prepaying a mortgage. They aren’t looking at the actual math of amortization schedules. They are simply regurgitating what they’ve been taught. They haven’t studied the amount of interest you save. Each line on YOUR amortization schedule represents a MONTH OF YOUR LIFE.
One additional principal payment
saves ONE MONTH of YOUR LIFE.
Twelve additional principal payments
save 12 MONTHS OF YOUR LIFE.
What is one month of your life worth? Seriously, think about it.
If you were on your death bed and were offered the ability to buy one more month, how much would you pay?
Now
that we’ve framed all of this properly, let me ask you another
question… is all of the hassle and planning to get free gasoline worth
it? YES it’s worth it!
Think
about what we’ve done here. We’re not living with extreme frugality,
driving a Smart Car and feeling like a dork every time we head out on
the road. No offense to Smart Car owners. 🙂
Mr. Mustache is certainly a badass, but we don’t have to live with extreme frugality to achieve our financial goals.
We can create win/win scenarios by thinking creatively.
We can always figure out a way to have everything we want in life. We can have our cake and eat it, too.
If you don’t have access to a fuel savings program like this, see if you can figure out another way to save $200 a month so that you can reinvest the savings into additional principal payments on any outstanding loans you may have.
