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Is the Cheapest Place for Gas Costing You Money?

empty We’ve been talking about ways to save money. Today we want to look at something that is top of mind for many of us – how to save money on gas.

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Follow the price of oil like a speculator

Oil prices go up and down. If you knew the price of oil went up, you might want to hurry to fill up. If you knew it went down, maybe it would pay to wait a day or two. Now you can track the price of oil at Oil-Price.net. Large companies do it; why shouldn’t we?

Time your purchase

While we haven’t seen any research that proves this theory, it seems that gas prices often go up right before the weekend, especially long weekends. So test for yourself and, if you agree, try to buy your gas by the middle of the week.

Serial rewards

Some credit cards offer extra rebates (e.g. 5% instead of a normal 1% to 2%) on fuel purchases during an introductory period (e.g. six months). Consider this – if you have good credit, employ a strategy where you get a new card and use it through the ramped up reward period. Then move on to another one.

Loyalty programs

Our grocery store chain has opened convenience stores next to their main stores. To drive (pun intended) business to these new stores, they’re offering an incentive to their grocery store customers.

For every $25 you spend on groceries, you get a 5 cent per gallon discount on gas at their convenience store. We saved 60 cents a gallon on a recent purchase.

Shop before you shop

Sites like Gas Buddy, Gas Price Watch, and Fuel Me Up help you find the gas stations with the cheapest fuel in your area. Gas Buddy seems best for our area; check them all out to see which is best for you.

But before you do …

Is it worth the drive to save money on gas?

We know people who drive out of their way to go to the gas station with the cheapest fuel. It seems almost oxymoronic, doesn’t it? And aren’t you glad we got the “oxy” in there?

It struck us as an interesting question to prove out – is it worth burning fuel to save money on fuel?

gas-buddy_small

Here’s our calculation …

(click the image to enlarge)

We found the prices for our area gas stations at Gas Buddy, as shown in the picture above. Using MapQuest, we determined that it would be a 3-mile round-trip from the Bigg Studio to the closest gas station, which charged $3.85 per gallon. This was the second highest priced gas in our area on that day. That figures!

It’s an 8-mile round trip to the station with the cheapest gas – $3.66 gallon. Using our handy calculator (okay, we were able to calculate this in our head), we saw that we could save 19 cents per gallon by making the drive. That seems pretty significant.

But here’s the rub … our car only has a 17.4 gallon gas tank. So if our tank was bone dry when we arrived at the gas station (a feat we probably come close to more often than we would like to think), the most we could save is $3.31.

Suddenly it wasn’t as interesting for us. We often work from our house so we don’t really drive that much. But we have friends who drive a lot for work; they fill up their car as often as three times a week, so that would add up to over $500 for the year. Alright, it’s worth continuing.

In order to get the cheapest fuel, we would have to drive 5 more miles. How much does that cost? The best source we could think of for that is the Internal Revenue Service. They allow a deduction of 50.5 cents for every mile driven for business. Since we figured the IRS wasn’t in the business of being generous with deductions, we figured if anything this might be a little on the low side.

So we multiplied the 5 miles by the 50.5 cent cost per mile. It would cost us $2.53 to drive to the station to get the cheapest gas, where we would save $3.31 if our tank was completely empty.

The most we could save by driving was 78 cents per fill-up.

Even for our friends who fill up three times a week, this only translates into about $120 per year. It hardly seems worth it when you consider …

We’ve assumed that our time isn’t worth anything. Because it’s going to take more time to drive out of our way for the cheaper gas.

(Side note: Unless our tank was less than ¼ full, it would actually cost us money to get the cheaper fuel.)

So here’s what we concluded:

Driving to find the cheapest gas doesn’t really work for us. It might work for you, especially if you have a bigger gas tank. You can use the process we’ve mapped out to run your own numbers. But don’t forget to place some value on your time!

However, in general, it’s probably a waste of time and money to drive out of your way for gas, unless you can …

Combine that trip with other deals

It just so happens that the gas station with the cheapest price in our area is in a retail zone. It may be the same for you. So if that area offers the best deals on the staples you need, and you combine that with coupons like the woman who feeds her family of five for as little as $10 a week, and fill up with the cheapest gas in your area while you’re there, paid for by your ramped up rewards credit card that you’ll pay off every month, now you have something going for you!

Here’s one more thought on buying fuel. It’s a very simple one, but we recently got burned by NOT doing this. What does that say about us?

Pay attention

We pulled off the highway not long ago to fuel up. We turned right as we exited the off-ramp and turned right into the first gas station just off the highway. As we were filling up, we noticed the sign that showed the prices of gas.

Then we noticed the sign at the gas station across the road. We could have bought gas for 20 cents a gallon less … had we just made a left turn! 

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I Need Money! Should I Cash Out My Retirement Plan?

frustrationThe financial news seems to be all gloom and doom these days. The reports are that we’re not in a recession, but times are tough for a lot of people.

No matter how tight things get, we still have bills to pay. People are responding to this very intelligently. They’re turning to public transportation, eating out less, seeking cheaper forms of entertainment, and cutting back on unneeded items.

But what do you do if that isn’t enough?

Tapping your retirement plan …

It’s tempting to pull money out of your retirement plan, like a 401(k), especially if you change jobs. In fact, about 40 percent of job changers in their twenties and thirties have done just that, according to a recent report by the Financial Industry Regulatory Authority (FINRA).

… could cost you $130,000 …

If you’re under 59½, it’s usually not a good idea to cash out your retirement plan. Let’s look at the example that FINRA used:

You’re 30-years old with $20,000 in your 401(k). If you earn just 6% on that money until you retire at 62, you’ll have nearly $130,000 in your account, without making any additional contributions.

… and then some!

Of course, you can start over. But you lose the power of money compounding on top of money on top of more money, all accumulating tax free until you take it out. So it’s like taking at least two steps backward.

But that’s not all. Here are 4 other steps back:

  • You’ll have to pay income taxes out of this money, since it was invested pre-tax.
  • There’s also a 10 percent penalty for early withdrawal (unless you’re over 59½)
  • Your employer is required to withhold 20 percent toward income taxes.
  • If you owe money, your creditors can’t touch your 401(k) unless you cash it out.

By the time you get a check, that $20,000 will probably be more like $14,000 net of everything. So cashing out of your retirement plan is a short-term solution with long-term consequences. 

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From Refund to Riches: How to Turn a $2,300 Refund into $723,000!

With tax day upon us here in the United States, a lot of people will get a refund soon. So today, we’ll discuss how to turn that refund into riches.

But this blog is really about “found” money – money you weren’t expecting. The average refund last year (paid in 2007 from 2006 tax returns) was $2,287, according to the IRS.

That’s a nice down payment on a plasma TV!

That’s what a lot of people do – spend their refunds on things that won’t be worth much in a few years.

Instead of that, you could save and invest it. But isn’t that’s boring?

Boring can be exciting when your money starts to compound!

How to turn your $2,300 refund into $643,000!

Say you’re 25 years old and you get a $2,300 refund every year until you retire at 65. We’ll assume that you earn 8% on that money, which may be a little conservative depending on what you invest in.

Under these assumptions, that $2,300 a year invested will turn into a nest egg of over $643,000 when you retire!

Now is that boring?

Age makes a difference. Take the previous example for a 35-year old. Your nest egg is still significant – it’s over $281,000. But by waiting just ten years to start, it will be less than half as much!

But even then, you still create a nest egg of nearly $300,000.

2 ways it can be even better

#1 – Quit loaning the government money at 0%.
That’s what you’re doing when you get a refund – you’re getting your money back, but you don’t earn any interest on it while they hold it. So redo your W-4 so you only withhold what you expect to owe.

Then you won’t get a refund, but you’ll have more money in every paycheck. But here’s the key:

You have to be disciplined enough to invest that money!

Let’s say you do that – Invest your refund check this year, adjust your W-4, and then invest the extra money that shows up in your paycheck. You’re that 25-year old we talked about earlier. Only now …

… you’ll have over $723,000, instead of $643,000. It makes an $80,000 difference!

Doesn’t that open your eyes about the “cost” of a refund?

#2 – Pay off debt that’s costing you more than 8%.

We assumed an 8% return. If you have any debt that’s costing you more than 8%, pay it off first and your returns will be even higher! Once your debt is paid off, start investing to build your nest egg.

Jake’s Take – Top 5 signs that you hired the wrong accountant

#5 – He insists on filling out your return using only Roman Numerals.

#4 – He offers to help you boost your deductions by renting you his wife and kids.

#3 – He spends most of your consultation looking nervous and asking if you're wearing a wire.
 
#2 – He does all his calculations on an Etch-a-Sketch.
 
#1 – His client list includes Leona Helmsley, John Gotti, and the Unibomber.

Our bigg quote today is a Proverb.

“Money grows on the tree of patience.”

So do you want to watch your new plasma TV or do you want to watch your money grow? The choice is yours!

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Next time, we’ll discuss why being imperfect is perfect. Until then, here’s to your bigg success! 

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