Your Very Own Hedge Fund

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.

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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Originally published at everydaycheapskate.com.