A Bit Here and There: It All Adds Up!
I first heard of the Money Saving Challenge last winter just as I was rebuilding my budget spreadsheets for the next 10 years to see if I could indeed afford to retire at 60.
It goes like this. On Week 1, you put $1 in the pot. On Week 2, you put in $2, giving you $3 in the pot, and so it goes for 52 weeks, each week putting $1 more than the previous week. At the end of 52 weeks, you’ll have $1,378. When I posted this trick on Facebook at the time, one of my friends said that she used it to save for Christmas gifts, except that she did it in reverse (starting at $52 on Week 1 and putting in $1 less each week).
I hardly ever have any cash on me. I find that when I break a $20 bill, the change I get back isn’t money to me anymore so I just waste the rest away. So, since money has become more of a mathematical abstraction to me, I never needed a trick like this to develop my ability to save. I’m better at going from an abstract model, as complicted as it might be, and enacting it in reality.
But what sparked my interest about this challenge is the number: $1,378. When I started my quest to rebuild my financial health in 2011, I had no idea what I averaged in gas money each year. I mean, it’s such a moving target: in the last decade, I’ve seen regular gas go for as much as $1.49/litre to as little as $0.89/litre, plus some years I travel considerably more or less than others. However, after tracking how much I spent on gas each year from 2013 to 2015, I found that I averaged about $1,500/year, which is damn close to $1,378!
So last December I decided that every late-December when I get my yearly bonus, I would leave $1,500 in my chequing account and earmark it as gas money. Initially I just paid cash as I went (with my debit card) and had a spot in my spreadsheet that showed me the balance in that “virtual account” I called Gas Money. My thought was that I could top it up if I ran out before the following late-December (which I thought unlikely even though I’m driving more these days), and if there was still some money left in it by the following late-December, I would only top it back up to $1,500. I figured I would have to try this for a few years to see if I needed to squirrel away a bit more than $1,500, but the benefit for me is that I wouldn’t be counting that amount as potential savings when I knew that I would in fact be spending it.
Then, last May, Tangerine Bank (where I maintain a savings account) offered me a MasterCard that would pay back 2% on three categories of purchases and 1% on all others, but for the first three months, the cashback on the 2% categories was 4%. You can change your three categories at any time, but knowing I would be going on vacation in those next three months, I chose “Hotels & Accommodations” as one of them, to be changed to “Gas” later, and “Restaurants” and “Groceries” as the other two.
The cashback goes directly into my savings account on the 17th of every month, and by paying absolutely everything I can with that card since the middle of May, I got $135 back as of September 17. It’s not a huge amount, but it’s free money just to use a card! Also, I wouldn’t care if the interest rate on the card were 50% (it’s actually 19.99%) because you pay no interest for the first 21 days and I pay it off at least once a week, often as soon as expenses are posted. I haven’t paid a bank any interest in the last 3 years, except for $35 in 2015 when I borrowed about $31,500 from my line of credit for 10 days in order to meet that year’s RRSP contribution deadline which was a few days before I would be receiving a huge tax refund from the Feds.
Also, twice a year for three months, Tangerine gives a considerably better interest rate on new deposits in their savings account. You have to read the fine print because sometimes the “new savings” are only up to a certain date well within the three-month period, but other times it’s for the whole three months. For July to September of this year, the rate applied for the whole three months and went from its regular paltry 0.8% to 3.25%, so I moved much of what I had in a savings account at my credit union where the rate is 1.7%.
Because Tangerine’s rates aren’t as good as my credit union’s for half the year, I used to drain that account at the end of every offer. However, as the new credit card cashback would go into that account, it dawned on me that I should simply view it as my virtual gas account and earn at least 0.8% rather than ziltch in my chequing account and, on my spreadsheet, I would separate the gas money from the funds I move in and out just to benefit from the semi-annual better-interest-rate offers. And then, in so doing, something else dawned on me.
Now, twice a year (in early-June and early-December), I move whatever interest I’ve earned at the credit union’s saving account into the Tangerine savings account and earmark it for the virtual gas account. Then, whenever I get some interest or cash back from Tangerine, I also earmark those amounts for the virtual gas account.
The point? As of right now, I spent $1,080.17 on gas in 2016. However, my gas fund isn’t down to $419.83 ($1,500 — $1080.17); it’s in fact at $819.50. In other words, with just a bit of planning and a few mouse clicks, I made a few cents shy of $400 and painlessly dumped it into my gas fund. So, come late-December, I might only need to put +/- $1,000 of my yearly bonus into my gas fund instead of the full $1,500. (Update, late-December 2016: I ended up spending $1,298.67 on gas in 2016 — I didn’t have much reason or opportunity to drive in the fall — so with the interest and paybacks earned to the end of December, I only needed $607.69 to top myself back up to $1,500. In other words, it looks like I got banks to pay about half my gas consumption this year!)
A bit here and there: it’s really does add up! I’ll take cash back over air miles anytime because I can really make it work for me. When I told one of my brothers about this little scheme, he just laughed and said, “That is SO something Mom would have done!”
His saying that made me smile. Because he’s right. I hadn’t thought of it that way until he mentioned it, but it really is something she would have thought of as well.