Are You Making Money at the Gas Pump? (How to Use a Cash Envelope System)

Today I’m giving thanks for low gas prices. I’ve actually been thinking about this for months. While I hop on Facebook and get an eyeful of bad news daily, I never, ever see anyone say something like, “Yay! I was able to fill up my car for a mere $20, just like the old days. Glory be!”

Are You Making Money at the Gas Pump?

However, if you think back to within the last 2 years, we were paying something like $3.80+ for a gallon of gas, and filling up was expensive. I know, this is just an inconvenience where I live, while high fuel costs are crippling in other parts of the world. But gas prices don’t just show up at the pump. Remember when gas was nearing $4/gallon in the US, all kinds of businesses were raising their prices and adding fuel surcharges.

Less than 2 years later, fuel costs have fallen to just over $2/gallon where I live, and could likely go lower. Without venturing into macro-economics, let’s just stick with what this means to the Average Joe and Jill.

It’s estimated that the average American driver saved $540 at the pump in 2015 (over 2014), and the savings is continuing in 2016. (Two drivers in your house? That savings could be nearly $1,100!)

Do you have an extra $540 in your savings account because of falling gas prices? Most people would say no.

Would you like to have that $540 back? Of course you would.

Well, it’s up to each of us to make that money back at the pump. In fact, if you don’t already have a side-gig, you can trick yourself into thinking that this is your side gig.

Call it the Envelope System-Lite. Or Light. Or Mini. Just keep it simple, focused on gas.

At the start of each month or pay period, pull out just enough cash to keep your tank filled. This is an estimate. Or a guess. Or a figure based on careful analysis. We just won’t call it a budget, because that just freaks people out.

No idea? Let’s figure this out together.

  1. Think back to how many times you tend to fill up your tank. Once a week? Each Monday and Friday? In my case, it’s about once a week.
  2. Estimate how much you spend each time you visit the pump. For me, it’s been just about $35 each visit lately. But there was that time last week I coasted into the gas station on fumes and crossed fingers. That fill-up was a little over $40, and just a tad stressful! A year ago, I was easily spending $50 each visit to the pump.
  3. Give yourself a little wiggle room. I’m going to estimate my monthly gas budget to be about $200/month ($50 times 4 fill ups).
  4. The other stuff. I don’t usually buy other stuff at the gas station, but if you do, account for this, too. Should you add $10 to each visit for a soda and chips? Do you get your car washed once a month at the gas station? Tack on these charges if that’s what you usually buy.
  5. Do not try to estimate this to the penny. In fact, you want just a smidgen more in your envelope than you expect to spend in a month.

Once you have this figured out, pull that amount of cash out ($200 in my example), clip it together, or put it in an envelope marked “GAS” in your purse or wallet, and just draw from that money at the pump. Yes, I realize that you are going to have to walk aaaaaaalllllll the way inside to pay for your gas, but that may just be worth $540 to ya.

envelope system for gas money

At the end of the month, if you have money left, take that cash out and deposit it into an envelope back at home labelled “LEFTOVER GAS MONEY 2016”. Or you can set up a separate bank account, and deposit it all in there. Your choice. Whatever you do, no dipping into that fund this year!!!

What if you blow through your gas money before the month is over? No problem. Congratulate yourself for getting close on your first estimate, and try again. It may take you a couple of months to get your gas money “allowance” right. Just adjust your original cash withdrawal, which was $200 in my case, to a number that feels more doable next month. Try to find a number that is reasonable, but still leaves you with a cushion of a couple of leftover bucks at the end of the month. You’re doing great so far.

What if gas prices go up again? That will happen. We just don’t know when. But let’s just focus on the now, when gas prices are still predicted to fall in the immediate future. When prices go up again, you can adjust your envelope “allowance” once more.

What if you use a credit card to purchase gas? If you are paying your credit card off each month, and do not carry a balance, you may have already mastered your spending. If, however, you are still carrying a balance, or if you think you are earning credit card “points”, I would argue that actual cash in your hand and savings in your accounts is better than potential points any day. Try the envelope system. You have absolutely nothing to lose. And many, many people have gotten control of their spending and increased savings, paying off thousands of dollars of debt just by using this simple system. If you really really super duper insist on using a credit card, I would suggest getting a gas card specifically for this type of purchase, and paying it off each month with the money from your envelope. Keeping your gas purchases separate from other purchases is what makes this whole system work.

By the way, studies show that we typically spend 20% more when we make credit card purchases versus cash purchases. So work with cash for the next few months, and see if that’s true for you, too.

Pretty soon this can become a game for you. Can you organize your errands so that you are driving less and still getting everything done? Can you carpool more with other parents or co-workers to save gas? Can you ride a bike or walk instead of driving sometimes? Can you maintain your car and organize the car trunk to improve gas mileage? Can you bring a water from home instead of buying a soda at the station, or are you happy to enjoy a cold soda as your reward, still using only your set aside cash? That’s cool. Whatever is leftover is your savings…so far. What will that add up to at the end of your year?

envelope system for gas money, leftover savings

What questions do you have about this $540 that you can earn at the pump? Have you used the envelope system for just one part of your spending before? Would you try this slimmed down approach to saving at the pump?