Pay yourself $2 a gallon

By Liz Pulliam Weston

We have, my friends, a terrific opportunity now that gasoline in most parts of the country costs about $2 a gallon.

The precipitous price drop since last summer leaves more money in our wallets. But unless we take action, that windfall is likely to dribble away in extra spending.

So I propose that we capture that money (more than $2 a gallon) and sock it away. Plumping up our savings cushions never hurts, and if energy prices rise again, we can tap our own individual strategic reserves of cash.

It's a simple enough skill: Take advantage of periods when your expenses are lower to guard against times when your expenses may be higher. But this skill was largely neglected in times of easy credit. Why save, after all, if you can charge the expense to a 0% credit card?

Now that credit and jobs are harder to get, the skill of squirreling away extra cash is worth relearning.

Peril at the pump

If you drive, you probably had a few "silent scream" moments at the gas pump last year when the cost of a fill-up took your breath away.

Here's how Your Money message board poster "Dunkleboom" described the feeling after paying $60 to fill up an old Volvo sedan last May, before prices had even hit their peak:

"I nearly passed out," Dunkleboom wrote. "Let me know if you've had a similar moment, spilled hot coffee on your lap, swallowed your car keys, wept all over the station attendant's greasy shirt, climbed up and ripped down those big plastic numbers off the illuminated sign. I just about did. Oh the agony. I was paying $3.75 a gallon."

If you can relate, hang on to that feeling of helplessness and despair as a way to motivate you now:

• Use the calculator on the right to figure out your yearly savings, then divide that result by 12.

• Or you can figure the amounts by hand, estimating your yearly driving mileage and dividing it by your car's miles per gallon. Someone who drives 15,000 miles a year, or 1,250 a month, and gets 20 mpg would buy about 62 gallons a month. Then subtract what you're paying per gallon now from last summer's peak price -- it was $4.11 nationally. Multiply that times gallons burned.

• Set up a transfer from your checking account so that amount gets dumped electronically into your emergency fund or, better yet, a separate account set up just for fuel savings.

Making all this automatic is important. If it's just sitting in your wallet or your bank account, it'll get spent. If it's whisked away automatically, chances are you'll never notice the money is gone.

Another step to resist temptation: Move the money to a different bank, where it might take a day or two to access the account. Many online banks offer high-yield, FDIC-insured savings accounts with no fees or minimum balance requirements; you can withdraw money from your current bank accounts instantly, setting up as many subaccounts as you'd like, labeled however you want. But it typically takes a day or two to make a transfer back into your main bank's checking account or to have a paper check mailed to you. That'll keep impulse spending at bay.

• Video: Is online banking really safe?

There are plenty of other ways to apply the same basic technique. For example:

Capture grocery savings. You potentially can save 20% or more off your food bill by shopping sales, using a chain's loyalty card and deploying coupons. (Read "Click your way to lower food bills" for tips on how to maximize those savings.)

But the money you don't spend at the food store is likely to be spent on something else unless you remember to move it into savings.

Many grocery chains make it easy by listing the amount you saved right on your receipt. If you're signed up for mobile banking, you can use your cell phone to transfer the savings even before you leave the store, or simply call your bank's toll-free number to make the transfer. Or you can get online as soon as you get home and move the money.

Continued: Reroute your bill payments

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