Does the “$4 Per Gallon Savings Plan” Really Work?

Dana writes in:

I loved your recent article on the 52 week savings plan. I shared it with my friends on Facebook. Lately several of my friends have been sharing a “$4 a gallon savings plan” lately and I was wondering if you could look at this plan too! Thanks!

Dana’s talking about a savings plan I’ve seen on Facebook a few times recently that’s called the “$4 a Gallon Savings Plan.” As with the other plan, I have no idea what the original source is, as it’s usually been shared as an image file with no source and I’ve been unable to track down a true source for the idea.

Anyway, here’s how the plan works.

Not too long ago, gas was priced at $4 per gallon, but today, it’s significantly less than that in most areas. (Obviously, there are some areas where gas is at $4 per gallon or higher. It’s worth noting that this plan works just fine if you substitute $5 for $4 or $6 for $4, so it does work everywhere.)

The plan is based on the idea that you effectively “spend” $4 per gallon on gas regardless of what the price is and you save the difference.

How do you do that? When you go to the pump, you buy gas as normal and save the receipt. Then, when you get home, you grab an envelope that you’ve designated for this and a calculator. You take the number of gallons you purchased down to the last decimal, multiply that by 4, then subtract the amount you actually paid. You then put that much cash in the envelope, rounded usually to the nearest dollar.

So, let’s say gas is $3.099 per gallon and you put 12.245 gallons in your car. What you’d do is multiply 12.245 times 4 to figure out how much you would have paid if gas was $4 per gallon – $48.98. Of course, you actually paid $37.95. So, you’d subtract 37.95 minus 48.98 and you get $11.03. The plan suggests that you round up to the nearest dollar, so you just drop $12 in the envelope and forget about it.

At some later date, when you actually need cash in an emergency, you tap that envelope and take care of your problems – or, on the other hand, you use it to help pay for something important, like a new car.

I like this plan better than the “52 Week Savings Plan.”

For starters, it’s consistent all throughout the year. With the other plan, you end up paying more during certain weeks, no matter how you execute the plan.

More importantly, this plan actually makes budgeting easier. You are always “paying” $4 per gallon of gas, so if your driving is consistent, then the amount you “pay” each month for gas will also be very consistent. That number becomes really stable and it’s easy to estimate how much you’re going to be paying each month.

It is a little clunky in that you have to save your gas receipts and do a bit of math after each fill-up, but if you make this into a routine, it’s not going to be too much additional work. If I were doing this, I’d probably save up a few receipts in my wallet and do them all once a week or once a month.

If you want to really kick this into high gear, just simply make it into a “$5 Per Gallon Savings Plan.” Just multiply your gallons times 5 instead of four and then subtract what you actually spent from that. You’ll end up saving a lot more in that envelope, but you’re also guaranteeing yourself a 25% increase in fuel costs.

If you need a really easy system to get started saving, this one works quite well. It makes your fuel spending really consistent while also helping you build up a little emergency fund. It won’t make a life-changing difference, but it’s certainly a great way to make sure you have some cash in the cupboard for a crisis.

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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