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compound savings

February 15th, 2012 at 08:50 pm

We all know how compound interest works, but we don't often think about compound savings. These are the things you do over the years that save you money on necessities so that money is freed up for other purchases.

For example, years ago I made several changes to lower my electric and heating bill. I changed my lightbulbs to CFLs, I started plugging all appliances, computers, TVs etc into power strips and turning them off when not using them. I started working to heat/cool just me instead of the whole house, by lowering the thermostat, using an electric throw. I used ceiling fans instead of the air conditioner and opened and closing blinds/windows as appropriate to heat/cool the house. Since I have budget billing it was easy to see how much I saved from the year before by doing these things. My savings came to over $400/year.

So now the compounding part comes in. I saved $400/year on what I was spending for a necessity like utilities. I saved it that year and since I continue to do those things I've saved it every year since. If it's been 5 years, I've saved $2000, at 10 years it will be $4000. This is not money that went into the bank as savings, but it's money that I didn't have to earn after taxes, or money that is freed up to spend on more fun things or leave in savings so I can stay retired.

Here are some other examples of compounded savings.

I set up automatic payments on 4 bills/month. That saved a stamp, check and envelope for each one. The savings per month this year are .45/stamp, .01/envelope and .05/check or .51/bill x 4/month = $2.04/month and $24.48/year. $122.40/5 years and $244.80/10 years.

I haven't paid for many basic supplies in over 20 years, such as toothpaste, deodorant, shampoo etc. Buy using coupons and rebates I've been able to get basics that I need without spending cash. I guesstimate this saves me $20/month, or $240/year, or $1200/5 years or $2400/10 years.

I use the pantry principle for food. I buy when it's the lowest price and stockup for several months. I get many food products free this way, but I also guarantee that I'm paying the lowest price for most of the food items I do buy. I'll guesstimate the savings at $100/month, $1200/year, $6000/5 years and $12,000/10 years.

Other examples might be buying a car with good gas mileage, moving close to work, stop smoking, insulate the house, telecommuting. Anything you do to permanetly make a change to a necessary expense can be counted in your compounded savings.

If I add just these areas up I get a yearly savings of $1864.48. I get a 5 year compounded savings of $9322.40 and a 10 year compounded savings of $18644.80. Not bad for making a few changes in your life. Most of which you've probably forgotten that you did those things to save money, but you've been reaping the benefit ever since.

per year
400.00 - utilities
24.48 - automatic bill pay
240.00 - free necessities
1200.00 - stockpiling groceries at low prices
-------
1864.48

I walked at Walmart with mom today and got 4 packages of Benefiber, each pack had 3 individual packs of fiber in them. I got the cherry-pomagranate ones and they are very good. They were $1.97/each and I had 2 coupons for $5/2 so I made $1.03 on each set of 2. I used the overage to purchase 2 packs of sugar free jello at $1.12/each. I had to pay a few cents, but a very good deal.

I also had another coupon for free lens cleaner and cloth at the eyeglass place and got that on the way out. I got some a few weeks ago and I think it works really well.

I earned enough swagbucks today to purchase another 2 $5 Amazon gift cards, happy with that Smile

I finished reading Blood Sugar 101 What They Don't Tell You About Diabetes by Jenny Ruhl. I really liked this book, very informative and straightforward. Definitly recommend to people with diabetes.

I also finished the library book Zach's Law by Kay Hooper. Romance - ok.

4 Responses to “compound savings”

  1. rob62521 Says:

    Good post! We try to save here and there and stock up on things when they are on sale too.

  2. Single Guy Says:

    To truely compound your savings you need to invest your savings in some manner. About 5 years ago I started a DRIP where I have a set amount purchased every month. While this hasn't been for all my savings, I have been putting in my savings for not having a garbage pickup (I recycle & compost most everything - and I go by the county dump every day so I can pay a small fee if I need to trash something - usually once a month at most). Just those little purchases each month has in 5 years added up to almost $2,000 and a yearly dividend of $70.

    And I do the same with heating / cooling / electricity as you do. I haven't calculated my savings amounts, but over the past 10 years its probably close to what I invested in the local utility stock. That is now giving dividends of $90/qtr, which pays for most of my electric bill any more (in spring and fall my bill over 3 months usually is less than $100 total).

  3. wowitsawonderfullife Says:

    Thanks so much for sharing your story. Particularly your energy saving tips.

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