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Feb
22
2013

What Goes Into My Money Snowball ?

As Warren Buffet himself started out with just a few coppers from his early money raising attempts to start his money snowball, he then used that cash to fund bigger and better projects not all of which ventures bore fruit. The trick is not to put all our eggs in one basket, and always have a fallback position from which to make our next bold attempt. Keep trying :)

Saving expenses

As a child I was always pretty good at finding coins on the ground, and my mother said at first that was because I had good eyes, but then she realised I walked with my head down, a different story for a another time, but I must have found a good few pounds over the years. It’s only in the last few years though, that instead of just pocketing the money, I added it to my penny tin, and made a note of it. It all goes to the bigger vision.

The penny tin was bought from WH Smiths many years ago in my childhood, using my pocket money. I had wanted one for such a very long time, but they were quite expensive. Once bought though, I had hardly any spending money left over, so I had an expensive cash tin but no cash to put in it. I thought at the time it was a bad decision. It was going to take a very long time with only pennies per week to recoup that sort of money. Now, all these years later and I still have that same cash box, and have now been able to use it to much better effect. It serves as the receptacle for the feeder fund for my money snowball…. and it’s working hard :)

Fuel economy

Every day spending now brings one form of saving opportunity or another. For instance I get Tesco club card points on almost every litre of petrol I buy, and Shell Drivers club points on all the rest. I switch between petrol forecourts dependent on which offers the best deal at the time. These savings come back in the form of vouchers that can be used to buy more petrol or exchanged for other great deals, most of which we don’t take up, so I usually get the petrol savings and add the saved cash to my penny tin using the 80:20 rule. Eighty percent of these savings go in the tin and twenty percent goes into my pocket as extra spending money.

Likewise, when we had our Lovenholm multi fuel stove installed, we did so on the basis of saving money as well as the other more pleasant side effects, along with the replacement of the old inefficient gas fire and boiler. Both of these home improvements yielded some pretty decent savings over the last few years, and although I don’t always add the physical cash to my savings tin, I do record the amount of money on paper and add it to my running total. These savings have proved to be much greater than I originally planned due to the Winter weather in subsequent years having been worse than those in years prior to having the stove installed. As an offset to this saving of course, we do buy some solid smokeless fuel for the depths of Winter, per my lady’s preference, and that spent money has to come out of the savings tin, since the gas saved is not all down to burning of wood.

Little and often

Energy saving light bulbs and remote control socket switches all play their part, as I’ve been monitoring our reducing energy usage over the last few years and can therefore calculate just how much money we have reduced our electricity bill by. So far that is in the regions of a 25% saving from when we first started. These savings are only in the form of a couple of pennies per day, but every little helps… especially when it takes no real effort.

Savings can come in many forms including shopping around for better deals on household bills such as insurance, mobile phone, landline and the like. Even washing the car by hand rather than using the £5 option at the petrol forecourt with the drive through car wash. As does taking a packed lunch to work, along with teabags and a canister of semi-skimmed milk. All these savings add up and provide 80% of the money saved to fill the penny jar.

Birthday and Christmas gifts also provide additional funds for my tin too. When I receive either cash or vouchers, using that to buy things that I would normally buy anyway offsets spending my own cash, and therefore is a candidate for the penny tin. It has to be items I would have bought anyway, because otherwise it doesn’t make any saving. Although infrequent in nature, these can seriously add up over time. My uncle used to write me a cheque for as many pounds as my age when I was a child, and that always ended up in my savings account, it really mounted up over the years especially with the higher interest rates paid in the seventies and eighties.

Passive savings

There are a selection of other minor things that make up the money I add to my savings tin, and then when I have enough in the tin, I transfer it to the next level of my money snowball… a savings account which is offset against my mortgage. Whilst I may not physically pay the money into the bank account, I instead just transfer the equivalent amount from my current account to savings and then withdraw the cash from my penny tin to go into my wallet. Another form of offset saving :)

All these items are what I call passive savings, in other words none of this money was earmarked for any other purpose as it was money that I would otherwise not have had. It is not detrimental to any other expense. It soon mounts up to much larger amounts, and forms the basis of my strategy and will ultimately be used for bigger and better things. This isn’t financial advice, and shouldn’t be taken as such. It’s my strategy, my choice, and whilst it works for me, it may not work for anyone else. Everyone develops their own plan eventually. Do you have a plan ?

Summary: I love it when a plan comes together

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