Use a Savings Stack to Hack Your Current Spending

Today I will discuss how to use a Savings Stack.  As I have discussed in Save More of Make More I typically only focus on saving money on Cars and Housing and leave the rest for others.  However, I have stumbled upon ways to hack your existing spending in other categories that are too good not to share.

The method that I employ is to couple credit card savings with other savings programs to multiply the savings. This can be done with most retailers, but my favorite is to utilize this with my normal grocery chain. Since I cook most of my meals at home (another way to save big money), I buy groceries every week. This means there is always an opportunity to employ this strategy.

This strategy is very similar to the Travel Hacking strategy widely utilized in the Financial Independence community. The difference is that the end goal is to amplify the savings on the spending, not to generate travel miles. The savings end goal is more useful to a family working toward FI since a nomadic lifestyle is not realistic in most cases.

Step 1

I use my Stacking Savings approach by first investigating current credit card offers for new accounts. I’m looking for an offer which has a good bonus and doesn’t require spending which would exceed my normal spending. I believe like many folks that the best credit card is the Chase Sapphire Preferred card. It offers a great bonus of 50,000 Ultimate Reward points which are the most flexible points in the space. The points can also be transferred to many travel partners making them valuable in almost any circumstance. There are many great credit card offers at any given time, so it’s best to check the current offers when deciding on which card to open.

Step 2

After I have gotten my new credit card, I look for opportunities to save additional money. My favorite savings stack is to purchase gift cards at a store which offers bonuses on gift card purchases. This is very common at grocery stores, but can be found at other retailers as well. In recent years stores have found that gift card sales are a good way to boost revenue. This has made bonuses and/or discounts on gift card purchases more common.

Example Savings Stack

At this point I would like to walk through a specific example of using this approach that a recently used to save a significant amount on a DIY project for my house. I wanted to add some more storage in my garage and I estimated the cost would be approximately $500 at Home Depot.

So I looked into current credit card offers. I already have the Chase Sapphire Preferred, so I looked into other Chase cards. The one I settled on was the Chase Freedom Unlimited card. This card offers 1.5% cash back on all purchases with no annual fee. It also offered a one-time bonus of $150 when a total of $500 has been spent on the card. This lined up perfectly for me as I expected to spend that amount on my garage project. I am a fan of credit cards with low spending requirements to earn the bonus. Some cards offer larger bonuses for larger spend, but if you have to spend extra money to get the bonus then it defeats the purpose of this savings strategy all together.

Next I looked at gift card offers at various retailers. The best I found was 4x fuel points at Kroger (local grocery chain). In Kroger’s Fuel Reward Program, for every $100 spent you earn $0.10/gallon savings on a tank of gas (up to 35 gallons). Therefore, 4x savings equates to $0.40/gallon in savings per $100 in spend. So by purchasing $500 in Home Depot gift cards, I was able to earn $2.00/gallon in savings on fuel costs (Note: This has to be broken into two purchases as $1.00/gallon in savings is the maximum on any purchase).

Total Savings Earned

In total on $500 in spend to complete my garage project I saved as follows:

Savings = $150 (Credit Card Bonus) + $7.50 (1.5% Earnings on Credit Card) + $70 (Savings on Fuel)

Savings = $227.50 or 45.5%

Summary

This is pretty remarkable savings for very little effort. I spent 10 minutes online researching credit card offers/applying for the card and 5 minutes picking up gift cards. Also, the best thing about this strategy is that it can be replicated easily. Since the credit card part of the Stacking Savings strategy is identical to the normal Travel Hacking method, there will be almost no impact on your credit score. This is due to the fact that the negative impact of opening a new line of credit is offset by the lower utilization of total credit from the new credit account. Personally I try to plan a Savings Stack at least once a quarter which allows me to save over a $1,000 each calendar year. I believe this is excellent as I was going to spend all of this money anyway.

I wish all of you luck in using the Savings Stack strategy and please let me know if you have ideas to make the Savings Stack even bigger.

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