Are you interested in having the oil companies pay your gas for the rest of your life? Of course you are who wouldn’t be? No, I don’t have a big question mark on my chest touting government grants. I just have capitalism.
- Figure Out How Much You Spend on Gas Per Year – This is as easy as checking your credit card statements, writing it down in a book, or doing the math. Cost = Miles/MPG*Cost/Gallon
- Choose a Basket of Quality Oil Companies – I would choose at least 3 or 4 oil companies that have been around a long time like Exxon. Use your favorite stock picking options here to choose which the best to buy right now are. I like to look at how much the stock has grown per year on average compared to how much it’s grown per year at the Markowitz model current price, or a CAGR analysis.
- Determine The Dividend Per Share – Using your favorite financial information service find the dividend per share of each stock in your oil stock basket.
- Determine How Much Stock You Need to Buy – You do this by assuming the dividend returns and stock appreciation so the value is greater than your total yearly gas costs. Most financial advisors would agree that you can take 4% of any stock portfolio each year and not withdraw more than the value will grow. If your gas costs are per year you’ll want to earn that much in returns after taxes. Taxes for dividends and long term capital gains are still (with some rounding.) The dividend yield for Exxon right now is 2.34% (just use whatever your dividend yield is.) So add this to your 4% portfolio raiding for a total of 6.34%. The value you need to start with.
- The Great Part of This System – If oil prices start to rise, odds are the companies will start having record growth and you’ll have a larger bucket of money to take for you gas prices. If the stocks grow 14% that year you’ll have twice as much money for you gas fund that year alone. What else could you save for this way? What about groceries or cell phone bills?