Even if you retire early, life continues to present a steady parade of opportunities and problems.
In our latest life episode, Mrs. Moose and I are moving down from the mountains and into the house that she and her brother inherited from their father.
One big opportunity: free housing in a desirable neighborhood with likeable neighbors.
One small problem: ginormous electricity bills. How high? During 2013, the house gobbled up 8,371 kilowatt hours (kWh)—averaging 698 kWh per month. During the first nine months of 2014, the average gobbling grew to 860 kWh per month. At this increased rate, electricity will cost more than $1,000 this year.
So why is the electrical footprint of this house so revolting?
One likely culprit lurked for decades in the garage: a Montgomery Ward Signature upright freezer purchased in the late 1960s. Its door gaskets were cracked. So too was the plastic shell underneath the bottom shelf (on the bright side, someone had covered the crack with duct tape). I figure this leaky monstrosity gobbled about 200 kWh per month. This reflects a reasonable midpoint between: (1) the 100 kWh our 1990 Amana fridge draws at our old house (as measured a few years ago by a borrowed kWh meter); and (2) the 300 kWh we shaved off the bill at the new house in the first month after we disconnected the offending freezer (we didn’t bother borrowing a kWh meter beforehand because we were anxious to staunch the bleeding).
Disposing of the freezer took only an hour’s work. First, we unplugged the thing and transferred the edibles over to the kitchen’s fridge-freezer. Then I went online to sign up for our local utility’s appliance recycling program. A week later two guys drove up and loaded the freezer onto their truck. The haul away was free and the utility will send us a $50 bonus check for our troubles.
So how much value will we receive in exchange for defrosting forever?
I have three answers for you.
My C answer goes like this. Dispatching the freezer will save us about $20 each month in electricity (200 kWH * $0.10 per kWh = $20). Since I lived in the last house for 20+ years and hope to live in this next house for just as long, I’m looking forward to 20 years with a freezer-free garage. This will save us about $4,800 ($20 * 12 months * 20 years = $4,800). Add in the $50 we’re receiving up front from the utility and our savings total $4,850 ($4,800 + $50 = $4,850).
My B answer calculates the earnings we’ll receive if we take the monthly savings as they accumulate and deposit them in a tax-free vehicle such as a Health Savings Account (HSA). For this purpose I use a future value calculator. This chart reports how much we’ll have gained at the end of 20 years under three interest rate scenarios:
|Interest Rate||Future Value of Savings After 20 Years|
My A answer calculates the “present value” of the future income stream produced by the freezer’s departure. For example, the chart above reports that at 5 percent interest we’ll have gained $8,358.31 twenty years from now. Using a present value calculator, I figure the amount I would have to deposit today at 5 percent interest in order end up with that same $8,358.31 twenty years hence. Present Value measures in today’s dollars the economic boost we’ve received in exchange for ridding ourselves of the ancient kWh hog. Here’s a chart of present values under the same three scenarios reviewed above (note that present value is inversely related to interest rates; in other words, the higher the rate of interest the lower the resulting present value):
|Interest Rate||Future Value of Savings After 20 Years||Present Value of 20 Year Savings Stream|
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Does a geezer freezer lurk in your own garage? If so, now’s a good time to check whether your utility will haul the appliance away for FREE (and even bestow upon you a nice bonus check). No matter how you choose to figure it—A, B, or C above—an hour’s worth of work can save you thousands.