Free Home Improvement: Another Way to Value Insulation

by Josh on October 1, 2009 · 5 comments

in Ideas

Even more than the cost comparison I just featured, a common calculation of the value of insulation is the length of time it will take for energy cost savings to pay back the cost of improving the insulation and weather-sealing.  Unlike many other home improvement projects, investment in insulation and energy efficiency should eventually pay for itself in savings.

But what if, after upgrading your home’s insulation (and paying for it), you took the difference in monthly energy expenses and put it in a savings account?  That accumulating savings fund could be used to cash-flow future home improvements.  If those improvements also saved monthly energy expenses (a high-efficiency water heater, e.g.) you would have even more monthly savings to fuel your improvement fund.

A Completely Made-up Example

Here is an example I made up to illustrate this principle.  The numbers aren’t from any real case and could vary significantly based on your circumstances.  Still, I think it is useful to show the potential power of leveraged energy savings through upgrades to insulation and appliances.

Starting average monthly energy expense: $200

Average monthly energy expense after insulation improvement: $160 (20% savings)

Average monthly addition to savings due to reduced energy expenses: $40 ($200 – $160)

Accumulated annual energy savings: $480 ($40 x 12)

Invest savings in high-efficiency water heater or other expense reducer

New average monthly energy expense after water heater upgrade: $130 ($10 savings)

New average monthly addition to savings due to reduced energy expenses: $50 ($200 – $150)

New accumulated annual energy savings: $600 ($50 x 12)

Invest in additional efficiency improvements or pay for other house projects with “free” money that used to go to the utility company.

Continue the savings cycle indefinitely


The repayment potential of insulation is a big reason why insulation improvement usually tops lists of cost-effective home projects.  But with a bit of financial discipline, insulation and energy improvements can not just pay for themselves, but underwrite the cost of future house projects as well through accumulated energy savings.

Do you consider repayment time in your home improvement plans?  Have you adopted a savings plan like this after improving your insulation?  Share your good ideas in the comments.

{ 5 comments… read them below or add one }

reuben Collins October 1, 2009 at 10:17 am

What holds me back from creating something like this is that I’m not entirely convinced I’d be able to cover the costs. I like your analysis in theory, but one line you left out is the repayment of the initial cost of the insulation. You also need to factor in the length of time you plan to be in the house as well as the additional money you’ll get for the insulation when you sell the house. If I spend $X on insulation, before I can use the monthly energy savings on future projects, I have to repay myself $X before it’s “worth it.” And I need to figure out how long it will take me to recoup those initial costs and determine if I will be in the house that long – and if not, I need to determine whether I can recoup the costs when I sell. Otherwise, it becomes more cost effective to just keep paying higher energy bills.

But that might be over-thinking it a little bit.

Reply October 1, 2009 at 11:13 am

Naturally, if we all plan to stay in our beloved houses, err homes for a while… then whatever upgrades we do will eventually pay themselves off.

I like your idea of reinvesting said savings of insulation (or other upgrade) into yet another home upgrade and on and on. Its clever really, becuase the 1% interest rates in US banks is a joke. But then again if you know what you are doing you can get 4% in Australian banks or even 10% in Russian banks 🙂 then take out a little bit once in a while for the upgrades. It may require a flight every year or every other year to said country, but who doesnt like a vacation now and again? Especially when the interest earned paid for the trip in full!


Josh October 1, 2009 at 1:01 pm

@Reuben & @1916home- I did mention paying off the insulation within parenthesis in the second paragraph, though it could have been repeated in the example. And you’re right, this post presumes staying in the home for the foreseeable future. That’s my situation and I easily and unknowingly slip into that bias.

I guess I was thinking about this issue more simply: if I had $X available for home improvement projects (from savings, a tax refund, an inheritance, etc.) I could spend that on new countertops or bathroom tile and the money is trapped as equity. But if I spent that money on insulation or weather-sealing that save me utility expenses, those savings might eventually buy me a new countertop or bathroom tile too.

Obviously the devil is in the details here– that’s why I called it “a completely made up example.” Off to research Australian banks…


Coupons October 16, 2009 at 7:04 pm

This makes a lot of sense. Definitely something to think about when prioritizing home improvement projects.


central vacuums October 20, 2009 at 2:17 am

Very useful tips, thanks for sharing, keep on sharing more informative post like this, eagerly waiting for your next post. Keep up your good work.


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