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.