Outfitting your home for maximum energy efficiency is not cheap, true. For the full blown upgrade, you would likely be looking at replacing your furnace, air conditioning, hot water heater, and all of your windows. Expensive stuff, to be sure. All the same, energy efficient home improvements are quickly becoming very popular. Is shelling out all the cash really worth it? You bet it is. However, spending your hard earned cash on upgrades to your kitchen or bathroom needs to be looked at closely. See our article on home improvements.
To do it right, you will have to spend a fair amount of money which will use up some of your savings. You might even want to consider a loan or a home equity line of credit to complete the work, but the returns will start piling up immediately.
Money Saving and Tax Saving Benefits from Energy Efficient Home Improvements
If you go green with your furnace and air conditioning, your home becomes up to 50% more efficient right off the bat. New windows? You could save another $25 a month just from the additional insulation here and there. Add another $25 per month for a new solar water heater. Put these savings together and look a few years down the road. Not only is it relatively easy to pay off the improvements, you quickly begin to have more money to save or invest.
Another added bonus is that in most cases, energy efficient improvements to the home, especially residential solar panels can add significant value to your home when it comes to selling it in the future. As heating and cooling costs increase folks are starting to want “green home improvements” in the homes they are looking to purchase. Oh, and wouldn’t it be nice to help the environment in the process.
The last benefit, or shall I call an incentive is that the federal government, as well as many state and local governments, now offer some pretty substantial tax credits and benefits for installing green improvements to your home. I know that in the state of Arizona, you can install a solar hot water heater for about $5,000 but with the tax incentives etc. you can really get it installed for around $900. With this in mind, you can have your heater paid for with your energy bill savings in about 3 years.
How, exactly, are you going to pay for all of this without going broke, though? Even knowing that it is an investment whose returns are not too far off on the horizon, it requires a lot of money up front. If you have a substantial amount saved in the old nest egg, you should have no qualms about spending it on this project and then reimbursing yourself when the work is paid off. Otherwise, don’t hesitate to take out a low-interest loan or put the work on a credit card with a low (possibly even promotional-rate) Annual Percentage Rate - APR.
If you have read any of my other articles, you might be shocked to see me recommending that you take on debt of any kind, but this is a great, sure-thing investment that can and will save you money. If you are looking at making only minor improvements and do not have the money to do so, it’s fine to look into unsecured financing; these loans do not require much in the way of equity (I’m talking to you, new homeowner) and you are more likely to pay off a smaller amount -- albeit at a slightly higher rate -- than you would a larger amount.
For larger improvements that require more substantial loans, I strongly recommend that you obtain secured financing (cash out refinances, home equity loans, home equity lines of credit, etc.) if possible. Using the equity you’ve built in your home can help you get a lower rate, which allows you to make more money-saving improvements and pay them off over a more drawn-out period of time. Your monthly payments should not be quite as high with secured loans, either.
Josh Michaels is a freelance writer who survives on very little income and carefully considered financial decisions. This combination has allowed him to have fun, travel the world, and start a retirement account – all without the pleasure of holding a full-time job. He can be reached at: joshmichaelsmoney@hotmail.com.
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