Loading ...When you break down the idea of investing to its basic purpose, you’ll find that it’s not just taking your extra money and hoping to earn a decent return from it . Investing, in essence, is simply something that you do to ensure that your future cash needs are met. Usually that entails “squirreling” money away for future use, but it can also take the form of spending now to save later. If you can spend some of your savings now that will result in a cut to your living costs by a certain amount, then that cost savings is equivalent to a return on your investment. Done wisely, you can earn a return that is tax free, low risk, and higher than you could earn for equivalent risk traditional investments. The Goal To Be Met As I’ve mentioned in past articles, my financial goal is to have enough passive income to cover a comfortable lifestyle. How It’s Done To get to that goal faster, I must either increase my passive income or reduce my lifestyle costs (without sacrificing any elements of my quality of life). Increasing income is much harder than cutting costs, so I try to find unique and unusual ways to reduce expenditures, while maintaining my current lifestyle. So what are these cost saving ideas I look at to increase my passive income? Some Good Cost Saving Ideas Listed below are some cost saving ideas to get your feet wet. Energy Savings There are some very decent returns for spending money now to achieve savings from reduced energy consumption. This can range from blowing extra insulation into your home, to a full blown solar or wind power set up. Other benefits are reduced such as dependence on utilities and reduced environmental impact. Some examples If a $20k wind power system will mean your $1,800 annual electricity bill disappears and you assume that bill would have risen by 3% annually, then you will save $65k in electricity over the next 25 years. That means your $20k investment will return you the equivalent of a 6% compounded return over those 25 years! Meaning, if you invested $20k in a GIC for 25 years instead, you’d have to earn 6% to make the same return as buying the wind system. If a solar hot water system would cost you $6k and would save you $500/year in energy costs, and again assuming that would have gone up by 3% annually, this purchase would save you $18k over 25 years. That $6k investment is saving you the equivalent of 5.75%! If spending $1,000 to add insulation to your home will save you $300/year in energy, that is a 10.5% return over 25 years. I don’t know of any other traditional investments with low risk that pay relatively assured returns that high and with no taxes payable as well. Some other energy saving investment ideas:
Food Savings Cutting your grocery bill by making capital purchases is something else you can consider. It’s usually quite cheap to do so and there are other benefits, such as fresher food that is organic and as local as you can get. Some examples would be buying fruit trees or bushes, such as cherry, peach, apple, raspberry, etc. Your initial cost might be a few hundred dollars, but you’ll have thousands of dollars worth of fresh fruit over the lifespan of the trees and bushes. Another fairly obvious idea is to put in a vegetable garden. Very low cost and high return, it just needs some time devoted to it. One of my favourite food-related investments is buying small appliances that will allow me to make things from scratch, such as bread machines, pasta makers, etc. They pay for themselves quickly if used a lot and you also benefit from fresher, healthier foods. Repair and Maintenance Savings If you’re handy, buying your own tools to do home repairs and renovations or automotive maintenance or repairs is money well spent. Several years ago, I bought a warning light reader for checking engine lights on my cars and the $50 I spent has easily saved me ten times that amount in garage charges for scanning/diagnosis! I also have a full car washing set that saves me money on car washes at the gas station. Haircut Savings Many years ago, I purchased a good quality hair trimmer, which has easily saved me thousands of dollars in hair cuts. I had a brush cut or shaved head look anyways, so no point in paying a barber for that. My two young boys also get trimmed with it, so no more paying $15 per cut per kid every few months. Water Heater Rental Savings This seems to be something that is only common in certain parts of the country, but if you rent your water heater, you should look into buying it out. If you’re paying $20/month for a heater worth $600, the return for buying it out is quite good. What You Must Consider and Factor In
The Bottom Line I’ve tried to use numbers in my examples that are realistic, based on research I’ve done, but you’ll want to evaluate any purchase using your own numbers to determine if it’s a worthwhile investment. As you can see, sometimes it is worthwhile to spend money to save money! If anyone has any other such ideas, please add a comment! I’m always looking for new ways to save.
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Posted under Cost Savings, Energy Savings, Food, Investments, Passive Income
This post was written by Bullseye on July 29, 2009
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While living at the same house for 25 years ensures you benefit directly from the savings, don’t forget that it could help increase the value of your house if you need to move sooner.
Plus, some of these items would qualify for the HRTC, improving the return even more!
I’m on the same track of mind as you on these. There are times however when the urge to splurge just gets in the way. When that happens, I’ll just make sure that it comes from an entirely different source of funds from the regular family income source.
wow,a nice work,and thanks for the sharing.