Every month this year has brought one off or ‘special’ expenses. April was higher than usual. We moved one of our parents from abroad to come live with family in the US. A campus visit for our college bound son…and finally birthday and anniversary celebrations.
There is no doubt that when things get busy, expenses go up due to less planning and a desire to just get things done quickly. Looking at this month’s categories, of the top 6, the top 3 would usually be classified as one-off. At the same time, I try not to obsess over spending in isolation. The family also needs a sense of comfort and well being and constantly injecting the topic of spending into the conversation takes away from that goal. The occasional splurge and gift giving adds a lot to the quality of our life.
I do try to focus my attention on structural changes to our lifestyle that increase efficiency. As part of that, we have been considering getting a solar system installed. The costs of electricity will rise by about 20% this summer after our contract expires. On average we consume about $2200 worth of electricity in a year at the old rates, which will likely rise to $2500 going forward.
The quoted cost of a PV system that covers 100% of our needs, comes to $20,000 after all tax incentives and rebates. This implies a 12.5% after tax rate of return, or the same as a taxable investment return of 19.8% at our marginal rate of 37% or 16.6% at our average tax rate of 25%.
Another way of looking at such investments is that they allow us to opportunistically move gains from market investments to hard assets that lock in certain rates of return. As the market is doing very well now, it makes sense to take some money off the table into a sure thing.
The down side of a house project is … owning hard assets … dealing with maintenance, delays, contractors etc. Any deviation from the plan on paper resulting in additional costs can kill the promised rates of return. However that is life, and as an engineer, there is a certain joy in tinkering with technology that adds to the intangible value of the project.
The solar system should get installed over the next 2 months and we will catalog the journey as well as the cost / benefits.