Spending to Save

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.

I try to limit my consumerism significantly in order to attain a level of savings that will eventually be high enough that I no longer have to work.  I stop myself (usually) from making wasteful purchases, and as such have begun (compared to five years ago) been able to somewhat reduce the amount of crap that I have lying around my house.  There are a couple of purchases that I am pondering that may actually save me money down the road.

The first item I am looking at is fairly cheap, less than $100, that could possibly save me 25% in fuel costs per year for my car.  I’d like to think that I am an efficient driver, but if I could save some of the approximately $2,000 per year in fuel costs I take on, I would be a happy person.  I read about the Ultragauge in an article written by Mr. Money Moustache and have been pondering this purchase for the last month or so.  On top of helping me, my wife just recently started driving our car by herself and this tool could possibly teach her to drive much more efficiently.

The second purchase I am looking into is a tankless water heater.  Currently, I am renting a hot water heater – it was here when my wife and I moved in and we just haven’t really thought about it since then.  This purchase will cost between about $1,500 and $2,000.  It costs me about $35 per month for the hot water heater rental, so it would be about 4 years before I would have repaid the capital cost of the heater.  I’m hoping that due to some efficiency gains had by not constantly heating a huge tank of water, that it would work out to around 3.5 years.  Looking at cashflow, it’s one less payment I would have to make every month as well, and I am always looking to rid myself of bills.

One purchase that I made when I had just moved into my house, and has paid significant dividends is a programmable thermostat.  This cost around $80 and easily saved that much money over the first 6 months between heating and cooling costs.  In the winter when my wife and I are at work, the house is kept at a somewhat frigid 10 degrees Celsius.  We make sure that it’s warm enough for when we get home, and then shut off the heat about an hour before we go to bed – on a normal weekday, the heat comes on for about an hour in the morning and 4 hours in the evening.

Those are just a few examples of many I’m sure there are for products that can be purchased that would save money.

What have you spent money on to save in the long-run?

11 thoughts on “Spending to Save”

  1. My wife and I recently looked at replacing our water heater with a tankless heater as well as the monthly rental rates seem to always go up. We decided to keep the water heater based on the fact that our water heater started to leak one day. We called our water heater provider late in the day and the next morning installers and a new tank showed up at our door. They replaced the old tank with a new one. Sometimes there is a small price to pay for piece of mind knowing that in an emergency, the tank will be replaced immediately (if we had said we had young children they would have come that night) at no extra charge (other than the tip we left them and a $35 charge)!

  2. The programmable thermostats are really a great thing. The only problem we encountered with them is that if your heating your whole house on only one zone it takes longer for the heat to warm up the house. There’s money well spent in dividing your house into at least two zones (bedrooms and other living areas).

  3. $35 per month for water heater rental? WOW. I pay $99 per YEAR for my rental. Buy the tankless now. Or even buy your own regular tank which you would have paid for in less than 2 years.

  4. I admit I’m handy, but it’s not difficult to install a tankless water heater.

    The three important items to do:
    1. Upgrade gas meter to higher BTU. (Usually free)
    2. Run at least 3/4″ gas line to heater, 1″ even better.
    3. Vent products of combustion properly.

    It’s all in the instructions, take your time.

    I used to have a 50 gallon water tank. My wife and I only used the hot water when taking showers. The payback was even greater than your numbers. After 1st installation, a new tank would take only a few minutes. It’s the first change out that’s challenging.

  5. Just a caution about the tankless water heater- a family member received one and when it needed repair they couldn’t find anyone to service it.

  6. Thanks for the mention! I think you might have meant to link to this article regarding the ultragauge: http://www.mrmoneymustache.com/2011/07/26/hypermiling-expert-driving-to-save-25-50-on-gas/

    I think at your level of driving, it could indeed be quite worthwhile.

    Also, the other commenters are right – $35/month for a water heater is ridiculous! Standard water heaters only cost $400-$500 brand new, so by renting you’re paying almost 100% annual interest on that loan. The idea of renting a $500 device for multiple years seems strange to me – just buy it. They last 10-15 years at a minimum (I just changed out a pair of still-working 1994 models for a friend last year for a single energy star one).

    A tankless water heater will save most people between $60-$120/year in natural gas, which is also a good return on the extra $1000 or so invested – especially if you can get some cash back from the government for the efficiency upgrade (here we get 30% back).

  7. Consumer Reports had a comparison of tankless vs tanks within the past year. I believe their conclusion was the payback is long vs. a high efficiency tank model. (but rebates etc. can greatly affect that)

    Another concern is our winters. The BTU’s (gas) needed to heat water to 100 degrees is more when the water starts at (say) 5 degrees than 15. And a tankless has to do that heating in very short order – so sizing is important.

    The rental seems very expensive – what is the cost to buy it out? A new tanked model should be worry free for 7-10 years.

  8. I will go against the flow here, by recommending you to do your research before jumping to install a tankless water heater.

    First, by replacing your rental with an owned one (no matter the type), you will get rid of a small but recurring expense. That’s most likely a good deal.

    For a back-of-the napkin calculation, a tankless can cost you over $3000 installed. A water tank should be under $1500. The differential is $1500.

    My current gas consumption is generally under 30 cubic meters/month. Let’s use 40 so that at 25c/cubic meter the value is $10/mo. If my old tank has a 50% efficiency and the new one is 100% efficient, I’m wasting half of the money, so a tankless will reduce my gas bill with $5/month. That means I’ll need $1500/$5=300 months to break even. That’s exactly 25 years. Even without considering the future value of money or the opportunity costs, it doesn’t look like a good deal to me.

    The best thing you can do is probably to first buy out your existing tank. I used to pay $11/month for rental, and the buyout was $100 for a 12 years old tank (the older it is, the cheaper it gets but also more likely to die in your hands). I’m happy I did it!

    My tank is now 15 years old, and it didn’t leak yet. It was never properly maintained before I bought it. Minimal maintenance (unscrewing and checking the anode once a year) is easy if you are at all handy. If not, at least flush the tank yearly. And meanwhile do your homework so that when it leaks, you know whom to call and what you want to install. Even if it takes 2 days to replace it, I guarantee you will not die because of a couple of cold showers, even if it happens in January!

    Tankless has its own advantages (less space, infinite hot water capacity) and a few disadvantages, and you may do the switch for reasons other than the money. Just make sure you know why you want/need it.


  9. Hey Dave, Great Post!

    I was curious what temperature you heat the house to when your home? I usually keep our thermostat at 19-20 when we are home and turn it down to 16 when we are away. If it’s a difference of more then 4 degrees you probably spend more energy bringing the temperature up from such a low setting.

  10. @Addicted2dividends: No, that’s not correct. The gas needed to heat the house back to normal temperature is always less than the gas required to keep it at constant temperature. The lower the temperature it gets and the more time you keep the low temperature, the bigger the savings.

    The rate of gas consumption is indeed greater when you heat the house from 16C to 21C compared to keeping it at 20-12C, but that’s for a relatively short time. Another factor is that the furnace works better (with higher) if it runs continuously instead of short runs.


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