ROI of Replacing Light Bulbs

May 6, 2008 by Kevin
Filed under: Money and Career

This is one of my favorite posts from the other site. I am in the never-ending quest to save money, lower the household expenses and become financially free at some point. This is just one of the wonderful ways to save money. It had some good banter between Gail and I as she loves that lamp in the corner of our living room. I, on the other hand, am planning a very unfortunate “incident” for our little energy hog lamp friend…

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Try to calculate the Return on Investment (or Internal Rate of Return) of doing this…good luck. Today, I spent several hours doing household chores. My wife went back to Detroit for a business trip and left me a little honey-do list. So today, like the good robot husband I am sometimes, I did my thing and went through that list. I spent every agonizing, errr enlightening, moment on checking off every task and achieved the whole thing – save some last minute cleaning she wanted done right before she comes home on Tuesday.

One thing that wasn’t on her list but was on mine, was replace every dinosaur light bulb we have in the house with those new fandangled bulbs that look like a bowl of spaghetti. Since I am all about saving money and doing my own financial analysis to justify my actions, I had to look at this based on my return on my investment (or Internal Rate of Return). It took the idea of saving money bigtime for me to actually do the right thing – what kind of person am I???

I thought this process would have taken me about 20 minutes, but after spending roughly 2 full hours on this little project, I was felling pretty good about myself. I replaced nearly 40 light bulbs and did a variety of equivalent 60 watts, 75 watts and 100 watts.

What is cool about this is the learning process. What I learned was the following:

the old 60 watt version uses only 14 watts in the new version
the old 75 watt version uses only 18 watts in the new version
the old 100 watt version uses only 23 watts in the new version

These new light bulbs use 1/5 of the electricity as the old version. HUGE savings when it comes to paying my those really nice folks at the utility company. The package says I can save, under normal uses, the following:

the 14 watt version saves $46/year
the 18 watt version saves $56/year
the 23 watt version saves $77/year

Since I replaced nearly 40 light bulbs today, I know the savings could very well be huge. If the average savings per yer is $50 per bulb (on average since most of them were the small kind) and I replaced 40 of them (I need my calculator), but I think that is roughly $2,000 per year in energy savings. I am not that optimistic and I know that it simply can’t be true, but lets say I was off by 50% and it only saves me a cool grand each year.

Time to crack out one of my best friends (Microsoft Excel) and do a little investment return. The total investment in light bulbs was $33. My time is free since I was working around the house and my wife gets a special discount – for barter of course… The internal rate of return on this investment is silly to discuss. It is off the charts, so let’s not even discuss it.

What is truly neat to look at is how these 10 C-notes are going to multiply over time, invested VERY mildly at 8% return. To see what this means to me in 30 years time – saving the $1000 every year; invested at 8% annual return – simply use the following formula in excel “=FV(.08,-1000,30)”.

(BTW, I am writing this with The Matrix on in the background…killer flick)

This silly little bulb replacement exercise just netted me an additional $113,283.21 for our retirement. If my adjustment down to $1000 per year is wrong and I actually save the $2000 per year, my take at the end of all of this (just replace the 1000 with 2000 in Excel) is an unbelievable $226,556. I am besides myself right now. Somebody needs to come on over my pad and punch me in the face a bunch of times for not doing this sooner. If not in the face, then at least a couple swift kicks in the beans. What the heck was I thinking?

Oh yeah, one more thing, I of course put all my dinosaur bulbs on craigslist to try to offset my $33 initial investment. For some reason, spending the initial scratch still gets to me. Those light bulbs seem perfectly fine, but in the in long run, those things were eating me out of house and home. Taking food off my table sort of speak. And the Financial Analysis Guy can never have that!

One more thing, the Financial Analysis Gal has this amazingly beautiful floor lamp in the corner of our living room. It is artwork – I will give it that. She loves it and we can’t craigslist it quite yet, but the time is coming. Why? That halogen lamp uses 300 watts (that’s 21 FREAKING times more energy than my little spaghetti style friend). That lamp is now officially put on notice!!!

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