Yesterday, I visited the MIT Museum with my sons and some of our
friends. It was quite fascinating
learning about all of the history of technology as well as more recent research
topics.
While there, I was watching a demonstration on alternative energy,
specifically solar panels and hydrogen fuel cells. It was quite interesting!
But the speaker also shared some of the economics of solar
panels and that got me thinking. He said
that it would cost him about $35,000 net after tax credits to install panels on
his roof in his suburban
His electric bill is around $1,800 per year.
You might be thinking that it’s not worth it to spend $35k
to save less than $2 per year.
Well, that’s 5.14% simple return per year!!!! Tax free!!!!!
Where else can you get that kind of return today? That’s a pretty good deal!
Now, I’m not suggesting that we all run out and get solar
panels, though it would be really good for the environment.
How many people are taking advantage of opportunities to
maximize earnings on their money?
And how many people are saving in a tax efficient way?
This example illustrates that there are opportunities to
save (or earn) return that, on the surface, doesn’t look like it has anything
to do with personal finance.
And then there’s the initial $35k investment. This example works if you can afford to put
down the $35k upfront. Actually, it’s
around $50k, but currently there are tax credits for solar installations which
lower the final bill to the $35k.
If you borrow the $35k (really $50k), the interest expense
will reduce your return.
So, the key would be to either have enough cash to be able
to afford to do this, or borrow in a way that doesn’t really cost you anything.
Ultimately, wouldn’t you want to be able to do this, or make
any other big purchase, without worry about money?
Most people either don’t have the cash. Or they can borrow it, but at interest rates
that wouldn’t make this an attractive investment.
So, how are you building up your capital so you can afford
this? Or, how can you borrow this money
with minimal interest to do this?
Answer to last week’s trivia question – B – 19%. Though it seems small, it still represents
about 55 million Americans. And that
number is poised to increase dramatically in the future.
This week’s trivia question – According to the US Department
of the Treasury, in fiscal year 2012 (started in Oct 2011), how much have
Americans voluntarily donated to the government to reduce the debt. Is it…
A – Zero! Who would volunteer to pay down the debt? We already pay enough in taxes!
B - $1.5 million
C - $2.4 million
D - $10.9 million
