Feb 11, 2021

Budgeting For The Cost of Energy

President Biden is issuing various Executive Orders, which many analysts predict will raise the cost of energy.  That means higher electricity, natural gas and gasoline prices in the years ahead.  This could mean adjusting your budget to include as much as 30% or more for higher energy prices.  There are some things you can do to mitigate higher prices; but they are not free.   More energy efficient windows can be installed on your home.  Perhaps, additional insulation in your attic would cut heating and air conditioning costs.  If you are sitting on a heating and air conditioning system that is more than 10 years old rather than repair them, it might be time to install higher efficiency units.   And, of course, you can have solar panels installed on your home. 

The real question is return on investment.  Clearly, if you plan to stay in your home for at least 10 more years making these investments now will probably provide a good return on investment.  Depending on the size of your home everything I have listed could cost  $50,000 or more.  However, there still may be some state or federal tax credits available to help cushion the cost.  

Next, is the issue of your car.  Strictly electric cars, which may be the wave of the future are not cheap.  The premium over a gasoline powered car may be well over $10,000, however when gas goes to $5 a gallon, which is likely, if you do a lot of driving, you should get your money back over the life of the car.  Hybrids make good sense since they run on both gasoline and electric power.  The mileage is usually not as good; but at least you don't have to worry about refueling on long trips.  

The cost of energy will be a hot topic in the years ahead. The so called "Green New Deal" will result in higher energy cost.  The only question is, what can we do lower what we are paying so that we have more money to spend on other things that are important to living a great life.