Category Archives: Finance

Save Money On Electricity

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A typical American household might spend $100 this month on electricity. Over the course of the year, that bill will total $1200. Not only is our hard-earned money disappearing into thin air, but we are also destroying the environment in the process. That’s because to produce electricity, power plants must burn coal. Not only does this contribute to carbon emissions and smog, but forests are often destroyed in the coal mining process. The great tragedy, ultimately, is that saving electricity — and our money — is actually very simple. It only takes a few minutes to learn how to conserve electricity, but afterwards, you could save around a thousand dollars each year. That’s not a bad reward for helping to preserve the environment.

Many homeowners won’t bother with conservation simply because they don’t understand how electricity is being billed. Electricity isn’t tangible like gasoline is, so it’s difficult to figure out how electricity is measured, how much our devices use, and how all this is priced. As a result, it’s difficult to predict whether one electrical device is more wasteful than another. For example, most people know that a Hummer wastes more gasoline than a compact car, but few know whether a hair drier is more wasteful than a television. The mystery behind electricity pricing is what makes conservation difficult to practice, so before we start saving money, let’s first understand how electricity is billed.

Power, energy, and time are three related variables that follow this equation:

Energy = Power × Time

To better visualize these concepts, let’s use a rough analogy. Imagine we decide to build an old-fashioned water mill on a fast-flowing river to grind flour. The rate at which water flows influences how quickly the watermill works: the faster the river, the more flour we can grind. In a way, the rate of flow is similar to the power usage of a device: the more power your air conditioner uses, the more energy you will be charged for. Although we might measure water flow in units of feet per second, we measure electrical power in units of watts (W).

Power, however, is not what you are billed for (1). If a farmer rented a watermill to grind flour, he would probably be charged based on the amount of flour he grinds, not on the speed of the river. The amount of flour produced depends not only on the rate of water flow but also on the length of time spent milling. Likewise, our utility company doesn’t bill us for the power used but rather the total energy used. According to the equation above, the total energy is a product of power and time. Since the unit of power is in watts (W), and the unit of time is measured in hours (h), it would make sense to measure energy in units of watt•hours (W•h).

A single watt•hour, however, is a trivially small amount of energy. It’s the amount of energy that a one-watt device uses in one hour (1W × 1h = 1W•h), or what a two-watt device would use in half an hour (2W × 0.5h = 1W•h). For comparison, a single alkaline AAA battery contains around 1.15W•h (2). Measuring energy in watt•hours only makes sense for a tiny sliver of ultra-efficient devices, such LED flashlights. For the typical home appliance, however, it makes far more sense to price electrical energy in the much larger units of kilowatt•hours (1 kW•h = 1000W•h).

For our calculations, we’ll use the sample rate of $0.14/kW•h, which is the price of Tier 2 electricity from Southern California Edison as of June 2011 (3). (You’ll need to check your own electric bill to find out your exact rates.) Using this knowledge, let’s try to figure out how much it costs to operate some typical appliances:

  1. How much does electricity cost to run my laptop? I use my 2007, 13″ Macbook for about 4 hours/day, 5 days/week. During normal operation (light web surfing), it uses around 25W of power (4). 25Watts × 1kW/1000W × 4 h/day × $0.14/kW•h = $0.014/day. That is, I would pay around one and a half pennies each day to power my laptop. To figure out the cost per month, we multiply by the number of days per week, then by the number of weeks per month: $0.014/day × 5days/week × 4.5weeks/month = $0.315/month, or about 32¢ each month. To calculate the cost per year, we multiply by the number of months per year: $0.315 × 12 months = $3.78/yr, or almost four dollars each year.

    As you can see, laptops are actually cheap to power. In general, electronics designed to run on batteries are energy-efficient. (Just remember to turn them off or sleep them when not in use.) If you’re looking to save significant money, you’ll need to hunt around the house for big energy hogs. Let’s take a look at a more interesting example: central air conditioning.

  2. How much does electricity cost to run the AC during the summer? Let’s say we live in sunny Arizona, so that the AC is blasting 12 hours a day, everyday for 6 months of the year. We’ll estimate the power use of a 2.5-ton central AC at around 3500W during operation (5). One detail to remember for ACs is that they don’t usually run continuously. Air conditioners only operate when the room temperature exceeds what is set on the thermostat; all other times, the AC is in sleep mode. With this in mind, let’s estimate that the AC is powered on around 33% of the time. With the AC turned on 12 hours each day, we estimate that it is actually operating for about 4 hours each day. 3500W × 1kW/1000W × 4h/day × $0.14/kW•h = $1.96/day. The cost of operating monthly is $1.96/day × 30.5days/month = $59.78/month. The cost of operating it each year is $59.78/month × 6months/year = $358.68.

    With central AC, you would waste over $350 dollars each year. Part of the reason it’s so expensive is because central AC is cooling the entire house, when really all you need is to cool a single room. Air conditioning is also much more energy-intensive than using a fan.

  3. How much money would you save by using a fan in place of the AC? On the medium setting, a box fan might use around 60W power (6). 60W × 1kW/1000W × 12hours/day × $0.14/kW•h = $0.1008/day. The cost of operating monthly is $0.1008/day × 30.5days/month = $3.0744/month. The cost of operating it each year is $3.0744/month × 6months/year = $36.8928/year. Compared to the central AC ($358), that’s a savings of $321, or nearly 90%!

    As you can see, it pays to focus on the biggest energy-guzzlers first. Heating and cooling account for over 70% (7). The runners-up are probably lighting and refrigeration.

Monthly Cost = Power (in W) × 1kW / 1000W × h/day × Price (in $)/kW•h × days/month

Save 100% compare to the clothes dryer

Keep in mind five key tactics:

  1. Small is beautiful. All other things equal, a smaller device uses less power than a larger one. Central heating wastes much more energy than a portable space heater, and a widescreen-TV uses much more electricity than a smartphone. Save money by using the smallest appliance possible.

  2. Less is more. The less you use a device, the more money you save. Remember that saving electricity is not simply about lowering power consumption but also about lowering time used. Even Energy-Star appliances, if you leave them on all day, can waste money. So turn off devices when you’re not using them, paying special attention computers, monitors, televisions, lights, fans, air conditioners, and heaters.

  3. Not too hot, not too cold. The higher the setting on a device, the more power it uses. Turn the power on your device to the lowest setting to save plenty of cash. You can lower the power settings on most devices, such as hair driers, fans, desk lamps, and even kitchen ovens. This will make a huge difference in your heating and cooling bill. In the summer, keep your AC’s thermostat set above 80F, and in the winter, set your heater’s thermostat to lower than 60F. You could easily save hundreds each year (see above calculation).

  4. High-tech is nice. Check out compact fluorescent lightbulbs, energy-star appliances, better home insulation, front-loading washers, geothermal heating/cooling pumps, tankless water heaters, and top-opening refrigerators. Although these inventions all require an upfront cost, they will more than pay for themselves after a few years, if not a few months.

  5. But low-tech is even better. You’ll save the most money when you ditch electrical devices altogether. For example, I don’t use an air conditioner, fan, TV, smartphone, drying machine, or treadmill. Low-tech does more than save money on electricity; it saves on the upfront costs of buying equipment in the first place. If you’re serious about going green, low-tech is usually lightest on the environment.

Just like with gasoline, electricity prices will surely increase in the future. But if you lower electricity consumption today, you might be able to power your home using only renewable energy. This can help you lock in the cost of electricity, saving you plenty of money and lowering your carbon impact. Conservation, as always, is the key to financial and environmental sustainability.

  1. Usually you will be billed for energy alone, but a few utility companies have a demand charge based on your peak power usage. To illustrate, suppose you had three appliances: a washing machine, a microwave, and a vacuum cleaner. If you ran all three appliances at once, you would have a much higher peak use of power compared to if you ran one appliance after the other. The demand charge is based on the maximum power used at any instant for a given day (or month).
  2. Some batteries and the amount of energy they store.
  3. See Southern California Edison’s website.
  4. Two different estimates on Macbook power usage. I just approximated.
  5. Estimate provided by Mr. Electricity.
  6. Power data for different fans from SaveGreenly.com.
  7. According to the EIA, space heating accounts for 41% of energy consumption while water heating and air conditioning account for another 20% and 8%, respectively.
  8. Photo credits: Brian Talbot, CC BY-NC. alessandraelle, CC BY-SA.

Sustainable Means Cheap

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A solar cooker is sustainable because it requires no electricity to run. You can build one for about a dollar.

Green living can never catch on if people can’t afford it. Sustainable living, then, isn’t just about taking care of the earth; it must also be sustainable financially. It would be great news, then, if living sustainably could save us money. What better incentive could there be to care for the earth?

Logically, it makes sense why green living ought to be cheap. Money is a store of value, and part of that value includes natural resources like water, wood, metal, and oil. The more money we spend on shopping, the more resources are used to produce our products. All other things being equal, conserving money should result in conserving our limited natural resources, which in turn lowers our environmental impact.

But by now, we’re all too familiar with sustainable products that cost double or triple of what their conventional counterparts cost. Our logical analysis doesn’t seem to match at all with reality. If money is truly linked to resource use, why is sustainable living so expensive?

The truth is that sustainable solutions truly are cheap — so cheap, in fact, that they’re often not worth selling. Real green solutions are often completely free of cost, requiring only a little cleverness and some elbow grease. But because a lifestyle can’t be sold as a physical, tangible product, businesses can’t make profits selling it. As a result, we don’t see green solutions sold on warehouse shelves like conventional products would be. So lifestyle solutions are rarely advertised, which mean that, tragically, they go totally unnoticed.

What gets advertised instead are the imitations. These greenwashed products are similar enough to their conventional counterparts, but tweaked slightly so that advertisers can call them sustainable. A greenwashed product will use a little recycled paper here, avoid a few chemicals there, but otherwise remains essentially the same. It still wastes energy, produces garbage, and destroys natural resources. Yet because these imitators don’t require any real lifestyle change, they are profitable enough to sell.

The prices in this table are ballpark estimates. Notice how the sustainable alternative is often practically free.
Conventional Greenwashed Sustainable
Conventional electricity ($0.15/kWh) Solar electricity ($0.35/kWh) No electricity (free)
Tissue paper ($1/box) Recycled tissue paper ($2/box) Reusable hand towels (free)
Toilet paper ($0.50/roll) Recycled toilet paper ($1/roll) Bidet water (free)
Bottled water (soda) ($1/bottle) Recycled plastic (aluminum) bottled water (soda) ($1/bottle) Water fountain (free)
Disposable diapers Biodegradable diapers Reusable, cloth diapers
Cotton t-shirt ($10) Organic cotton t-shirt ($20) Second-hand t-shirt ($5)
Stove Energy-efficient stove Solar cooker ($1.50 to build, free to operate)
New hardcover/paperback book ($20) Paperless e-reader ($200) / e-book download ($20) Library book (free)
New car ($15,000) New electric car ($40,000) Used bicycle ($150) / Bus passes ($600)

A serious flaw with greenwashed products is that they are expensive, often double or triple the price of their conventional counterparts. Consumers then find themselves facing a false dilemma: pay extra, or walk out the store feeling guilty.

Why do we keep falling for the same old deceptive marketing?

From a young age, we’ve been trained to think of ourselves as consumers. Out of instinct, we view everything in life as a commercial transaction. Eventually, we become dependent on shopping to solve all of life’s problems. If it’s not shrink-wrapped in plastic and sold in a big box chain store, we don’t even consider it.

  • If I want to work-out, I’ll buy a new treadmill instead of jogging in the park.
  • If I want to read, I’ll buy a book instead of borrowing one from the library.
  • If I want some entertainment, I’ll buy a new game console and some DVDs instead of playing sports.
  • If I’m thirsty, I’ll buy soda from a vending machine instead of using a water fountain.
  • If I need to sneeze, I’ll buy tissue paper instead of reusing a cloth handkerchief.

Our gut reaction is to throw money at every problem in life. So it’s no surprise that we approach the issue of green living with the exact same consumer mentality: buy a solution from the store. We want to be able to walk into the mall, waste our money, and walk out with a shiny new trinket in a bubble-wrapped, styrofoam-packed, cardboard box. It’s reaffirming to our Western way-of-life.

The consumer lifestyle will never be cheap, nor can it ever be truly sustainable. To be truly green, we have to step outside of consumer culture. Instead of purchasing new, we should be reusing and improvising. When we shop less, we spend less money and waste fewer resources. Not only will this lifestyle be gentler on the planet, it will be gentler on the wallet. It’s sustainable in every sense of the word.

  1. Photo by EBKauai, CC BY.

Why Don’t I Feel Rich?

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Two years ago, if you had told me that I was fabulously wealthy, I would have laughed. Hsinya and I were mired in student loan debt. As newlyweds, we struggled each month just to pay the rent. At times, we were forced to pay for our tuition and groceries using credit cards. We studied hard, avoided parties, and did our best to live frugally. Still, each year, we kept slinking further into debt. Secretly, I thought of myself as being poor—pity me.

Relatively speaking, I truly was poor when compared to my richer neighbors. My friends were really living it up during college. Their parents paid for their tuition, room, and board. My friends had money to buy expensive clothing, laptops, and cars. They dined out, went on cruises, and studied abroad in luxury. Naturally, I felt justified to consider myself poor.

But that’s the funny thing about living in America. By surrounding myself with other rich people, I got a distorted view of reality.

As I began to learn more about the world, I started to realize how fabulously wealthy I already was. I was not merely comfortable, nor well-to-do, nor even affluent–I was filthy rich. I had been envying others, when all along I had little appreciation for how wealthy I already was.

I never understood what true poverty was. In America, even our poorest citizens are extremely well-off. Someone working for minimum wage can earn around $15,000 per year. According to the Global Rich List, that places him in the top 15th percentile in terms of global wealth. Minimum wage might not sound like a lot, but it’s enough to rent an apartment, to buy food, to get basic healthcare, and to build savings.

But you and I, as tech-savvy minimalists, probably earn far more than minimum wage. Most of us have college degrees, which places us well above the top tenth percentile in terms of wealth. In fact, most middle-class Americans probably fall in the top 1st percentile of wealth. We are incredibly rich people.

If $8/hr is financially equivalent to fabulous riches, how then does the other 90% of the world survive?

As it turns out, two thirds of the world survives on less than $10/day (1). That paltry amount is supposed to pay for all their food, shelter, and clothing needs. I can’t imagine how anyone survives on such a meager income. I’ve had meals where the appetizer alone cost more than $10. Yet the rest of the world somehow manages to get by.

Consider this:

  • As we gripe about minimum wage in America, sweatshop workers in Costa Rica are gladly working for $1/hr. For such great pay, they’re willing to endure grueling conditions to manufacture the clothes that we wear.
  • As we enjoy our latest and greatest electronics, scavengers in India are collecting the obsolete computer parts we throw away. Our e-waste contains valuable metals that they salvage for scrap production. But first, they must burn off the impurities, which exposes them to hazardous mercury fumes on a daily basis.
  • Though we often complain about our food, refugees in Sudan don’t have any choice. Each day, they receive a daily ration of rice and beans, mostly donated through charities. Each entire meal costs only a few cents per person.
  • While America was complaining about rising gasoline prices in the Middle East, the poor in Tunisia were literally setting themselves on fire. In an effort to protest their poverty, they doused themselves with oil and burned themselves to death.

Poverty is very real. We’re only a plane-ticket away from seeing it firsthand.

My life has been amazing. I’ve never once worried about contracting malaria. I’ve never been homeless, nor have I ever feared starvation. For most of my life, I’ve struggled with the reverse problem: excess. As a child, I was morbidly obese. By the time I was 12 years old, I weighed over 215 pounds. I had too much to eat, not too little. I didn’t exercise because I could afford to drive everywhere. Instead of playing sports, I watched TV and played video games inside my enormous house.

I thought I was poor, but I had never seen real poverty. By most global standards, I was actually insanely rich; I just didn’t realize it.

Suddenly, I remembered what Jesus taught.

Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also. (Matthew 6:19-21)

This passage does not apply only to those whom we perceive to be rich. It speaks to every Christian in the Western World; we are incredibly rich people. Being rich isn’t a sin, but being ungrateful is. We ought to put our excess money for God’s purposes—for charity, for preaching the Bible, for reaching lost souls, for encouraging the persecuted church. But all too often, we are secretly dissatisfied with the material riches that we have received. Judging by the way we whine about our money, it’s clear our hearts aren’t set on heaven—we’re still stuck on acquiring more earthly treasures.

Each day, I’m presented with two choices.

On one hand, I can ignore what I’ve learned and return to a normal life filled with ungratefulness and envy. After all, thinking about real poverty and true heavenly riches is a tremendous emotional burden. I’d rather just whine about my low salary and the high cost of taxes.

On the other hand, I can be honest with myself. I have been blessed with so many material riches from my heavenly Father. Am I using them for the sake of the Kingdom of God?

  1. According to Global Issues, 80% of humanity lives on less than $10 a day, and almost half the world—over three billion people—live on less than $2.50 a day.
  2. Photo by GlacierTim, CC BY-NC.