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Lifting the Simple Payback Burden

May 24, 2014 | Posted by Mitt Jones
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iStock_000039384322Small.jpg“Look at this one.”

“Which?”

“This one. It’s 100% goose down, heavy fill.”

“That sounds good.”

“Yeah. It will be so nice to have a warm comforter!”

“Yeah. But what’s the payback on it?”

“Huh?”

“The payback. How soon will it pay for itself?”

That’s a conversation you’ll probably never hear. Comforters are about warmth and comfort, right? Buying a new blanket could be seen as an investment in comfort, a sense of well-being, and perhaps the ability to get a good night’s sleep. But most of us don’t expect a financial return on investment when we purchase a blanket.

So why do we so often put the simple payback burden on work that increases the comfort and energy efficiency of our homes? Having talked with hundreds of homeowners about home energy upgrades, I’ve reached a few conclusions about why we put the payback burden on energy efficiency improvements.

The Savvy Choice

One reason we are drawn to payback calculations is that most of us want to feel we are making good decisions when we spend money. We want to make the smart choice. Insisting on a given payback period gives us an approach that helps us feel confident and savvy as consumers.

In truth, depending on payback calculations only makes sense if your primary driver for the project is money.

A Clear Path

Insisting on a five- or ten-year payback can also be appealing because it provides a way to cut through complexity. When faced with weighing the pros and cons of various home energy upgrades, it’s tempting to simplify by choosing only the options that will pay for themselves in a given period of time.

Again, the simple payback approach will only yield the right answers for you if your primary goal for the upgrades is making or saving money.

Home Energy Savings

The final reason we think about payback with energy upgrades is because we can. Unlike other home improvements, home energy upgrades often reduce monthly expenses. Because they reduce bills, it becomes natural to treat them as financial investments—to judge them on how soon they will pay for themselves.

We don’t put this burden on any other home energy improvement, and yet arguably no other improvement has the potential for transforming the comfort, health, and safety of our homes.

Different Questions

Our advice is to give yourself permission to stop asking “How soon will it pay for yourself?” and start asking a different set of questions:

“Are we able to live in our house the way we envisioned when we bought it?”

“Do we feel comfortable in our house?”

“If we knew we could transform our drafty house into a comfortable home, would we invest in an energy upgrade?”

“How much is our comfort worth?”

Increasing Value

The good news for the financially savvy is that energy-efficiency upgrades are starting to be recognized in the value of homes: Investing in comfort and energy efficiency may well increase the value of your home.

There are also health and safety benefits of many home energy upgrades, along with that little climate change issue.

By all means don't buy a comforter you can’t afford, but keep your real goals in mind as you compare options. For many home performance customers, reducing energy bills is a welcome benefit, not the primary driver. 

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