A money manager’s guide to earning a guaranteed 1,123% return on investment | Money Saving Tips

[Comments/Suggestions on this or future articles greatly appreciated]

My mama always taught me to be thrifty with my money growing up.

She abhors frivolous purchases.

Thus this recent Mother’s Day I decided to gift her the best gift I could – NOTHING.

Instead I went and bought myself something from the nearest Walmart – the Freestanding Clothes Hanger/Dryer. I actually had one earlier, but it broke, so I went and bought a new one on Mothers Day.

Image Source: atr.com.my

You ask yourself what does this contraption have to do with Mothers Day and boy, is this dude lame or what not buying his mom a gift, even a card or something.

Well, I did mention that I was going to give her the best gift I could. And this it folks!

Let me explain.

I kept tabs of how many times I did laundry (washer/dryer use) over the past two years. It was 67 times to be precise averaged over two years.

In my cost calculation I have excluded detergent and softener and static remover product costs as those vary by personal choice and store promotions any given time.

The cost basis was a single load of running the washer and dryer at my apartment’s laundry facility. All prices stated are in Canadian Dollars as of 2010 and 2011.

Although this is unique to my place and building, I can tell you for certain that the analogy can be applied any place in the world where people use laundromat facilities. No matter what the single load washer run cost is, the cost for running the dryer in all instances will be equal to or greater than the washer load cost. Based on these assumptions lets go ahead further.

Cost of Freestanding Hanger – $30

Single Wash Load Minimum Cost – $2.50 (typical wash load setting)

Single Dryer Load Minimum Cost – $2.75 (a typical load)

Laundry loads in each year – 67 loads

Total washing cost each year – 67 * $2.50 = $168

Total drying cost each year – 67 * $2.75 = $184

Total potential laundry cost each year – $352

Note that total drying cost is scratched off above. That is because I actually never used the dryer machine. Instead I used that contraption you saw above. It works just fine cause it is environmentally friendly to use, does not discolor my clothes from heat, and saved me an extra 10 minutes each load by not having to go down to load the dryer and again return to empty the dryer. That’s a whopping 11 hours for the year that I saved in addition to the cost savings.

So my real total laundry cost was just $168.

That amounts to over 50% in savings in laundry each year.

Look at it another way. If the money saved on dryer costs is income to me, and the cost of the hanger is $30 (one time charge), then I earned a whopping 1,123% return on my investment over two years. A hedge fund guru ain’t got nothin against this hanger.

For the overtly motivated readers, lets look at this using a simple Discounted Cash Flow (DCF) technique. Inflation excluded.

Year 1 Year 2
Cash Flow $154 $184
NPV $331
Discount Rate 1.35%

Year 1 is the cash flow is -$30 (purchase) + $184 (savings) = $154

I used a discount rate based on ING Direct Canada Investment Savings Account interest rate as of May 2012.

Thus the value of the purchase of the hanger and the estimated savings over two years is equal to $331 in cash to me today.

Now I could go buy my mom a nice Mothers Day gift with that, eh. Though she would not have any of that.

Earning $331. Awesome! Saving 22 hours so that I can catch all the X-Files episodes on Netflix. Priceless!!

Epilogue

I have received several inquiries on how one can save energy at home using clothes dryers. Well, all I can say to that is my entire article above, in case you missed the whole point, is that I am advocating not using the dryer. Further with regards to cost savings achieved by not using it at home, it is hard to determine the energy usage attributed exclusively from dryer.

Read what ENERGY STAR has to say about it here.

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