Part 2 of 2: Dawning New Light – LED Light Bulbs Brighten Your Finances

world-lamp-1236637(2)I have to confess: when I initially created the LED Bulb Calculator and spreadsheet, I was blown away by how quickly LED bulbs pay for themselves.

Do the calculations for yourself. The savings from LED bulbs could be substantial enough that you’ll want to swap out your existing light bulbs sooner than later, like maybe starting this week. The savings could even justify replacement of working incandescent bulbs rather than waiting for them to burn out.     From the previous LED posting*, let’s review the variables required to calculate savings from LED bulbs:

  • Wattage of incandescent bulb being replaced
  • Cost of electricity in kilowatt hours (KWH)
  • Price of LED Bulb
  • Watts consumed by equivalent LED/CFL bulb
  • Average usage per day

*Note: If you missed the Part 1 installment on LED bulbs, click here to read.

To replacing an existing, functioning incandescent bulb with an LED bulb:

Payback period (in months) = Price of LED bulb ÷ (((Incandescent Wattage – LED Wattage) ÷ 1000) x Daily Usage x Cost per KWH) x (12 ÷ 365)

Example:

  • Price of 60 watt equivalent LED bulb is $5.00
  • Incandescent Wattage is 60 watts
  • LED Wattage is 10 watts
  • Cost per KWH is 15 cents or $0.15
  • Average daily usage is 2 hours

Payback Period = 5.00 ÷ (((60 – 10) ÷ 1000) x 2 x 0.15) x (365 ÷ 12) or $5.00 ÷ 0.015 x 30.42 =

Approximately 11 months (333 days), less than a year

Folks, anytime you the opportunity to make a surefire investment that pays for itself in less the year, you probably want to take it.

For this example, the calculated Return on Investment (ROI) over 5 years is 107% per year! Try getting that kind of interest rate from a CD these days…

Annual savings from replacing just one bulb: $5.48

Note these calculations do not even take into account the savings due to the longer life of an LED bulb.

If the cost of replacing the incandescent bulb is factored in at the price of $1.00, then:

  • Payback Period is reduced to 285 days, approximately 10 months
  • ROI over a 5 year period increases to 123% per year
  • Annual savings increases to $6.29

Obviously the outcome will vary somewhat, depending upon the cost of electricity (KWH) where you live (US average is 12.5 cents per KWH) and the local prices for LED bulbs.

I am providing you, dear readers, with 2 ways to calculate your savings: (1) go to my on-line calculator to get the payback period and annual savings (2) download a more sophisticated spreadsheet which also calculates Rate of Return and factors in additional savings from the longer life of LED bulbs. The spreadsheet is compatible with most Excel versions as well Open Office.

To download the spreadsheet, I ask that you sign up for emails from Frugal, Wealthy and Wise. Once you sign up, you can click a link on the Thank You page to download the spreadsheet — you can opt out of the email list anytime in the future.

Here’s screen shot of the spreadsheet.

LED Spreadsheet

A bit of advice about deploying LED bulbs in your home: buy just a few to begin with, perhaps different brands to determine which you prefer. Shop around as prices can vary widely. In my experience, Home Depot has the best selection and value. You will likely want the ‘soft white’ variety for home use. Use either the calculator or spreadsheet to determine how much a given bulb must be used each day before it’s worthwhile to swap it for an LED bulb.

As always, I appreciate your comments, feedback. Please share your experiences with LED Bulbs.

Regards, Paul

PS You may also want to consider installing LED bulbs at your business or place of worship.

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