### Cost of Living

February 03, 2012
– Comments (37)

Lets just say I drive 12,000 miles/year, get 35 mpg and gasoline averages $3.75/ gallon. I spend $1285/year on gasoline.

XOM's current dividend is $1.88/ year. At that dividend I would need to invest in 685 shares of XOM to cover my gasoline costs.

At todays price, $84.76/share I would need to invest $58,060 to cover my annual fuel cost every year well into the future if neither the gasoline cost or the dividend increases.

$58,060 plus the $17,000 cost of a 35mpg Corolla and for $75,060 I have reduced my annual energy cost for transportation to zero.

or

Before tax credits an 8kw solar system is $30,000, installed. A Nissan leaf is $36,000. So for $66,000 I can reduced my annual transportion energy cost to zero - sort of. To truly get to zero, I would need a zip car or rental budget for longer than 70 mile round trips. The 8kw system should also be enough to charge my car and run most of my house too. 8kw is enough to charge a Leaf battery from empty to full in three hours.

An additional consideration is the 15% tax on that XOM dividend means I have to invest 15% more into the XOM stock to cover that expense which now comes to 788 shares for $66,769 plus the car is $83,769.

Another consideration is the liklihood that the dividend will keep pace with the price of gasoline. Since 1990, when gasoline was $1.15 the dividend has also tripled so pretty much it has negated the need to reinvest additional cash into XOM.

Right now, in the real world, I do get a Federal tax credit of $10k on the panels and $7500 credit on the leaf. (plus state and utilities depending on your state and utility but we'll leave them out to pay for the zip or rental cars)

$83,000 for the corolla and XOM stock, minus $66,000 for the leaf and panels is $17k plus the two credits is $35,000.

The Leaf and panels calculation is pretty much a sure thing, so it is zero risk.

To pay me the additional $35,000 the XOM stock would have to appreciate from $66,769 up to $101,000 or $128./share. Since I am waiting for the $35k which if I bought the panels I could invest in 413 shares of XOM today, it has to pay me inflation too, at the last 20 years average over 20 years of the panels life is another $48,000 according to one calculator I found. Now we are at $149,000/ 788 is $189/ share.

So an investment in XOM has to more than double over 20 years to match an investment in solar panels and a leaf, before compensating me for the risk that it doesn't achieve that goal, and the cost of gasoline does not outpace the dividend.

Of course my 413 XOM shares have also appreciated to $78,000 plus I am saving the dividends, not spending them on gas. and thats worth another $25,000 cash, plus more if I reinvested them. That is another $60,000 that the XOM stock has to make for me, so now it has to get to $266/share in 20 years. Of course if it does then it also means my 413 shares are now worth $110,000 and thats $50,000 more that the 788 share XOM investment has to earn for me to match the leaf/panels 413 share investment of the same amount.

Now the original investment in XOM has to get to $260,000 or $329/share, and now my 413 shares are worth $135,000 and thats another $25,000 and my 788 shares have to get to $361 ea. My 413 shares are $149,000 and thats another 15,000 to get to before the gap is closed but now we are at $380/share, and thats another $8000....

So in twenty years XOM has to get from $85/share to $400/share and I've only broke even.

Does anyone else consider their investments in lowering their cost of living as an investment?

Does anyone else even consider lowering their cost of living an investment?

Did I totally screw this up?

Best wishes,

Steven