ROI spreadsheet to guide your alternative investments

ROI, or return on investment, is obviously a number that we want to keep high.  If you loan somebody $100 for 10% interest, you expect $110 back…for a 10% ROI.  You put money out there to go to work and it magically comes back with a few more friends.  It’s the entire idea behind investing, but I’m going to wager that it also has applications for many, many other things in your life.  For instance, I bought kitchen towels for $15 so that I didn’t have to pay $7.50 every month for disposable paper towels and the ROI has been insane.

In true engineer fashion, I like calculating ROI because while I know that kitchen towels are probably going to pay for themselves, I wanted to quantify it so that I can compare it to other investments.  I wanted to be able to answer questions such as “If I can only invest in kitchen towels or a toaster oven, which one is financially better?”  I wanted to be able to prioritize my investments.

So, let’s start small and figure out how much these kitchen towels are going to save me.

First month savings

$7.50 (cost of paper towels for a month) – $15 (cost of cloth towels) = -$7.50

Well, that’s not great.  But, I ordered these in October of 2014.  So, let’s account for that.

First year savings

($7.50 * 12) – $15 = $75

That’s a lot better!  But, before you scoff that $75/year is just chump change, let’s take a look at the ROI.  Remember, the stock market typically gives 10% ROI over a ten year period (though we typically say 7% to account for 3% inflation).

First year ROI = ((Savings – Cost) / Cost) * 100

First year ROI = (($75 – $15) / $15) * 100

First year ROI = 400%

Well shit!  That’s amazing!  Who wouldn’t love to send money out and then get 400% interest back?  Let’s span this over a ten year period so that we can compare it to the stock market.  To be fair, I would say that these towels appear to be halfway through their lifespan, making their lifespan about 2 years (even though I’ll likely still use them for house rags…just not kitchen napkins or drying clothes).

Over ten years, I would buy 5 * $15 sets of these kitchen towels for $75

I would save $7.50 * 12 months * 10 years = $900

Ten year ROI = ((Savings – Cost) / Cost) * 100

Ten year ROI = (($900 – $75) / $75) * 100

Ten year ROI = 1,100%

When you start to have commas in your ROIs, you’re doing something right.  I clearly outperformed the stock market, not by buying the right stocks…but by buying kitchen towels.  If we wanted to get real nuts, we could assume that we’d take those savings and invest them in the stock market.  And hell, let’s get nuts!

Over ten years, I would buy 5 * $15 sets of these kitchen towels for $75

I would save and invest $7.50 * 12 months * 10 years @ 7% interest, using the rule of 173 would be $1,297.50

Ten year ROI = ((Savings – Cost) / Cost) * 100

Ten year ROI = (($1297.50 – $75) / $75) * 100

Ten year ROI (by also investing the savings) = 1,630%

Great googly-moogly.  That’s impressive.  What does this mean?  That $75 was better spent on kitchen towels than it was buying index funds.

What an interesting concept!  So, what else can we invest in?

  • Remember those hair clippers?  If you keep them lubed up and in good shape, they’ll probably last 5 or more years.  3419.55%
  • dryer stand has an ROI of about 674.44% based on the electrical cost saved by not running the dryer
  • A crappy $200 Craigslist bike, used for five years to commute 9 months out of the year and only 15 days out of those months (non-snow/rain days) would be 95.75%

In fact, I started a spreadsheet that I can refer to if I ever think something might be good to invest in.  This makes it easy to quickly input an idea and play around with the numbers.  For instance, I can answer you such questions as “What’s the maximum amount I should spend on a toaster oven so that I can still beat the stock market?” or “How long will this electric bike have to last so that it turns a profit?”

In regards entries for “Perk phones” and “SB Phones”, yes, those ROIs are right.  I haven’t made a post about Perk phones yet, but it’s definitely on my to-do list!

Is it possible that maybe instead of blindly socking away money into index funds, we should be socking it away in these other items?  The math says yes, but you can only buy so many kitchen towels before you have too many kitchen towels (hint: it’s less than 10).  You also only really need one dryer stand…while you can buy index funds to your heart’s content.

Let me know if you guys have any other ideas of items to “invest” in!  What areas am I missing?

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