Winter Time is Saving Energy Time

A nice fire in the oven. A good add on to your home heating system.

A nice fire in the oven. A good add on to your home heating system.

After housing, car and food, utilities are quite likely to be one of the biggest budget positions in an average household.

Actually, it is amazing how much some people spend on heating, electricity and water, and how they even think this is normal and inevitable. From my surrounding I know people who spend as much as 130 EUR on electricity and 105 EUR for gas per month for ONE person. And in Money Mustaches Blog, there was once a guy that spent more than 300 USD (=200 EUR) per month on electricity for a family of three, which corresponds to even higher figures in Germany, where the price of electricity is at least twice as high as in the US.

So what do these people to with all that electrical and heating power? Are they trying to add to global warming by heating with the windows open, because they perceive their area of living as too cold? Are they running 3 mega-huge flat-screen TVs 24/7? Is there an extended demand of ice cubes to produce christmas ice sculptures? Are they running a secret laundry service in their basements?

Or, god forbid, are they just wasting energy, because they never put a single thought into efficient energy usage?

Let’s start with understand efficient heating first.

(Electricity use will follow in a separate post.)

To do this it is helpful to learn a bit about the physics of heating to understand saving potentials:

Warmth actually can transmit in three ways:

  • Conduction
    Warmth is transferred by direct contact of two objects. E.g. if you touch a hot plate or if air in your room is cooled by touching the cold glass of the window
  • Convection
    Warmth is carried away by a fluid element. E.g. wind is carrying away the protecting warm air around your body. Or the cool air next to the window sinks to the floor as it is heavier than the warm air inside the room.
  • Radiation
    Warmth is transmitted from a hot object via radiation. E.g. the sun feels warm in the face even in winter, or the fire in a hot stove warms you if you stand in front of it.

Another important thing to know is the energy storage capacity of different materials:

  • Air has a low storage capacity (it is not dense nor heavy). This is why you can easily stand 90 degree Celsius hot air, e.g. in a Sauna.
  • Water has a much higher storage capacity (ca. 800 times air, given same volume). This is why you cannot stand 90 degree hot water.
  • Brick, Metal etc. has an even higher storage capacity.

Knowing this, it’s easy to understand how heat is carried away from where it should be, e.g. in your house.
Now you can think about reducing the loss of energy by curbing or improving each of the energy transmission effect as necessary.

Some ideas are:

  • Conduction has to be minimized.
  • This can be done by insulating your house (very important!), by closing the blinds in the night, by wearing an extra pullover, by having a carpet under your feet, using a blanket.
  • Convection has to be minimized if it concerns cold air.
  • If there is a lot of convection in the room, cold air will spread and there will be an uncomfortable draft.
  • A draft will require 3-4 degrees C higher temperature to still feel comfortable! And if some air stays where it is, it is acting as insulation (this is why styofoam works).
  • Stopping convection is thus important and can be done by putting a barrier between cold and warm parts of a fluid (mostly the air), e.g. by having a curtain in front of the window.
  • Closing doors in the house is important!. And of course insulating any gaps in windows, under doors etc.
  • Even growing plants like ivy on your outer walls will help stopping convection of cold air towards your outer wall. This can save up to 10% of energy. Or you use a rough outer surface of the house as it is done in modern homes. The little creeks there will keep air from convection on a microscopic level.
  • Convection of warm air is desired.
  • Thus your radiators should be free, no furniture in front of the etc. The warmth shall circulate into the room, otherwise it will just vanish into the wall behind the radiator and to the outside. Same holds for an oven.
  • An open fireplace is very inefficient. Convection will blow hot air right through the chimney. A metal wood burner (“Schwedenofen”) or a “Kachelofen” is much better, the hot air is slowed down there and will pass its energy to the metal and thus to your room, before leaving to the chimney.
  • Radiation is often underestimated or not understood. Radiation in a room means that apart from warm air around you, you will pick up energy coming directly from radiating warm objects (like an oven, the sun, or even from a wall). If an object is cold it will radiate less and people perceive this as cold radiation (whereas it actually is only a lack in radiation, as there is no such thing as cold radiation). An extreme case is e.g. after sun settles on a crisp winter evening in the mountains – drop in radiation from the surrounding can give you an extreme feeling of coldness there. However, for heating purpose, radiation is very important:
  • If radiation is high, you will feel quite warm even at lower air temperatures. High radiation can be reached by:
    • Sun falling in through a window. The radiation from the sun (not only the light but all of its spectrum) will be reflected around the room and will make you feel comfortable. Thus choosing a house with big (and well insulated) windows towards south-west is VERY helpful to curb heating costs. The sun will heat your home PLUS make you feel more comfortable by the radiation it provides.
    • A metal wood burner or a “Kachelofen”. The very high temperature of this type of oven provides radiation (infra-red radiation in that case) that is reflected throughout the room. Apart from the direct heating effect, this radiation will increase you level of comfort even at low air temperatures. Thus an oven is a good investment. Another plus is that you can make it comfortable in short time, thus you don’t have to heat this room when you are not there.
    • Floor heating. Floor heating provides a lot of positive radiation , but I am no expert here.
  • Low radiation (“cold” radiation) is not desired. Unfortunately it will come from any badly insulated and thus cold object, like a single-glas window (replace this immediately!) or from a badly insulated outer wall. The effect there is opposite to sun or oven: The bad insulation not only wastes energy to the outside, but it also makes you feel more uncomfortable, even at high air temperatures.
  • High energy storage capacity of walls means: If you are ventilating fresh air into your home, do it by opening all windows and doors of your home at once for 5-10 minutes once a day or so (turn heater off). This way, all the air inside will be replaced. But as 95% of the energy in your house is stored in the wall, not much energy will be lost. It will feel quite cold for another 10 minutes inside the room, but then the air gets warmed up by the walls. This way you get a lot of fresh air in by loosing little energy.
  • Venting by tilting the windows is much worse, as it constantly drains energy from the room without a full exchange of used air. And you virtually heat energy out of the window.
  • In the night lower heating by using a heating computer.
  • Use modern burners in your house. As insulation of walls, roof and new windows, this is in most cases an excellent investment that will give you easily 5-10% return p.a. Consequently don’t look on this as one off costs, but as an investment.
  • If you rent, you should negotiate with your landlord and offer him to pay a slightly higher rent if he does the investment. This is a clear win-win situation, especially if energy-saving investments are tax-deductible as in Germany.
  • Definitly change to a cheap supplier of gas. This can easily safe 200-400 EUR p.a. in Germany. But be care-full not to pre-pay nor bind into too long contracts.
  • Ask around at your neighbors to get some wood from their garden works for your burner if you have one.
  • Arrange with local forest owners for pick up of dead wood allowance.

Following this basic steps, most households will have significant saving potential to their heating costs.
You can easily save a couple of hundred bucks each year here and save the environment as a plus!

At Woodpeckers, our current heating energy consumption is as follows:

  • 10.500 kWh of gas per year (last five years avarage) plus around two cubic meter of wood for the metal wood burner. This is for a 150 sqm home, built early 90s, 4 persons, heating done with gas, two days homeoffice of Mr. Woodpecker as well as Mrs. Woodpecker.
  • Gas provided by Maingau Energy. Switch to them saved around 200 EUR p.a. in Woodpeckers case.





Housing – Buy or Rent?

3.000 EUR rent equivalent per month might be ok for this house. But for an ordinary row house in a suburb of Munich?! (Photo: Provence, France)

3.000 EUR rent equivalent per month might be ok for this house. But for an ordinary row house in a suburb of Munich?! (Photo: Provence, France)

One of the biggest financial decisions in your life will be the potential buying of a house.

Actually, this is a really  severe decision, especially in big cities or other expensive places; a decision than will determine your cash flows, your freedom and even your way of life for decades to come.

Thus it is amazing how blue-eyed most people approach this decisions. At least in Munich, Germany, where Woodpecker’s live, and where real estate prices are sky rocketing currently, the only thought people seem to have is:

How can I quickly get in the market before prices rise even higher?!

Woodpecker kept on observing this for a while now and I speak to as many people as possible who are currently buying houses or are looking for some, and virtually nobody ever put forward real economic arguments, like return on investment, opportunity costs etc.

Instead it is always:
Prices will continue to rise, so we have to join now.
Plus the inevitable:
Real estate is the only asset that will protect me from the coming hyper-inflation.

Real estate markets in Germany have not been booming for a long time, thus Woodpecker has limited experience, but I strongly belief these are signs of a bubble formation.

However, let’s get away from speculating and let’s look at the economics:

Does it pay to buy a house?!

I will not go into deep details of the economics (there an endless tools in the internet for those interested), but start with a more general quick-scan approach – some questions, that, although basic, most potential buyers seem not to consider (at least in Germany today).

First question is your motivation to buy a house.
This question will determine the value the good “living in an own house” has to you.

  1. Is your motivation purely economical on the optimal provision of the good “living in a house”? I.e. your decision is only driven by efficiency: Will you pay more by renting over decades or by buying?
  2. Does your motivation include a speculative element? I.e. apart from receiving the good “living in a house”, you want to speculate on the price changes of your asset “house” (You do that automatically, when you assume “prices will continue to rise”, “my city will continue to boom” etc.!).
  3. Do emotional values play a role for buying a house? Like feeling better or more secure when owning. Do you value very much the freedom to change things at your house, that would be difficult in rental homes? How much is this emotional part worth to you?

Next question is your investment alteratives. This will define your opportunity costs, i.e. the the chances you are forgoing as your money will be tied up in the house.

  1. Do you have an idea where to invest your principal in, if not in a house?
  2. What is the return you’d expect from such an investment?
  3. Does investing and caring for your money (e.g. buying stocks) is fun for you? Or is it a bore and secretly you’d be happy to put all your money in your house, so you don’t have to care about it anymore?

The third question is your expectations of the future. This tells you how the price of your house will develop. (I’d not overrate this bullet though – as the future tends to be a difficult beast to predict ­čśë ).

  1. Do you really think the price of your house will always go up? Why should it? And why hasn’t prices always gone up in the past? Why do markets crash here or elsewhere? Are you sure you can judge the market and all factors better than those poor guys that messed up in the past or elsewhere?
  2. Do you really know how inflation works and that it will sky-rocket in the future? Do you have arguments for that or are you simply repeating statements that are circulated by others? Could it be the majority is wrong here?

The last question is very important for a downshifter, as it targets at your freedom.

  1. How long will you have to pay down mortgage on your house? How heavy will this burden be? Will it significantly reduce your dimensions of freedom (e.g. rates are so high, you will not be able to reduce working hours or take sabbaticals for the next 20 years or so).
  2. Are you prepared for a shock-event? Are you flexible to handle such an event even with a lot of debt on your shoulders? Shock events could be: You lose your job, you get somehow disabled, you get divorced. Etc. All that things tha can severely distort your mortgage plans and force you to very costly decisions.
  3. Are you ready to settle down here? Or do you want to keep flexibility to move around or experience new areas in your city later?
  4. Do you belief you will be able to sell the house later to consume the proceeds of the sale? If not, you will simply save for your kids – this is noble, but would certainly cut you off from much of the potential returns the house would generate.
    Typical example here: Woodpeckers elderly neighbours.
    They have no kids, but live on a huge ground, that I’d estimate 1.000.000 EUR worth, in a ridiculously huge (but run-down) house of 200+ sqm.At the same time they have to live like poor people because their retirement rents seem low and they are not willing to let go of the house. They could have it all: Travelling, great vacations, services, fantastic food, entertainment or charity for the rest of their lifes, instead they cling to this very run down house and the huge garden, while complaining about all the work it implies. A very irrational decision, but very common too. The price they pay for this “emotional aspect” of their house is virtually 1.000.000 EUR! Are you sure you will not end up like this?


In Woodpeckers case, the decision (at current market prices) goes as follows:

  • The decision on buying a house is to a great extend driven by economics.
  • We do not want to speculate on house prices. Real estate is not an asset class that we know well and I think most of my ideas on its development will be pure speculation or linear extrapolation of the status quo. Thus I’ll assume prices to rise along with general┬á inflation (2,5% p.a.) only, but not outperforming it. Same assumption on development of house rental prices.
  • My asset class is stock trading. I am confident to generate a minimum return of 5% p.a. after taxes. This is confirmed by past trading success and by market statistics, showing that stock markets over the long run yield even around 7% p.a.
  • Thus, I’ll expect a return of 5% p.a. for a house as well. Consequently I’ll take 20 times annual renting costs as a proxy for a “fair” house price. This is a good rule of thumb, there are some deviations to both sides as inflation, interests and change in rental fee, or renovations in the case of owning, but in general this factor has proven to work fine.
    The renting cost to be applied is the “cold rent”, as it is called in Germany, thus the rent before additional costs (insurance, utilities, taxes, heating), as the latter will have to be paid even if you own the house.
  • Woodpecker family’s current “cold rent” is 1.650 EUR p.month or 19.800 EUR per year for a 150 sqm house + garage + small garden.
  • If buying we want something similar or larger, thus a fair price for a similar house would be 19.800*20 = 396.000 EUR. Subtract around 10% of broker, tax, moving costs, this yields a house price before costs of 356.400 EUR.
  • Emotional value is existent, I’d value it at 2.000 EUR a year (…or even less, if you think about it in this way…), so let’s add 2.000*20 to the fair house price: 396.400 EUR.
  • For shock events, I’d like to subtract 10%, as cash or a liquid stock portfolio will be more flexible in those cases. And I’ll subtract another 10% as freedom and flexibility (e.g. to reduce working hours, or to take sabbaticals, or to move somewhere else) are very important to us, and much easier achieved if you have a fair amount of liquidity.
  • On the other side, I’ll add +20% to the fair price for potential security in an inflation scenario (although stocks should do ok in this case as well) and for securing against rental fee increases and potential hassles from having to leave the rental house.
  • Over all, fair price comes in at roughly 400.000 EUR (before tax and broker).

4-5 years ago, this would indeed have been an somehow achievable price in Munich for Woodpeckers type of used house.

Today, prices unfortunately are way off, probably around 500.000 EUR for our size and location of a 20-year-old house and around 650.000 EUR for a similar new built house in the neighbourhood sold to a colleague 3 months ago (and his was a row house only).

Translating this example of a new built house back to monthly cold rent, we would end at (650.000+10% broker+tax)/20/12= 2.980 EUR per month!!!

And would you pay an equivalent of nearly 3.000 EUR per month for a 150 sqm row house in a Munich suburb?

Well thanks, we would rather not, so we will continue to rent our house and maybe recalculate in case prices come down…



Refurbishments for Free?! Team up with neighbors and Landy…

Flowers at Woodpeckers. Ha! Last year ;) This year is far behind.

Flowers at Woodpeckers.
Ha! Last year ;). This year nature is far behind.

Finally, even at winter struck middle Europe, spring arrived last week. With summerly temperatures and people flocking outside to have fun under the blue skies or do some work in the garden / at the house.

Spring is there, time to share!
And to team up with your neighbors…

Bustling with energy, Woodpecker and family started / accomplished a few projects – as always not without trying to find frugal and efficient solutions, and to improve social interaction ;).

1. Expand the terrace – for free!

The terrace in Woodpecker clan’s house is way to small to cater for our increased family size and increasingly frequent grill events with friends and family.
However, Woodpecker rents out the house and cannot force the landlord to do anything, so this is the deal we struck with the landlord (call him Landy):

He is paying and providing all the necessary material. We do the choice together, but the bill is his. In return, Woodpecker, Family&Friends will do the construction work.
Actually, this is a perfect win-win situation: Landy will get a new terrace relatively cheap while pleasing his renters. Woodpeckers will get a new terrace without any increase in rent, while pleasing Landy.

Did that kind of deal a few times by now, for a new parquet floor, new carpets, and minor improvements. By now Landy outright loves us as “the best renters he ever had” and we are enjoying a quite favourable rental in return. I mean, the guy is as much an economist than me, but then – as most people – he is not without reciprocity.

Woodpecker on top gets some very welcome and nice diversion from his often-good-fun but low-physical-activity office job. Plus improved relationship with a very practical hands-on neighbor who volunteered helping in construction.
This guy in return gets some nice steaks and frequently lends out one of the few electric tools of Woodpecker’s.

2. Refurbish the balcony balustrade – for free!

This was more than necessary, as the balcony really started to look ugly with all the wood starting to rot after years of neglecting. However, no way to force Landy to do anything on his own, as all is still functional.
So we struck the same deal as above.

Tried to do the Tom Sawyer trick with some passing passers-by. Had good laughs with most of them, but unfortunately none volunteered.
However, the kids and me still had fun painting on a bright sunny Saturday. The little boy now can climb the ladder at age 1 ;).

3. Clean the lawn of moss and plant some stuff

Of course we don’t have a scarifier. Didn’t know what the hell this is only 5 years ago! (…a bloody noisy machine ripping out tons of moss from filthy un-british lawns in a huge cloud of dust and pollen)
But guess what? Another neighbor has, along with all kind of spades, picks etc.
Lended all out in return for some eggs they happened to need for pancakes.

4. Received some fire wood for free

While working all day outdoors, our other (elderly) neighbor came around to greet and to get rid of some fire wood he had produced from cutting his fruit trees.
Very welcome, bring it in!
As the guy had nothing else to do, he even sawed all the stuff in handy pieces for us.

Well, actually he owed Woodpecker, as I repaired his WWI style fuse system some months ago – actually after two hours searching for the f**** fuse box. This guy had simply had glued a wallpaper over it twenty years ago!!! Good old fuses seem to last longer than today…;) ­čśë

5. Got invited to a cycling tour by the guy who gave me the scarifier

Fun thing is, people quite enjoy helping others! In today’s world too few people seem to ask, so go ahead and give them the pleasure.

6. Had a grill party to celebrate at Woodpeckers

Live long and prosper!

Again with a family that just moved in the neighbourhood – with kids matching the age of the Woodpecker boys. Walked up the other day, said Hello and invited them. Sure they were happy to come around. Zero petrol wasted, only quite some beers and steaks.

All in all a funny weekend.

Practically zero costs, but a lot of things achieved and a lot of sun soaked up!

And this is how the world goes around:
Talk to people, team up, do things without calculating your gains and costs too strictly, and all will benefit and prosper!

Cheers and enjoy your day,


Peergroups and Happiness

Decide well where to live – and how to choose the rest of your peergroup. (Seen in Munich: An old farmers house, now located almost in the middle of town).

A very important factor for your personal happiness is frequently stressed by happiness economics research, while very often underestimated or outright ignored by many people in practice, is the influence of your peer group.

Or more precisely:

The influence of your peer group’s material and financial level relative to yours.

Let’s look at an example:

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