There is a very subtle multiplier effect which is essentially a tax free income booster that can help you pay for a private school tuition. Here is how it works.
In November my wife was looking for a tree to plant on our very (very) small yard as a screen for a nearby street. The tree had to be fairly small given the constraints of said small yard.
She happened upon one that was ascetically pleasing with a maximum height and width of 30 feet by 30 feet. Measured from the location of where we would place it with a yard stick (it’s a small yard) at full size the tree will expand 15 feet each way. Perfect!
Method Tip 1: Avoid having to earn as much income on the purchase by purchasing a lower cost item.
The ten foot tall tree, while ideal in form and habit, was half bereft of leaves with a bit of a Charlie Brown Christmas Tree look going on. The tree was originally $120 but was marked down to $30. A sale!
Enter step one of the multiplier effect. She saved $90 dollars on the original purchase.
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That saved amount removed the need to earn that extra $90. Let’s assume a 40% cumulative, federal, state, sales taxes and mystery fees on the income. That extra $90 would have cost $126 in earned income to cover. Whew!
To restate- that is $126 in earnings we didn’t have to make to actually end up with the $90 extra we would have needed for the full price of the tree.
Method Tip 2: When making a purchase, have it solve multiple problems at once.
My mother told me that her grandmother had a purpose for every plant around the farmhouse, in addition to looking nice.
In our case we were looking for a small tree that provides a summer screen from the nearby street but still looks good and drops leaves in the winter for additional sunlight in the colder months. This works for both screening and sound attenuation in the winter as it is quite dense with branches.
What else could it do for us?
In our case the tree selected is a Granny Smith apple tree! It should produce about $20 bucks of
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organic apples every year (ok, more like $50 but I want to be conservative here to make a point).
And we placed it on the west side of the house to shade (and cool the air) going into the AC and near the house.
What about having to pick the extra apples that we won’t eat, giving bags of them to neighbors, family, coworkers and the local food pantry and then still having to pick busted ones off the ground? What a hassle right? Sure, but we have arranged our lives such that we get regular physical activity with this sort of money saving effort all year long. Annual gym memberships were cancelled long ago but we will only count the month of apple picking and leaf raking mayhem here for another $50 saved.
And for the grand finale, our nearby park has crab apple trees. These can be used to cross pollinate Granny Smith apple trees (they self-pollinate but word in the fields is that a nearby pollinator will help with yields). That is a second $30 tree we didn’t have to buy (nor had space for) because we selected a compatible tree for our neighborhood.
Total economic impact
The first year we saved $90 on the tree and $30 on a second tree we didn’t need to purchase. The tree (fairly big already) should produce apples about three years hence and provide the shade to assist with house cooling.
Lets look at the numbers using the Granny Smith multiplier method.
Year 1: $120 saved
Year 3 on: $50 saved on gym membership, $20 on apple costs and $5 on AC costs for an annual savings of $75.
Ten year economic output: $645
And remember this is all tax free after the initial $30 we spent. That is a money tree that offers $60+ annually in savings, builds community as we gift organic apples, screens the street and provides a beautiful tree to look at. Plus it is pretty cool to have an apple tree.
Let’s assume my conservative numbers are *still* too high and it only saves us half that, or $30 a month.
Fine. An investment with a yield will take a hit of 15% on the income so I would need $34.5 in monthly income ($414 annually) to produce that same value.
A typical safe stocks yield 3%. We would need a stock portfolio with a market value of $13,800 to produce that same income. And to purchase that stock we would have had to earn $20,010 in gross income to purchase that investment.
Oh, and the yield on the Granny Smith Apple Tree is $30 a year or 100% of its original purchase price, annually.
We just trounced the stock market and avoided having to earn an additional $20,000. Thanks Granny Smith!
Don’t overdo it
The multi-purpose mindset does have its limits. Spending an extra $10,000 on a fancy pick-em-up-truck because you might need to haul a jumbo pack of toilet paper someday is just a slow way to lose money. Just think about it first and run the numbers is all I am saying.
Get into the multi-purpose mindset. You can do this.