 Personal finance, Excel practice problem, recovery period for maintenance to reduce insurance premium. Get ready to get financially fit by practicing personal finance. Here we are in our Excel worksheet. If you don't have access to the Excel worksheet, that's okay because we'll basically build this from a blank sheet. If you do have access, there's three tabs down below. An example tab, a practice tab, and a blank tab. The example tab in essence being an answer key. Let's take a look at it now. We have the information on the left-hand side, building our tables on the right-hand side. Scenario being that if we install a couple safety items, we might be able to get a discount on the homeowner's insurance. And we'll think about the payback period or recovery period for that payment. The second tab will have some pre-formatted cells on the right so you can work through the practice problem with less formatting of the worksheet. The third tab then basically has a blank sheet with the information on the left so we can build it and practice on our Excel formatting. If you don't have any of this stuff, you can open up a new worksheet or whatever Excel sheet or electronic spreadsheet you have. I would format the whole sheet first, select in the whole sheet, right-clicking on it, formatting the sheet. I would go to currency, brackets, and then I'm going to remove the dollar sign, no decimals. That's my starting point typically, closing this back out. Then add the information on the left, which is good practice because we want to be drawing from a source data just in Excel in general. And then format such as the percentages where needed, make a skinny C column, and then we're good to go. So we've got the premium on the homeowner's insurance policy. It's $500, but there's a discount to install deadbolt locks. So if we do that, we get a 4% discount, but it costs us $175 to do it. So I'm not putting any locks on my door unless you pay me a discount for it or something like that. So obviously, there's kind of a safety thing here, so you would think that you might want to install the deadbolts anyways if they're recommending it. It might be in the fact that you're in an area where the deadbolts are kind of necessary, but we'll calculate it from a financial perspective. And then the other one, they're going to say there's a discount if you install these smoke detectors. And again, I'm not putting smoke detectors in my house unless you give me a discount on my home insurance. We probably want to put the smoke detectors in there because they might be good, but we're going to see how much it costs and what the recovery period would be to put the smoke detectors in there. So let's do our calculations up top. We're going to say savings. I'm going to kind of combine them together first and then we'll break them out one by one and then we'll do the recovery period for them. So let's say we had savings. This is going to be the header savings on insurance premium. So is it worth it for me to put this safety stuff in? I better get some cash back on it. So I'm going to make this a little larger. It's going to take a couple of cells. I'm going to put my cursor on D to F. D to F, let's make that our header format. Home tab, font group, and we're going to go to the bucket up top and we're going to say this is going to be black and white for our header. And then I'm going to say the original cost. So the original premium, let's say premium. It might be a better way to say it if I spell premium, right? Which I'm just going to assume it is right. So I'm going to say the original premium was $500. But then we're going to get these two discounts. Let's combine them together at first. Discounts are going to be for the dead vault discount. We call it the dead vault discount. The triple D, or double D, dead vault discount. There's two D's. And then we got the smoke detectors. And we're only going to do it if it becomes financially prudent for us to do so. Because we don't care because. So this is going to be home tab number group. And we're going to say percent. And then we're going to put an underline down here. Home tab, font group, and underline. And so then this is going to be the total discounts. Total discounts. We'll sum that up. Summing up. I'm going to put it into the outer column here. Equals the sum of the two discounts. Summing those up with our trusty sum function. And making that a percent. So I'm going to go to the home tab number group and percentifies that. So it's been percentified. And let's add some decimals. Well, we don't really need any dozen percent. It is what it is. Let's go ahead and indent because we got our subcategories here. This is our standard kind of formatting practice. Selecting these three home tab alignment and indent those. And let's indent this double time. Home tab alignment, indent it again. And then that's going to be our savings. So our savings. Our savings on the discount. Is going to be equal to the 500 times the 7%. So there we have that. And then we might calculate our new, what's going to be our premium at this point. Insurance premium after discounts. We might want that too. Even though that's not the header I put up top, but we might want that. So that means if it was 500 before and we get discounts of $35, we're down to the 465. Is that worth putting a deadbolt on my door? Yes. I don't know. Deadbolt. Let's go ahead. Let's do let's break it down another way. Let's take a look at another. I'm going to break. I'm going to make this blue and bold. We're going to go to the home tab font group and make this blue and bold. And let's try to break it out each discount by discount and then calculate the recovery period. So that'll hopefully change our mind so we can understand this better to see if it's worth our while. We're going to go to the home tab. We're going to put a paint brushy here and make a skinny J. Let's make a skinny G skinny G. And then let's do a discount for the deadbolts on this side. Let's hide some cells so I can see my information on the left more clearly. Going to put my cursor on column C where I got the arrow left click drag on over to column F. Let go right click the selected area. Let's hide that stuff so we can just see side by side what we're working on. That didn't hide it. That was unhide hide. There we go. Don't delete it. Just hide it. So now we're in column H. I'm going to make H a little bit longer here. And put a header. This is going to be the discount on deadbolt locks. Discount on the deadbolt locks. We're going to say this is going to be home tab. Let's make that our header font group make that our header formatting black and white on the background and there. So this is the original. Let's take the original premium was 500. But if we spend that full seven one seventy five dollars to get the dead volts, we get the double D discount. Deadbolt discount that is. So we're going to pull that from our data set. It's 4%. You'll recall. I'm going to make that a percentize. So home tab number group percentizing that. So and then we're going to go to the font group and underline it. That means we get the discount. The discount on deadbolt locks is for equal to the 500 premium we had before times the 4%. So for just the dead volts, there's that $20. We would be saving. So let's put some blue borders on that. Let's do the same thing for the other one. Let's make that font group and make it blue and bordered. Wait a second, not blue and white silly blue and border. That's ridiculous. You can't see white on the blue. Okay, so let's let's just copy this whole thing down here. Let's copy that and put that down here. And this is going to be the original premium again. It's going to be. I'll just say that's from the 500 again. And then now the discount is at the three. And this is not the discount on the double D discount for the dead volts. This is the discount on the smoke detectors, smoke detectors. So it's 15 for that one. And that comes up to, if I take my total discounts, total discounts is going to be equal to the 20 and the 15, which comes up to our 35, which we saw before. So now let's calculate the payback period for those two. Let's make this blue and bordered first. Don't get ahead of yourself. Don't get ahead of yourself. But I'm so slow. I hate waiting for myself. You got to wait for yourself. Otherwise you get too far ahead of yourself. So I'm going to put my cursor on the skinny G here and we're going to go to the home tab clipboard and we're going to format paint it and we're going to put it on the J, making J the skinny J skinny J. I knew a skinny J before. He's still kind of skinny, but he's got not as skinny. So we're going to then say this is going to be the recovery period on the dead vault. So let's call this the recovery period on dead bolt locks. And I'm going to make this a little bit longer. Let's make this a bit wider. Let's make it all the way out here because I think I'm going to set name at the bottom. So this is going to be the cost to do it, the cost to do. We're going to say that equals, it costs us $175. We're saying to put the dead vaults on our, because we got a bunch of doors because we got, we got a big house. Got a dead vault, all those doors, real sneaky people try to come in and take your stuff. So discount on dead bolt locks. We're going to have the discount of in dollars. Let's just do it this way. I shouldn't even have typed it out. I should have just said this equals that, which we just figured equals the 20 right there. And so that means that, and we're not really taking into account, account time value of money, but you know, in general, just a quick calculation. If I'm saving, if I'm saving $20 on the premium each year, we're going to say, and it cost me $175 to pay for the dead vault locks, then the recovery period on dead vault locks is going to be equal to the $175 we had to pay divided by the $20 we're saving every time we have the premium payment. We're going to say yearly. So that means we're going to recover it in nine years. Let's go to the number group and make another 8.8 years. That's way too long. I don't need locks on my doors because it's not financially. Actually, it's probably a good insurance thing in and of itself. So that's probably longer. We're probably going to have the house for that long, you would think, and it would probably be a safety thing more than a financial thing as well. So probably still want those dead vaults on there, we're thinking. But in any case, home tab font group. And let's make this let's make this black and white. So it's going to we're going to get it paid back within the eight or eight to nine years. Let's make this border blue. So I think it's worth it. I guess I guess so if we have to if you want to do it. So this is going to be let's do the same things for the recovery recovery period on the smoke detectors. So the cost to recover the smoke detectors, it's going to cost us $48 to put those noisy, beepy things in the house. They should pay us to put those squawky things in there. It's ridiculous. How much do I get on a discount if I have to do that discount on the smoke detectors? I already calculate. Let's just say equals this one over here. This is going to be equals we said $15 a year that we're going to save on the premiums. So that means that the recovery period on on the smoke detectors smoke detector detectors. I didn't spell that right up top. That is going to be equal to if it costs us $48 and we say $15 divided by 15 a year because the homeowners and it takes like three years just to put in those squeaky things and they probably want me to check the batteries on it or something to make sure it squeaks whenever I cook a good meal. Whatever I guess maybe three years. So three years to recover that home tab thought group. Let's put some black and white on it. Let's put some blue and border blue, border blue as well. Let's put some underlines here that would look nice font group and underline that looks so much better. I can't even believe it. I can't even believe I had it without an underline for that long because it's just the amount of improvement. Let's do the recovery period if we combine them, which isn't the fairest way to calculate it. But let's say if we like combine them together, we'll get like combined recovery period just for the giggles of it. And so we're going to go up top. We're going to say this is the font group and say this is going to be black and white. And so this is going to be the cost to do both of these things. Let's say just cost to do both. Let's just do them both. I mean if we're going to do it, I'll have to do all this stupid stuff that the insurance company wants if they want me to get a discount, whatever. So the discount, this discount on both then is going to be equal to the 20. I saved $20 and the 15 to do this stupid stuff that they want. But you've got to jump through some hoops sometimes. Sometimes you've got to jump through some hoops. Recovery period combined recovery period. So if I get, if I, if it cost me 223 for both of them and it cost me a total of $35, then to recover the full cost combined together would be this divided by this. And that would be about six years. And I'm going to be living in the home for a long time, I think. So I still feel like it's kind of worth it. If I have to jump, if I have to jump through these hoops to do this mundane and worthless exercises of putting locks on the door and having a squeaky smoke detector, then so be it, bureaucratic institutions always wanting some crazy thing. But obviously you can see why the insurance company might think that those would be beneficial because it might reduce the likelihood of, of losses, which of course you would think would be beneficial for the insurance actuarial calculations and so on and so forth. And clearly, although this is a very good recovery period calculation to do, and it could be applicable in a lot of different areas, doesn't take into consideration the time value of money, but it's a nice quick kind of calculation to get an idea of the benefit that you, that you're receiving. So you want that concept, but clearly here it looks more like it's kind of a safety issue as well. So if they're recommending that you do that, then there's probably a reason for it. So we probably want to put them in anyways, even if it, even if it wasn't the most financially sound thing to do in terms of the discount in the insurance premium policy. Also note that I realized that I just misspelled a whole bunch of things. So I think I corrected those with the spell check. So if that was driving anybody crazy, then, you know, I fixed it now, but that's what spell check is for. So I checked it. So it's probably still some wrong stuff, but it's better than it was, I think.