David Bach The Automatic Millionaire

It's hard to believe winter's almost here -- especially if you live in New York City like me, where we enjoyed summer-like temperatures all last month. But like it or not, colder weather is on the way, along with the sky-high bills we pay to keep our homes and families warm.

Reports say this year's winter will be colder than last, which by itself could mean higher energy bills. But the U.S. Energy Information Administration -- the research and statistics agency of the Department of Energy -- is projecting an overall increase in costs for home heating fuels as well, which means higher winter energy bills for sure.

I've discussed home energy audits before, but given the seriousness of this year's situation, I feel it's worthwhile to go into more detail.

The Big Heat

In 2006, the average American household paid $889 to heat their homes. This year, we'll see roughly a 10 percent increase, with home heating bills increasing to an average of $977 for the winter.

What's causing the increase? As I write this, crude oil prices are over $90 a barrel -- that's over a 50 percent increase since January of this year. The price of crude oil directly affects the price of your home heating oil, and because of the interrelation between fuel markets, it also affects the price of natural gas, propane, and even electricity, since electric power generators depend on fuel to operate.

That's a simplified explanation, I know. But rather than turn this into a political debate, I want to address what you can do today to decrease your home energy bill this winter -- and at the same time do the right thing for this amazing planet we live on.

An Audit You Won't Dread

You can't fix what you don't know is broken. A comprehensive home energy audit will evaluate how airtight your home is, as well as how efficient your home's heating and cooling systems are. It'll also recommend ways to conserve hot water and electricity.

By uncovering these trouble spots in your home, an audit will help you pinpoint costly problems you can correct now before you get hit with the first dreaded bill of the season. How much can you save? Well, that depends on the results of your audit, but you can figure on reducing your winter energy bill by anywhere from 10 to 30 percent, and maybe even more.

Many of the actual fixes -- like adding insulation and weather stripping and sealing ductwork -- you can do yourself as a weekend project. And you might be surprised by how effective these small modifications are. Other, more complicated improvements -- like replacing windows or an old furnace -- may require the help of a contractor. But without doing an audit first, you won't know which fixes make the most sense financially. So eliminate the guesswork; it'll save you time and money.

Tools of the Trade

For a professional home energy audit, you can expect to pay from $100 to $400, depending on where you live and the size of your house. The investment is well worth it, since it'll easily pay for itself with the money you'll save on your monthly bill.

The energy expert you hire will use certain tools and tests to evaluate your home -- like the blower door infiltration test. This identifies air leaks that allow heated air (which you're paying for) to escape outdoors. For most homes, air sealing is often the single most effective step you can take to stop energy loss and start saving money. Other equipment used in an audit includes infrared cameras that reveal missing insulation, cold air pathways, and moisture problems.

A good audit will provide a full report prioritizing recommendations for energy efficiency improvements. A really good audit will also indicate how long it will take you to recoup your investment.

Finding an Expert

You have several great options for finding an expert to do your home energy audit. Start by calling your local utility company, because some actually offer free audits to customers. If not, ask if they can provide a referral to a professional in your area.

Home Performance with Energy Star is a national program offered through the Environmental Protection Agency and Department of Energy that recommends auditors throughout the country by state.

As a last resort, check the Yellow Pages under "Energy." Just be sure to ask for references, and of course it doesn't hurt to look up any possible past complaints with the Better Business Bureau online.

Doing It Yourself

If you prefer to do your own energy audit, there are plenty of tools and "how to" guides to help you through. The Department of Energy's web site walks you through the entire process step by step, including how to do your own pressurization test. The site also offers additional tips for do-it-yourselfers.

If you prefer to get started on a smaller scale, try the Energy Star Home Energy Yardstick to compare your home's energy efficiency to similar homes across the country. You'll need your utility bills from the past 12 months, and once you answer a few questions about your home you'll receive a report of (somewhat) customized recommendations.

What a (Tax) Relief

Once you've completed your audit, you'll be making improvements to your home based on the report recommendations. Certain improvements -- like adding insulation, replacing windows, and installing high-efficiency heating equipment -- may be eligible for a tax credit of up to $500.

This maximum applies to improvements made to your primary residence over a two-year period from Jan. 1, 2006, to Dec. 31, 2007. There's a complete summary of what improvements are covered online.

Environmentally Speaking

Between heating, cooling, lighting, appliances, and various electronic luxuries, we all use an extraordinary amount of energy to power our homes -- not just in the winter, but all year long. All that energy use not only puts a strain on our bank accounts, but also on the planet. In fact, according to the Alliance to Save Energy, a typical house emits twice as much carbon dioxide as a typical car over the course of the year.

Scientists use the term "ecological footprint" to measure our use of resources against nature's capacity to regenerate what we've taken. It's estimated that the total human footprint worldwide currently exceeds the capacity of the planet to sustain us by 25 percent.

Our homes -- where and how we live -- are a big contributor to our ecological footprint. In addition to fossil fuels, they use up land, water, wood, metal, and minerals. They account for more than 20 percent of our national energy demand as well. So if we're smarter about how we use energy in our homes, we can save plenty of money -- and make a positive impact on the environment, too.