The Real Cost of Conveniences

What is the most you would pay for a cup of coffee?

By 7:00 a.m. this morning, I was at the local Albertsons. There is a Starbucks inside and several people were already in line. I have been to that store many times and they have quite a few regulars.

I bought the biggest and best and most expensive cup of coffee they had. It was a Large Pumpkin Spice Frappuccino with four shots of espresso. Get your own recipe here. It had a healthy dose of whipped cream and some cinnamon sprinkled on top. It was chilled, like a fantastic malt. For the next forty-five minutes, I savored every sip!!!

The YUMMY purchase was research for a new book which I am writing: Stop Flushing Your Money Down the Drain. It is a financial planning book, mostly designed for people who never really learned the ins and outs of financial decisions. In it, there are good discussions of insurance, lenders, auto purchases, the cost of raising children and pets, how to get better jobs, why formal education is overrated, and much, much more.

There is also a substantial section covering "The Worst Things we Spend Our Money On" (excuse the poor grammar). One of the first parts of that section is "Conveniences." In that section I point out that many people pay through their noses for convenience. The examples are everywhere: Carwashes, drive through foods, convenience stores (imagine that), going out to dinner, packaged items...and gourmet coffee.

I go on to illustrate that if a person wastes $4 per day on conveniences (or anything else), he losses an incredible amount of money, over time. I show my readers that if they would have used that money to pay off other debt or to invest it, after 40 years (a typical adult-life, before retiring) the consumer would have accumulated a whopping $465,0000, counting interest. I think that is dumbfounding!!!

So, what does all of this have to do with that particular awesome cup of coffee? Since I have only bought one other cup of gourmet coffee in my lifetime, this cup was very special. In this case, I wanted to find out exactly what is the very best experience somebody could have with such a purchase. For $7.75 I spent 45 minutes in coffee heaven. But, now the coffee is gone and so is the $7.75. And I can say without any doubt, it was NOT worth it. To compound my misfortune, I will be paying interest on that money forever. I will explain why in a moment.

It is easy to justify such convenient purchases with self assuring comments like "I deserve this" or "It is only a few dollars" or "I can always cut back tomorrow." These are the kind of justifications that lead otherwise smart people to financial ruin.

I am not suggesting that there is anything wrong with an occasional treat, such as the Frappaccino which I cherished, but rather I am talking about the habit of making allowances for routine extravagant purchases.

Worse yet, are the poor souls who compound their monetary woes by using their credit cards for such purchases. This can be another sin of convenience. Nearly everybody knows that plastic cards are not free money, but when those impulsive opportunities present themselves sometimes the plastic money is just too easy to get; consequences be damned.

I suppose a great debater might be able to persuade me that using a credit card is okay if the consumer budgeted for the purchase in the first place; and if he pays off the card each month without any interest charges being added to the loss - but I doubt if more than 10% of those using credit cards in this way fall into both categories.

The reason that impulsive purchases and conveniences are so damaging is that EVERY SINGLE PURCHASE WE MAKE BRINGS WITH IT A LIFE-TIME OF INTEREST EXPENSES, EVEN IF THE PURCHASER PAYS CASH FOR THE ITEMS. Let me use food to illustrate my point.

When you pay somebody else to prepare your meal for you, either at McDonald’s or some fancy restaurant, some of your cost is a convenience fee. For example, if you could grill a burger at home for $1 but you pay Burger King $3 instead, you are paying them $2 to do the work for you. From that moment on you will have an interest cost on your wasted $2... FOREVER!!!!! That is right: Forever!

That is because you could have used that $2 to pay off some other debt you have. If you have an unpaid credit card, you could have paid some of your debt down and saved the interest charge on that debt, perhaps 12% or higher. If you had a car loan but did not pay it down with your $2, interest continues on $2 at the rate of that loan. What is the interest on your mortgage loan? You could have saved that interest rate on $2 by paying down your loan by that amount.

Any loan that remains outstanding has an interest expense that you could have avoided. Even if you are completely debt free, you could have invested the $2 and received interest income forever, but by forgoing that opportunity there is an eternal interest loss and therefore a FOREVER expense.

Now add to this that people who buy impulsive and convenient hamburgers or coffee, don’t do it just once. They do it day after day. If they are not wasting their money on coffee or hamburgers, it is excessive insurance premiums, cigarettes, ATM fees, extravagant TV packages, lottery tickets or any number of other unwise choices.

As stated earlier, if a person only flushes $4 per day or $120 per month in any combination of these things, he or she is losing $465,000 over forty years (assuming 7% interest).

I am not trying to take away your pleasures. After all, what good is it to arrive at old age with a drawer full of money, if you have no life experiences to compliment your years? I am simply attempting to point out the real cost of our choices, so that we can make more wise ones.

In my new book, I lay out a list of categories in which most people are already wasting more than $4 per day and the simple things they can do to end up with a lot of "extra money" just by paying attention to their choices and redirecting some of the money they already make.

So I suggest you budget for your gourmet coffee or other convenience purchases. It is okay to order a pizza to be delivered if it fits within a budget, but do not succumb to the habit of paying for convenience over and over and over. Kathy agrees with me. And worse yet, do not put those purchases on credit cards unless you can pay off the card when the statement arrives.

Now that you understand the real cost of convenient coffee (and other purchases) I hope you will be able to make smarter choices. If you only buy one Frappaccino per lifetime, I can assure you that it really is special but if you get one every day because "I deserve this" then you are flushing $465,000 down the drain. Even a complete idiot would know that no cup of coffee is worth that.

Perhaps something in between will make sense for you.

What Say You?

Free Money for Me and You; Part II

Free Money for Me and You; Part II

(note: This is the last half of a two-part story. It will make more sense if you read the first part before this one. To do so, simply scroll down below the monkey and below my profile (no wise-guy comments) and click on it.)

Yesterday I told you about a far away King who wants to share his millions with me. Scoff though you may, sometimes these things are real. To prove my point, I was telling about a true story that I experienced personally. It started out the same way the King notified me. A little research revealed that I was entailed to $2,700 and a whole lot more. Now I will continue where I left off.

Colorado had just set up a program called The Great Colorado Payback / a few years earlier designed to hold unclaimed money which people were entitled to. There are literally thousands of people with unclaimed assets and I was one of those people.

With my identification in hand, I was fairly excited to find out what the story was. Naturally, the boys were just as pumped up because if the story was true, they were going to split about $500 just for figuring out where the treasure was hidden.

When we found the office of the State Agency, we first had to dispense with all sorts of paper work to prove that I was indeed the fellow I said I was; that done, the facts were revealed.

Way back in 1972 I worked for King Soopers www.kingsoopers.com (a large local grocery chain) for a little over a year. I was 22 years old at the time. In my orientation process there was a form which asked if I wanted to buy company stock with a part of each pay check. Now I was only making about $6 per hour, so how much money could I have had withheld for stock? It had to be a very modest sum.

Eventually, Patty and I decided to move to San Diego for a short time (little did we know, that area would prove to be a home away from home for the rest of our lives). At the time we had just been married about a year and we did not have kids or a home. We decided if we were ever going to see how the other half lived we better do it at that time, so off we went. We stayed there about 15 months and then returned to Denver where we have lived ever since.

While we were gone, the grocery chain sent a letter to our last known address asking us what we wanted to do with the modest sum of stock I had accumulated while I was working there. But they must have sent the letter sometime after the forwarding process at the Post Office had expired and we never did get the letter. Not knowing what else to do, the grocery chain handed our little account over to Merril/Lynch, the well known stock brokerage firm. And there it sat for 24 years.

After 20 years, Merril/Lynch turned the account over to the state who will sit on the money until it is claimed. After 4 additional years they allow private investigators to see if they can find the parties. That is how the writer of the original letter found me.

In my case 24 years had passed and King Soopers went through several ownership changes. Along the way they were either bought up of joined forces with Fry's Foods, Dillons and Kroger Companies. Sometimes the stock went up in value. Other times it split and more shares were distributed. By the time I discovered my old lost stock the dividends were indeed $2,700 and the stocks value was 10 times that amount. Altogether I picked up a check for $30,000. The amazing part is that I only made about $10,000 a year when I worked in that store and I only set aside a few dollars per pay check. It is dumbfounding that it reached such an impressive amount.

After pocketing $30,000, I couldn’t help but think about the lady who prompted me to investigate in the first place. I considered the facts and concluded that if I had signed the original agreement she would have received 30% of $2,700 or approximately $1,000. I decided if she would be reasonable, I could still give her that amount.

So, I called her and did not tell her what I had found out. I told her I was thinking about looking for the money myself, but I wanted to verify one thing with her. I asked her “If I agree to work through you will you limit your fee to $1,000?” She was so quick to say, "no" that I was fairly certain that she already knew that the account was a lot more than the $2,700 that she mentioned in her first letter. After all, she was a private investigator.

Her refusal to compromise meant she was willing to take her chances in hopes she would get 30% of the entire amount, which would have been about $9,000. Since I found the money myself (or at least Justin did) and it is likely I would have found it someday anyway, I decided that she did not deserve the full amount, if anything. Her greed did her in. Still, I felt like some sort of finder’s fee was in order. I wrote her a check for $100 and sent it to her anyway.

As far as the state program was concerned my claim was the 2nd biggest one they had ever paid out. Interestingly there was a man in Kansas who was said to have more than twice that much due to him but he just didn’t believe anybody that told him about it. I don’t know if he ever did figure it out.

One of the things that makes this story so weird is we lived in Denver all that time, except for the few months we were in San Diego Our names were in the phone book the whole time that Merril/Lynch held our account, but nobody ever tried to find us.

After we put the money in the bank we went back to the website and began looking up all of the people we could think of. We found a handful of people whose names were identified as having some money due to them. We had a ball the next few nights calling all of those people and telling them the news and sharing our story. Several of them later got their own refunds.

Over the years the states got much better at logging the money but as far as I know they still don’t expend much money trying to find the people who have unclaimed assets. A couple of years ago, Patty found nearly two thousand dollars in Iowa in the name of her mom and dad. There was also some money for one of her aunts.

If you want to know if you have a pot of gold waiting for you and if you live in Colorado, just visit this link and check it out. If you live in some other state or have lived there in the past, I am sure a quick Google search will reveal the state run agency in your area. Guess what I recommend you do.

Now, as far as the email from the rich king who is desperately trying to find some nice person to help him spend his millions, I can’t help but wonder who responds to those letters and what is the catch? I am tempted to follow one just to see at what point they want my bank account information and my social security numbers. On the other hand, I am afraid if I respond at all they will sell my name along with those of other responders. They probably refer to those names as the best list of stupid people.

But before we decide to eliminate all such emails, remember this: In 1993, I got an email that looked a lot like it.

Comments welcomed

Free Money for me and You

Free Money For Me and You

Today I am especially excited because I received an incredible email. It seems that a king in a far away country, which I never heard of before, has got many millions of dollars and he desperately needs somebody to take a bunch of it off his hands. I could barely believe that this wonderful man has selected me to share in his fortunes. I don’t know what I did to attract his attention, but I am not about to look a gift horse in the mouth. You may be a bit skeptical but when I tell you the following true story you might reconsider your position.

Sometime around 1992, I got a similar email. Computers weren’t very sophisticated then and my knowledge of them was even worse. The letter said that I had $2,700.00 in some secret hiding place. The sender of the letter left a phone number so I called it and spoke to a woman who said she could get the mystery treasure for me, but I would have to pay her 30% of the waiting funds. I almost told her to go fly a kite, but I had her send me her paperwork anyway.

The letter arrived a few days later and it had a little surprise. She was not asking me to give her anything up front. Instead, she said she would get the money first and pay me my share. Only then would she get her money. Well, that made me think that there might actually be something to her claim. I then proceeded to reflect on past years of my life to see if I could figure out what her offer was really all about.

I imagined all sorts of things including insurance policies, elderly relatives who might have left me something in a will and other fantasies. I came up with a couple of possibilities. Then I called her back and said I was going to try and figure it out on my own and if unsuccessful I would take her up on her offer.

That evening, I told my sons, who were 12 to 14 at the time, that I wanted them to do some research and if they could find my missing pot of gold, I would share it with them on the same basis that the lady wanted. They were both very familiar with computers already so they were willing to give it a try.

A couple hours later Justin found it.

All he could find out was it had something to do with stocks, which was weird because I had very little experience playing the market. I could not tell you the difference between the Nasdaq and the Dow/Jones Industrials I had a very modest sum in a mutual fund with Janus but there was no reason for me to have any secret money with them When we called the people in charge, we were in for an even bigger surprise.

As it turned out, the $2,700 that I was entitled to was only part of my new-found riches. In fact, that money was just the dividends that were paid on some mystery stock that I also apparently owned. I couldn’t help but wonder if the dividends are only part of the treasure, how much is the stock itself actually worth? The managers would not tell me any more over the phone. I had to go to their place of business and bring my identification.

Tomorrow, I will conclude the story

Your Comments are invited

The Smartest Real Estate Investment

The Smartest Real Estate Investment

Did you know there is an investment that is virtually guaranteed to make a nice profit plus has the potential to return hundreds of times your original investment? Well, you need to hear about tax certificates.

You might have heard about John Beck. He sells a program called Free And Clear that teaches how to acquire tax certificates. He has a program is fairly good, but his customer service program is suspect Click here. I am not particularly endorsing Beck but I know that tax certificates can be great investments

Here is how it works. When a property owner fails to pay his property taxes the County Assessor or a similar official schedules a time to sell the tax debt to an investor. Nearly every county in the country has tax certificates in one form or another. There are several different ways to handle the details.

Weld County in Colorado had several hundred certificates and slightly fewer registered investors. I won a certificate for a middle class home and a vacant lot. They cost $900 and $120 respectively. At another sale, in Jefferson County, there were a thousand bidders for several hundred certificates so a lot of them sold for a 5% premium. I didn’t buy any.

After the auction the owner decides if he wants to keep his property, in which case he simply pays back the investor with a reasonable profit, but if he does not catch up to his responsiblity the certificate owner can end up with the property. About one in a thousand ends up going to the investor. Some out of the way counties have tax certificates that did not sell at action so investors can buy them on line.

The tax lien certificates are a good investment. I suggest you get on line and research the specific requirements for the counties you like, but do it soon becasue the sales usually take place in the fall.

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