Mighty Bargain Hunter

Reusing paper towels?! Hmmmm …

Stumble it! Tip it! Facebook it! | 01/16/12

We don’t watch a whole lot of TV — and we only have basic cable anyway — so I’m not a regular watcher of Extreme Cheapskates on TLC.  The first time I had heard of the show was through a video on MSN.com.

This particular one-minute clip features four extreme cheapskate tactics:

• Cutting open toothpaste tubes to get at the last bit of toothpaste
• Sharpening the blades from disposable razors on the striking surface of a box of matches
• Pulling apart two-ply toilet paper to get two one-ply rolls
• Hanging up paper towels to dry

Life is a giant exercise in opportunity cost

Learning how to do more with less, and how to get by with less, is a great skill to learn.  What happens most of the time with doing more with less, though, is that it takes precious time to do more with less.

TLC ends this clip with Roy, the money saver featured in the clip, saying the following:

“Toilet paper is a lot like life in general.  The closer you get to the end, the faster it seems to go.”

I’ll give him clever points for that statement, but am I the only one who thinks that this statement drips with irony?  There is an opportunity cost associated with every activity we do.  The time that we spend doing one activity we can’t spend doing another.  The time we have is irreplaceable, and is consumed at the alarming rate of twenty-four hours each and every day, never to be consumed again.

Or, put another way:  You can make more money, but you can’t make more time.

To apply this to the activities in the clip, there’s a point of diminishing returns for these activities.  Cutting a tube of toothpaste open when the tube is almost empty is probably all right.  It takes two seconds to cut the tube and another ten to wash the toothpaste off of the scissors.  Sharpening a disposable razor on a matchbox is probably fine if you do it right.  Keeping it in a glass of mineral oil probably works too.  Splitting up a roll of two-ply toilet paper is borderline too much.  I mean, it works, but … ?

Reusing paper towels, though, seems way more trouble and time for the potential gain.  Roy says that he’s saved $2,000 over the past ten years on paper towels alone.  Let’s take this at face value and call it $200 per year.  First off, that’s a lot of paper towels anyway.  We buy maybe two big packages a year for $40 total.  Secondly, what about a package of shop rags?  Those would last for years and they’re meant to be re-used.  (Isn’t the purpose of paper towels to throw away the germs?)  Or go even cheaper and use old cut-up shirts.  Lastly, and most importantly, it looks like a part-time job wringing out and hanging that paperware on that makeshift drying line in the living room.  Just the time spent squeezing another three to five uses out of a paper towel means that he’s working for about 1.4 cents per hour.  (Approximately.)

“Making it do or do without” is fine, but doing so shouldn’t fly in the face of common sense, should it?

Posted in Frugal Living, Home and Garden | 8 Comments »

My two cents on Suze Orman and her prepaid card

Stumble it! Tip it! Facebook it! | 01/11/12

Suze Orman needed to upgrade her leather jacket to a flak jacket tonight in a personal finance scrap match with personal finance bloggers over her new self-branded prepaid debit card.  The Approved Card is her own personally-branded prepaid debit card with what appears to be a decent package of tools and features.  The downsides, as pointed out by PT Money, are a $36/year minimum fee and a less-than-clear path to using it for building or rebuilding credit.

Some of the more outspoken posters got tweets back from Orman’s Twitter account.  20 and Engaged has a history of the interactions here.

Am I a Suze hater?

People don’t reach prominence by trying to please everyone.  Suze Orman has been in the financial realm for a long time — certainly longer than any personal finance blogger I’ve met — has nine consecutive bestselling books under her belt, as well as successful radio and TV gigs.  She has a wide following mainly because she gets in people’s faces about the soft spots in their financial lives.  This doesn’t resonate with everyone, and that’s to be expected.

But for the record, no, I’m not a Suze hater.  She’s helped many, many people get on the right track with their finances through direct advice and education.  It’s clear that she engages with people, listens to them, and genuinely wants to help them.  This can’t be taken from her: She’s done well for herself on this earth by helping a lot of people.

Now, back to the prepaid debit card.  Piece of junk?

Suze Orman’s message is clear, but what’s also clear is that she is a sharp businesswoman and a tireless self-promoter.  (She’s the latter because she’s the former.)  She’s in a position to use the leverage of her large audience to spread her message, help even more people … and sell more products.  The Approved Card is the newest product.  Is it better than cash?  Maybe.  Is it a good long-term solution for managing personal finance?  Possibly.  For people who need a shorter leash for a season, a prepaid debit card with a healthy dose of Suze could be part of the solution.  Is it without risk?  No, but nothing is.

Regardless, I certainly don’t fault her for offering this product.  She should be free to do so, just as people should be free to sign up or not.  Time will tell whether it was a good product or not, and the market will decide whether the $3+/month is worth the value that Suze Orman adds.

Postscript: Are my blogging colleagues idiots?

Absolutely not.  I’ve met many of them personally, thanks largely to Phil’s work.  (Phil was the closest recipient of this barb from @SuzeOrmanShow.)  But since we all just live in Clay Shirky’s internet. and since now consumers of the media have not only the ability to talk back easily but also to talk with each other easily, repercussions from bad PR can be swift and long-lasting.  Ticking off bloggers in one’s niche is rarely a good idea.

Posted in Commentary, Personal Finance, Roundups, Saving | 6 Comments »

Yet another reason that lottery tickets are a waste of money

Stumble it! Tip it! Facebook it! | 01/7/12

It’s often said that the lottery is a tax on people who can’t do math.  It’s virtually guaranteed that you’ll lose money playing the lottery regularly, because the more you buy, the closer you’ll be statistically to the intended winning probabilities (i.e., losing more than winning).  Even casting lottery tickets as an investment is flawed; Powerball tickets generate about am 80% loss, which dwarfs any year-over-year loss of the S&P 500 or the Dow.

Let’s throw good financial sense to the breeze

Let’s say that for whatever reason, you still buy lottery tickets.  It could be ignorance of the above, or because you feel deep down in your heart that this is the week for the big payout.  Or, more reasonably, you could buy lottery tickets as an entertainment budget item, because you enjoy it.  Whatever the reason, those lottery tickets are in your hands.

Now let’s say that lightning strikes and you beat the odds.  You win.  A lot of money.  As in a life-changing lot of money.  You turn the ticket in, and get a picture with the state lotto commissioner holding a giant check as a capstone to your fifteen minutes of fame.  Congratulations.

Let’s say now that you’re concerned about having that giant lump sum beckoning you and all of your new-found “friends,” so you instead opt for periodic payments for 10 or 20 years.

Would you expect your lottery payment to bounce?

That would really suck, wouldn’t it?  Well, that’s exactly what happened to dozens of people who won prizes in Illinois over the tail end of the 2011 holiday season.  The checks bounced for a brief period of time due to a computer file being sent late.  The oversight has since been fixed, and the affected people even got free scratch-off tickets as part of the apology.

This situation taken by itself is probably nothing more than “oops, sorry” and was easily fixed.  But let’s not forget that this is Illinois – a state that is developing a reputation for not paying its bills.  Organizations are going bankrupt due to missed payments from the state, legislators are being evicted by their landlords, and the state Department of Corrections is needing to pay up front for the bullets that help to protect their officers.

When will the deadbeat philosophy creep over to the lottery?  Lotteries are sponsored by most state governments, after all.  The fact that this mishap occurred in Illinois is merely convenient, though: Illinois is certainly not alone with its fiscal problems.  The risk of having promised payments go away presents itself in any state where there is a lottery.

The way around this is to take a lump sum payout if it’s offered, but that introduces a whole new set of risks — the biggest one being that the people managing the lump sum are usually ill-equipped to do so.  But it’s hard to argue that this is better than being stiffed.

I guess if you get enjoyment out of scratching the lottery tickets, so be it.  But the promise of “$1,000 a week for life” is little more than that: a promise.  A promise that rests on the solvency of the state government that runs the lottery, and its willingness to honor that promise.

Posted in Commentary | 3 Comments »

How much is my gold chain worth?

Stumble it! Tip it! Facebook it! | 12/28/11

I received a question in a comment on one of my more popular posts that describes how to figure out how much gold jewelry is worth.  Here’s the question:

What is the dollar worth of an 18″, 14-karat, 14.38 gram weight gold chain?  No formulas please.

Before working out the answer, it’s important first to discuss the sentence that follows her question.

She doesn’t want me to giver her formulas.  She just wants an answer to her question.  Customers in general are more than welcome to ask for whatever they want.  I don’t fault her for just wanting an answer.  I don’t even assume that she is intellectually lazy for just wanting an answer.

Therein lies the time-vs.-money tradeoff of obtaining a valuation

If I were a pawn shop owner and she brought it in to me to see what she could get for it, I’d probably look at the chain for the purity marking, put it on a balance, check the spot price of gold, whip out my calculator, figure out what the gold content was worth … and offer her $100.  If she accepted the offer — if she had walked in expecting that it was worth about $50, she might jump at $100 — then I’d buy it, and sell it to a melter for at least three times that.  But first, I’d try to sell it for $500.

She might find a cash-for-gold place on the web, and send it there.  They may have a calculator on line that accepts the numbers she gave me, and spits out an answer right there.  She might get a pretty good deal, or she might not.  If she just takes their word for it, how will she know?  She won’t.  She’ll know only if she took the time to try to answer the question herself.

But whether she goes that far depends on how much money is at stake.  She wouldn’t go into the same depth of analysis to sell a used coffee maker that she bought a year ago.  If she could sell it for $3 instead of $2, she’s already invested too much time worrying about it for it to matter.

The main point of all of this is that if you don’t understand how a valuation is calculated, you’re doing the deal in a position of weakness rather than strength.  The cost of this can be great or small, and itself is a tradeoff of money vs. time.

OK, great.  Just tell me what the darn chain is worth.

The gold content of this chain is worth about $430.  Here’s the math.  The fractional purity of 14-karat gold is 14/24 = 0.5833.  For a 14.38-gram chain, this means 14.38 times 0.5833 = 8.4 grams of gold.  (The length of the chain doesn’t factor in.)  One troy ounce of gold is worth about $1,600 now.  There are 31.1 grams in a troy ounce, so this translates to $51.44 per gram of gold.  Multiply this by 8.4 grams to get $432 and change.

There’s the answer.  Now you can enter deals from a position of strength.  And hopefully the reasoning was clear.

 

Posted in Precious Metals | 2 Comments »