Control Your Cash Mailbag!

June 26, 2013
Financial freedom for the price of a stamp

Financial freedom for the price of a stamp

Real letters from real readers. Send yours to info @ ControlYourCash . com.

Dear CYC:

My fiancé and I are getting married! We know that destination weddings can get expensive, so we’re going to do it close to home. The problem is that he and I can’t come to an agreement on some of the most basic parts of the wedding. Like the venue. I want to hold the reception at the ballroom in a local 5-star hotel ($12,000), while he wants to do it at his father’s yacht club ($13,000, but my fiancé claims the view of the lake is awesome and there might be a party boat involved.) Which do you think is better?

Sincerely, Melinda in Broken Arrow

 

Dear Melinda:

None of the above. Either is a giant and needless expense.

Here’s how you do a wedding, assuming you’re not a trust-fund punk. First, go to the county clerk and get a marriage license for $60 or however much it costs. Then pay your priest/minister/rabbi whatever his going rate is, which is probably not that much. Finally, hold the reception at one of your parents’ houses. If your mother and mother-in-law want to help they can go to Costco and buy those giant packs of hors d’oeuvres.

One more thing. It’s probably too late for this, but don’t register anywhere. Find a tactful way to say “cash gifts only” to your invitees. One way to handle that is to just say nothing, and when they realize you aren’t registered they’ll probably take it upon themselves to discreetly hand you an envelope at some point during the evening. You might even end up making a profit on the deal. But yeah, do it on the cheap. This is one place where frugality makes tremendous sense.

 

Dear CYC:

My fiancée is driving me crazy. She’s already made a non-refundable $6000 deposit on a ballroom for our wedding, and let’s not forget the $5000 I spent on an engagement ring. I make $40,000 a year. And now we’re – I wouldn’t say arguing, but heatedly discussing such details as the wedding invitations. Did you know engraved vellum paper goes for $1.50 per invite? Multiply that by 200 and you can see what just one of our problems is. Beef medallions on the dinner menu vs. chicken for $1 a plate cheaper, it never ends. What do I do?

Sincerely, Brian in Broken Arrow

 

Dear Brian:

$11,000 in sunk costs already? Man. Another $7 won’t kill you, so you should buy our book and figure out how to build wealth instead of destroying it.

Also, it’s 2013. Why are you sending invites via any medium other than email? You know how much an email invitation costs, right?

Are you going to be one of those couples who never talk about money until it’s too late? It’s cool if you are, just know that you’re already well on the path to sitting across from each other at the kitchen table a couple years from now, she furrowing her brow and you staring at the readout on a Casio printing calculator, wondering why you’re so broke and whether you’ll have to move into a studio apartment once the baby arrives.

 

Dear CYC:

Well, your advice is certainly condescending. And unrealistic. You seriously expect me to have a discount wedding? Should I get my dress from Goodwill while I’m at it? Maybe you don’t understand how important this is and how deep our love for each other is. My wedding is going to be THE most important day of my life, and the idea of it being no more ceremonial than a Super Bowl party is offensive to me. I asked you a simple question about one venue vs. another and instead you start pontificating. Thanks for nothing, ass.

Sincerely, Go to Hell

 

Dear Melinda:

Why did you ask for advice if you didn’t want advice?

Let’s do this Socratically. Would you say that most people a) worry about money, or 2) live with the freedom of knowing that they have sufficient cash flow and a big enough nest egg to see them through anything – financial independence, to coin a phrase?

This part of our conversation is unilateral, but we’ll answer for you. Obviously the answer is a). We’d guess that they outnumber the people in the other category at least 9 to 1. Now…would you believe, or at least be open to believing, that there might be a correlation between the plurality of people who have traditional weddings, and those who end up in the first category?

This is the ultimate in short-term thinking. Your wedding day. DAY. Singular. One of maybe 25,000 you have ahead of you. Why on earth would you focus all your attention, and undue money, on a single day when doing so means hampering your ability to build wealth over the remaining 24,999?

If your answer is “Because every girl dreams about her wedding day and I’ve been fantasizing about this since I was playing with Barbies,” then you’re a moron. It’s a non-repealable law of the universe that you can’t have it all. Everyone has to make choices. Even the biggest individual expenditures are done with respect to other possible outlays. Carl Icahn just borrowed $5.2 billion to attempt to take over Dell Inc. He didn’t go for Lenovo, or Acer, or even a company that does something other than manufacture computers. Icahn thinks that’s the way to get the best return for his (or his lenders’) money, so he acts accordingly.

We know what your objections are before you make them. How can we compare something as cold and utilitarian as a business deal to the magic and emotion of a wedding day? Because whether you choose to accept it or not, when you indebt and/or impoverish yourself to get married, there’s still a transaction. Multiple transactions. And as far as the people on the other side of them are concerned, business is business. The wedding planner, the hall, the florist, the caterer, the DJ etc. all get paid. In money. By you. And your heirs, if you let your bills sit long enough.

Also, the math doesn’t work out. You’ve got at least a 40% chance, conservatively speaking, of getting divorced. Yeah, we know. You two are different. (Also, we don’t know why the Centers for Disease Control with its $11.3 billion annual budget, an agency originally created for the narrow purpose of fighting malaria in the Southern United States, ended up being the nation’s official recordkeeper of marriage and divorce statistics.) An average wedding costs around $26,000. Even the most degenerate gambler in the world wouldn’t place a $26,000 bet on a game where there was a 40% chance of losing it all and a 60% chance of…well, still losing it all.

It is astonishing how many adults we meet who insist on handicapping themselves at the onset regarding money. Everyone with even a passing interest in personal finance will tell you how important it is to save early for retirement – why, if you just sock away an extra $10 a month starting when you’re 21 instead of waiting until you’re 40 you’ll have a billion more when you turn 65, or something. Yet none of these people will advocate something more obvious and even more impactful: Not blowing $26,000, and forgoing the assets that that could buy.

Still, most people aren’t going to listen to this. For a completely unrelated reason, most people aren’t wealthy.

Filed Under: Bad Examples, Capitalism, Making Smart Choices Tagged With: , , ,

We’re So Smart It’s Terrifying

June 19, 2013
Awful

Awful

 

Two years ago we wrote a post on the foolishness of getting caught up in topical and exciting initial public offerings. And this was back when Facebook was still privately held.

For the unsophisticated among you, yet another piece of knowledge that’s so obvious it’s easy to miss:

Your bank account understands only numbers. It doesn’t care about social buzz, popularity, trendiness, your Pinterest board, what Jay-Z has to say about diversification, or what your friends are doing (especially what your friends are doing.) That bank account is antiseptic and uninterested (disinterested, really) in your workaday concerns. It only sits there. It doesn’t even necessarily want to grow. Great if it does grow, but getting it to do so is your problem. Your financial balances don’t want to grow because they don’t want to do anything. They have no capacity for desire, nor any other emotion. And with respect to money, neither should you.

Seriously, what is the point of snapping up Zynga stock the moment it goes on sale? For a lot of people, it goes no deeper than “Here’s this product/service that I use, and now shares of the company that makes it are available for purchase. Therefore, I can take both figurative and literal ownership of it, and derive validation that way.” If it’s important for you to self-identify as an avant-garde shareholder, in tune with the New Economy, Business 2.0, stop reading. You’re going to hurt yourself.

Folks, we’re in this for one thing only. MONEY. It’s all that matters, at least for our purposes. Otherwise go find a personal fulfillment blog or one of those unreadable debt blogs instead. Here’s one to get you started.

Back to the summer of 2011. It was a simpler time. Prince William and the incipient Duchess of Cambridge had just moved out of their parents’ places and in together. South Sudan didn’t yet exist as an independent nation. Amy Winehouse still had a pulse. And Crumbs Bakery went public.

Our parents’ generation had little trouble discerning between Things of Importance (work, responsibility, knowing how to fix a carburetor) and Trivialities (self-expression, keeping your friends apprised of your hour-to-hour activities.) Cupcakes were on the latter list, and near the bottom.

We maintained that a business predicated on the creation and delivery of cupcakes was something better suited for prepubescent neighborhood girls than for a NASDAQ-listed company. Or for a NASDAQ Capital Market-listed company. (That’s the real NASDAQ’s developmentally delayed cousin.)

Crumbs went in the toilet, and quickly. It took 2 months to lose half its value, which it never regained. In fact, it took another 6 months to lose half its value again. It’s since lost yet another half of its value and then some, making Crumbs stock a Zeno’s Tortoise of sorts.

Why was this an awful investment? Well, we already told you way back then, but if you didn’t click the link:

  • The company expanded way too quickly. 
  • It doesn’t take a tenured college professor to determine that cupcake demand is pretty elastic. The lower your income falls, which it likely has if you’ve lived in the United States since Crumbs’ inception, the smaller the ratio of it you’re going to spend on sugary treats.
  • Barriers to entry? Any idiot with a pan and some non-stick spray can bake muffins.
  • You’re probably fat. Eat some celery instead.

Our recommendation instead was to invest in Crumbs’ antithesis. A company beyond uncool. There isn’t even any room for this company on the hipness continuum. You can’t savor their products, or even touch most of them. McKesson distributes wholesale drugs and medical supplies. And it sells clinical software to hospitals, too. Is that getting you excited? If not you, then how about the lifestyle editor at The New York Times Magazine? Did Sex & The City ever do an episode about workflow management for osteopaths?

McKesson is up 38% in the last year and a half, or about 12,800 basis points more than Crumbs. If we told you one of these companies would be bankrupt in a year – McKesson, which pulls in $122 billion annually; or Crumbs and its $14 million market capitalization, with operating expenses that eat up its gross profit and then some every quarter – which would you pick?

People like to think they want more money than they currently have. But in practice, lots don’t. The ones who dabble in investing, more properly dubbed speculating in their cases, mostly have motivations other than that of increasing their net worth. We aren’t completely sure what those motivations are, and we don’t care. The road to building wealth doesn’t have to be glamorous to be effective, and probably shouldn’t. If everyone’s talking about an investment, it doesn’t mean it’s worth investing in. It doesn’t necessarily mean that it’s not worth investing in, either, but maybe you should use measuring sticks other than public natter.

Filed Under: Bad Examples, Investments Tagged With: , ,

Keep Rationalizing, You’re Doing Fine

June 5, 2013

 

"I would kill everyone in this room for a drop of sweet beer."

“I would kill everyone in this room for a drop of sweet beer.”

 

Prologue, because no matter how many times we say this some people are determined to miss the point: Go ahead, get drunk. Be louder and more obnoxious extroverted than you normally are, because you equate inebriation with socialization. Do it. We really don’t care, as long as you a) keep your car far away from ours and 2) don’t try to engage us in any kind of discussion, either frank or superficial, while you’re imbibing.

Here’s a story from our local paper. Visiting Attorney Celebrates His 45th Birthday (Note: Not 19th. 45th. Our subject is deep into adulthood, a word that used to be synonymous with “responsibility”) by not only destroying a few million of his evidently abundant brain cells, but taking a hotel room down with them. Not just any hotel room, but this one. If you dance at Spearmint Rhino in Las Vegas, it might look familiar: it’s the one Prince Harry gets naked at when His Royal Highness is in town. 5,829 square feet of indulgence at Wynn Las Vegas, yours for about $8000 a night.

Speaking of which, $8000 a night? It’s not like you can split the cost with 100 other guests, either. They have ballrooms for that. If you’re paying $8000 for a hotel room, you already have an aversion to money. Or at least to amassing it.

Anyhow, the attorney in the picture earned a law degree from the Northwest Pomona Valley Academy of Law La Verne and now works for his mommy’s firm in southern California. Also, he thinks he looks his best in a picture in which he appears to be bracing himself against a wall in an attempt to avoid vomiting this morning’s Miller Lites into the office carpet. He had no such reservations on his recent vacation though; overturning furniture, shattering glass, and turning the “walls, floors and drapes” into an edible fresco. $96,000+ later, the suite remains on life support, and our protagonist got to spend some time in jail. He also got sued by Steve Wynn himself, and the judge or jury who will rule against Mr. Wynn in a hospitality-related case, in Nevada, does not exist.

You’re not going to believe this, but as the police say, “alcohol was involved.” That euphemism, that use of the cowardly passive voice, always slays us. For instance, “alcohol was a factor” in the fatal car accident. Does that mean that the driver innocently and inadvertently hydroplaned on a giant puddle of vodka that was created when a tanker truck spilled? No, it means he deliberately got himself drunk and stopped caring about the consequences.

Segue? Sure! Mookie Blaylock was an all-star pro basketball player of a generation ago, most famous for 1) having a funny nickname and b) a Seattle rock & roll outfit briefly adopting that name as its own before changing it to Pearl Jam. Last week, Blaylock had a little trouble staying in his lane. But not nearly as much trouble as Monica Murphy, for whom a northbound Cadillac Escalade in the southbound lanes was the last thing she ever saw. Blaylock had an outstanding warrant for DUI, and drugs, which meant that his license was suspended at the time he killed Ms. Murphy. (The headline read “Ex-NBA guard Mookie Blaylock critically injured in car crash”. Unfortunate fella.)

Never mind killing an innocent woman. Really, never mind it: athletes, even retired ones, aren’t noted for having consciences nor empathy. But the decision to drink and drive (the cops in this case say “alcohol was not a factor,” and let’s take that with several grains of salt, applied liberally to the rim of a tasty margarita) will cost Blaylock plenty. Legal fees, bail, having to hire a driver if he gets off (and having to work for prison carpentry shop wages if he doesn’t), none of those are what you’d call economic enhancements.

And all for the reasonable price of going to a bar for the purpose of getting into a lightheaded state. Or in Mr. Pearman’s case, self-identifying as a high roller and having the corresponding spending patterns to match.

As far as we know, there is no substance on Earth that causes carpets to clean themselves, glass to unshatter, and furniture to regenerate. But even if there were, it still wouldn’t be as expensive as alcohol is. Continuing the analogy, there’s no liquid that when consumed causes an Escalade owner (or more likely, Escalade lessee) to stay with traffic and drive in a non-lethal manner.

Google “coupon” + “personal finance” right now and you’ll find thousands of imbeciles telling you that the path to monetary self-sufficiency begins with saving 34¢ on your next purchase of HeadOn™, Apply Directly to the Forehead®. Even if we restrict ourselves to comestibles, there’s still a far more forceful way to not impoverish yourself. Come on, you’re smart. See if you can figure out what is.

Filed Under: Bad Examples Tagged With: , , ,
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