Six Figure Investor

A few weeks ago, I conjectured that we will someday soon get a $1 billion lottery prize. Well, we don’t have that yet, but we do have the first over $500 Million dollar MegaMillion prize for the drawing on Friday, March 29th.

This is a new milestone, this is the first time any lottery prized has crossed over that threshold. The remarkable path of this prize is that it took two months of rollover prizes to get here but the prize amount is accelerating very fast. The Tuesday drawing had a prize of $363 million. So, in just one drawing the prize has increased by an incredible $177 million (there are two drawings every week).

Read more…

Every New Years day a local television station (CW11) broadcasts an all day marathon of the 1950′s series the Honeymooners. It’s still funny, and there’s a lot to be learned about American culture of that period because the show was a lot edger in its day than other programs about family life. This is a finance site, so I will keep my discussion to financial issues. After watching a few episodes, it becomes evident that Ralph Kramden (played by Jackie Gleason) and Ed Norton (played by Art Carney) lead very different consumer lives.

Ed’s apartment is furnished well, with window treatments, furniture and the modern devices of the era (TV, phone). In contrast, Ralph’s  apartment is quite spartan. Ralph often chastizes his wife about overspending and all the extras his wife gets, but that of course is really just a joke. One could conclude that Norton is more prosperous than Ed.

In one of the episodes, it is revealed where each of them stand in terms of their finances. Surprise, it was revealed that they both earn the same salary. What accounts for their differing lifestyles? That is also partially covered. Apparently Ed can afford his lifestyle because he has borrowed heavily to pay for it all. It isn’t made as clear in any of the episodes how Ralph “affords” his lifestyle, but his wife often complains about the previous schemes where he loses money.  So, his money is likely frittered away on get rich schemes that of course never payoff (it they did it wouldn’t be funny).

Norton is one payment away from bankruptcy, while Ralph is one scheme away from riches (which very likely will never occur).  Both have very little savings.

Here’s the lessons to be learned:

• Moderation in your finances is preferable.
• Have reasonable expectations about returns on your investments.
• Spend money now to live your life.

I occasionally go to Casinos and sometimes play the state lottery. The whole marketing effort tied to gambling, particularly for low end gambling, conflicts with my sense of logic. I understand that this is business and they go to great lengths to determine how to cater to different customers. Just go to any slot machine parlor, each one is branded differently to appeal to a small slice of customers. They are too noisy and complicated for my taste.

Most everyone knows that gambling is a losing game over the long term, the odds are in the house’s favor. If you look at it as entertainment, without any expectation of winning, it helps to justify the spending.

Some games are better than others. For example, some slot machines payout over 98% of the take, which is a very small house advantage. These higher payout machines, though, require bets of many dollars instead of dimes. Better odds require larger bets. But what if you could make a bet that pays better than odds? This would be like the slot machine paying out 102% of the take. You would think that no one would offer such a bet, but you can in fact buy a better than odds bet in the multi-state lotteries. You just need to know when to buy.

A better than odds bet occurs when the payout exceeds the odds of a payoff. The odds of the multi-state lotteries are as follows:

• Mega-Millions: 1 in 175 million.
• Powerball: 1 in 195 million.

So, when the prize exceeds the payout (175 million or 195 million), you are getting this over odds bet, right? Well, not exactly. The lotteries are playing a marketing trick to inflate the size of the prize. The big prize quoted for these games is an annuity, not a cash prize you can collect now. The cash prize is significantly less. In order for the cash prize to pay at odds, the annuity prize needs to be much higher. I ran a calculation on recent cash prizes to determine the discount applied to the payments. Here are the results:

So, there you go. If you want to get a better than odds bet, buy a Mega-Millions ticket when the prize exceeds $175M. Or, $300M if you want to see this payout in cash today. Good luck, the $300M prize has occurred only about 4 times for Mega-Millions, and a $400M prize has never occurred (yet) for the Powerball!



In the U.S, the hatchback is the downtrodden sibling to the sedan. All over the world hatchbacks are quite popular primarily because the higher fuel prices make these vehicles a better value. Here’s what a hatchback offers:

•  A smaller overall package than a sedan (good for parking).
• Better utility than a sedan, since the 3rd or 5th door makes it a wagon.
• Hatchbacks are generally lighter than a sedan which improves fuel efficiency.
• More configuration options to use the vehicle for cargo or passengers.
• Hatchbacks are cars, unlike heavy SUVs/Trucks which use body on frame construction.

Why are hatchbacks so disliked in the U.S.? Primarily, this has to do with the history of this car configuration as well as the tastes of the average consumer.

• In the 1970s, hatchbacks were imported due to high gasoline prices. These vehicle were generally low end cheaper vehicles. Hatchbacks inherited this reputation as being low end and cheap.
• Americans have always preferred larger vehicles. Over time cars have gotten larger and heavier. Even hatchbacks. In 1980, the Honda Civic HB was a very small car only about 1300 pounds. The equivalent hatchback sold today is over 2700 pounds (this is also the weight of my 2002 Civic HB).
• Low gasoline prices make smaller cars less desirable. This is not a uniquely American trait. When people have access to disposable income and relatively cheap gasoline, they go bigger. 

1982 Toyota Starlet. A cheap hatchback of its day.

Many Failed Attempts…

There have been many failed attempts to bring the hatchback back into the U.S market. Most are not having much success as the vehicles below are mostly off the market due to poor sales. Hatchbacks are not always cheap, there are expensive ones as well. However, still the only ones that sell consistently enough to make a profit for the automaker are still the cheap ones.

 The dead and dying list:

• BMW briefly imports the 3-series hatchback the 318ti.
• Mercedes briefly imported the C-series hatchback, the C230.
• Mazda briefly imported the excellent 5door 6 series mid size sedan.
• Audi is currently importing the A3 small 5door hatchback.
• Chevrolet gave the hatchback a good effort with the Malibu MAXX. When it came time to upgrade the car to the new generation platform, the hatchback was dropped.

A few notable good selling and new hatchbacks. All of these cars are lower cost models, and not in the luxuary category:

• Hyundai Accent.
• Chevrolet Aveo.
• Honda Fit.
• Ford is back in the market with two new hatchbacks, the Fiesta and Focus.

Enter The Savior – Toyota Prius

The slippery Toyota Prius

The best selling hatchback in the U.S is:  the Toyota Prius Hybrid! Initially, the first generation Prius model was a sedan. The second as well as the current third generation Pruis’ are hatchbacks. It’s interesting that the buyers of this vehicle don’t seem to mind that it’s not a sedan. In fact, the hatchback format has given the Prius an unintended competitive advantage: uniqueness. Because the Prius is a dreaded hatchback, most people can recognize it quickly because it stands out. It’s unique form has become synonymous with “Hybrid”. 

 Toyota probably went to the hatchback format because there was a design advantage: the hatchback format can be streamlined more easy to limit air drag. This makes the vehicle more efficient at higher speed. After all, the hybrid is sold as a ‘fuel efficient’ vehicle.

My 2002 Honda Hatchback. It is often mistaken for a hybrid.

 Can the Prius save the hatchback format? Well, another competitor, Honda, has introduced a similar Hatchback Hybrid that is a dead giveaway to the Prius. Ford, as mentioned above, is introducing two new (albeit cheap) hatchbacks. Hybrids are giving this format a new life, but I wouldn’t bet on any new love affair with the hatchback in America anytime soon.

I think I am like most men in that shopping isn’t one of my favorite activities. If you are living out on your own, eventually you will need to get out there and buy some stuff. When you consider what it takes to be a good shopper (it’s a skill really), men are generally outmatched. Even my 13 year old niece already has well developed shopping skills because she has the interest and also because she works at it.

The tips I have here will help you to shop better, save time, eat better, all the while saving money without actually having to make the investment in time that a Pro would make. You can use these tips immediately. That’s why I call them Saving Tips for the Lazy Single Man.

These tips are culled from my own experience as a lazy single man.  There are a mix of ideas here, some are typical recs that help you to lower costs. Others are not typical, because they help you to realize how you are wasting money on stuff after you buy it. For example, a lazy man is never going to return an item so these related tips fall into the category of ‘buy it right the first time’.

1. Buy a George Forman Grill. The GFG (‘George’) is one of those inventions that makes you wonder how single men lived without it. It will save you from starving in your apartment. It can cook almost anything quickly and easily (burgers, chicken, fish), and it will make you look like a Pro. This will save you money so you don’t have to go out to eat everyday.
2. Buy Generic/Sale Items. When you are at the supermarket, you can save money simply by choosing different products in the aisle (no coupons required). Consider the generic versions of products or competitor products that are on sale.
3. Buy the Large Size. For many items, particularly groceries, you can get a price break simply by buying the larger size. The tag on the aisle will indicate the ‘price per quart’ or ‘price per pound’. Use the tag to decide.
4. Buy Clothing Out of Season. To buy clothes frugally, buy them at the right time just when they are about to go out of season. For summer clothes, this is typically after July 4th. For winter clothing, this is usually after Christmas. If you go to the store at this time, the clothes will be on sale without requiring any planning or action on your part.
5. Mine the Dollar Store.  When you decide to clean the bathroom, you will need some cleaners. Or if you need a gift bag for your mother’s gift, the dollar store is a good place to get it cheaply. No sale required.
6. Get a Grocery Store Card. Sign up for one of those savings cards at the grocery store. It will save you money at checkout without any action on your part when you flash it. You don’t want to be bothered with marketing mail, so give them your college room address. They don’t care. Really.
7. Shop During the Week. Skilled shoppers know not only where to buy and how to buy but when to buy. Your time is valuable, you don’t want to spend the day fighting crowds and traffic particularly when you want to buy gifts during the holiday season. Go to the mall near the time it opens (yes, even on Saturday) and after work during the week. You will be surprised how quiet it is.
8. Understand Store Types. There are different types of stores, know the difference to help steer you in the right direction. High Quality/Full Price (1), High Quality/Sale Price (2), Low Quality/Low Price (3), and High Quality/Outlets (4).  So, if you are looking for a pair of Levi’s you are generally better off going to TJ Maxx or Burlington Coat Factory (2) versus Macy’s (1) or Walmart(3). You may also find them at a Levi’s Outlet (4), but be suspicious. My sources tell me that outlets don’t always have the best prices.
9. Host a Football Party. Going to a bar to get food and drinks can get expensive.  Pool with your friends to buy drinks and food and watch the game at home.
10. Go Vintage. Here’s where you have one up on the women. At vintage and thrift shops you can find men’s clothing easily because men’s clothing doesn’t change that much over time, so it can still work today. While you are there, pick up that cheap nightstand that you need, too.
11. Use Your Freezer. If you bought the bigger package of hamburgers to make on your George,  freeze some of it. It will last longer instead of going bad in the refrigerator. Meat/Poultry lasts for only a few days in the refrigerator.
12. Get a Doggy Bag. When eating out save your waste line and get a doggy bag for half of your meal. I know your mother told you to clear the plate, but the meals that you eat outside are too large. Put the leftovers in the frig and eat it for lunch the next day at work.
13. Learn to Cook. To eat economically, your best option is to make food versus eating out or even buying ‘ready’ meals at the supermarket. It’s not as hard as it sounds, if you start out using your microwave. Start off by cooking sides to go along with your hamburger you cooked on the George. Buy canned beans, green beans, corn, etc and heat them up in the microwave. Instant mashed potatoes are not much harder, mix in water/butter, then microwave. Next, try chili, it’s easy: microwave tomato sauce, can of beans and a chili seasoning pack (optional: add meat cooked on George).
14. Go All Black. I’ve at times almost missed my train to work because I couldn’t match a pair of dress socks. Make it easy on yourself, just buy all black plain socks, they work with anything and also with each other. No matter how many of them you lose, you’ll always be able to find a match.
15. Iron It Out. Take a look at your closet. A good look. Why don’t you wear that one pair of slacks? With women, they know exactly why they haven’t worn those well laundered slacks sitting in the closet: they are waiting for that day someday in the future when they will get to the right size to wear them. Since your weight doesn’t change that much, your excuse is simpler: you are too lazy to iron the pants. Admit it. I have a pair of nice slacks I wore once new. And then a second time when I was forced to iron them because I had nothing else clean to wear. Save yourself some time and money, buy shirts and slacks that are ‘no-iron’! A pair of slacks you never wear is wasted money.
16. Check Expiration Dates. Check the expiration dates on the food and medicine you buy. If you buy a good that is stale you will be too lazy to take it back, so it’s lost money. I once found a bag of pretzels that was expired for 6 months. It’s a good thing I checked the date.
17. Get A Discount. Retailers understand that there are a segment of customers who will pay full price as well as a segment that is always seeking a discount. You may be surprised that most retailers, even the high end ones, will give you a discount simply by signing up for a discount program. (Read why I recommend that you don’t sign up for a store credit card just to get a discount). Ask if they have one, you can then save every time you buy at the store. For a time, I paid retail price for clothes at Brooks Brothers until I found out that they have a discount program that saved me 10%.
18. Hang It Up. If you really want to impress your girlfriend, don’t buy an Infiniti G37, learn how to use a clothes line. If you don’t have a clothes line hang them up spaced in your closet. First, try those heavy bulky items like jeans, slacks, and shirts. If you took my advice and bought the ‘no-iron’ clothes, then you are done! This will save you some quarters with the dryer.
19. Automate Your Bills. It’s entirely too much work to buy stamps, write a check and mail payments. Use a bill pay service to automate your bills. I discuss how to do this here.
20. Finally, Contact Your Seer. Sometimes, you need to ask someone close to you where to shop. Yea, I know, this is like asking for directions on the road: you don’t want to do it. Try it. In my case I go to my sister who is an excellent shopper, a confirmed Pro with decades of experience. She was the one who told me about the Marburn shops where you can get all the linens (sheet, blankets, and those covers you put on the pillows that nobody uses) you will need for your apartment at great prices. I never would have found such a store on my own.