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Make Money by Selling Your Stuff

Corey — August 25, 2009

You know all that extra Stuff you have? The Stuff that’s piled in corners, packed in boxes, gathering dust in the garage, or sitting in a storage unit could mean lots of extra cash for you if you’re willing to sell it. Either it’s worth something or it’s just costing you money by taking up space. Here’s how you can make some space and some money by getting rid of your Stuff.

Ignore Your Inner Pack Rat

Your inner pack rat is telling you that you’ll use all that Stuff someday. Or maybe it’s whispering sweet nothings about sentimental value. The first thing you need to realize before you can make money by selling your Stuff is that you must ignore your inner pack rat! He’s what got you into this mess in the first place!!!

To really cash in on your Stuff, you’re going to have to get rid of all the junk that you never use. Then you need to go through the rest and figure out if you really need it or not. Be ruthless! If it’s something you haven’t used in the past 3 months, plan on selling it. Of course, you don’t have to sell everything to make some money. But you’ll make a lot more if you’re willing to part with all that extra Stuff you never use.

eBay

Your first stop for selling your Stuff should be eBay. It’s a great way to sell items for much more than you’d get by having a garage/yard sale – and you don’t have to sit outside at home all day on a weekend either. Not everything will sell very well on eBay, so think about it before you start listing items. There is a cost to this, but the higher prices you’re likely to get will outweigh that. Take quality pictures, use a good title, and write a detailed description to make sure you have the best chance of selling your Stuff at a good price.

Craigslist

For larger items that don’t ship easily, you’re better off using your local Craigslist classifieds. It’s absolutely free and requires little effort on your part. Just make sure to include a good picture, use a good title, and write a detailed description. Be prompt about responding to inquiries, and be courteous by deleting your posting when you’ve sold the item. Be careful about setting up meetings with potential buyers, and be prepared to deal with no-shows. Your best bet is to deal only in cash as checks could easily bounce.

Have a Garage or Yard Sale

This will take a bit more work than the other two options because you’ll need to organize all the stuff you want to sell, indicate prices somehow, and sit out with your Stuff all day while you wait for potential buyers. You’ll want to advertise by putting up signs along major roads near your house the week before and using any free resources like community newspapers and bulletin boards. Be prepared to negotiate with buyers, and don’t overvalue your items. The best way to sell nothing is to price everything too high.

Donate to Charity

Finally, donate whatever you’re unable to sell to charity. The Salvation Army and Goodwill are easy places to make donations of a wide variety of Stuff as well as church yard sales. If you itemize deductions on your tax return, you can deduct your donation and possibly reduce your taxes or get a larger refund. Even if you don’t itemize, you’ll have done something good while getting rid of your Stuff. You’ll get a warm fuzzy feeling, and you’ll have more space so you don’t have to pay for a storage unit. You might even decide to downsize your home and save even more money!

Don’t Waste the Money

Now that you’ve cashed in on your Stuff, be careful you don’t waste all that money. Build up your emergency fund, pay off debt, save for retirement, or give it to the needy. Just make sure you don’t go out and buy more Stuff that will start piling up again in all that space you cleared out!

Stop the Stuff from Taking Over Again

Now that you’ve cashed in on all that Stuff you accumulated before, take time to figure out how you can stop Stuff from taking over your space again. Why did you buy all that Stuff in the first place? Learn your weaknesses, then find ways to avoid the temptation to buy useless Stuff in the future. You’ll save money, time, and the hassle of having to purge all that Stuff again in another few years.

In Debt, Frugality, Miscellaneous, Saving

The Diminishing Marginal Utility of Hoarding: Why Being a Stingy Miser Doesn’t Pay

Corey — August 17, 2009

The other day I was playing around with an Excel spreadsheet I made. I was looking at how much you need to save to reach your retirement goals. At one point, I thought to myself, “What happens if you save more than necessary? How much will it increase your chances of reaching your retirement goal?” The answer I found was very interesting and backs up a verse in Proverbs. But before I can tell you what I discovered, I’ll have to explain what I was doing and how I was doing it.

Monte Carlo Analysis

In financial planning, we use Monte Carlo analysis to simulate random stock market returns among other things. When you’re planning your retirement, it doesn’t make sense to assume you’re going to get an 8% return every single year. The stock market just doesn’t work that way. Monte Carlo analysis gives a more realistic, though not perfect, representation of how the stock market actually delivers returns.

Monte Carlo analysis uses the assumptions you give it to randomly pick numbers within a specific range. I used Monte Carlo analysis to pick random stock market returns within a range based on historic performance results. I looked at how a person’s savings would grow as they invest for 45 years to reach their retirement goals.

Each 45 year investment period is called a “trial”. The success or failure of a trial depends on whether or not you reach your goal at the end of the period. I was testing to see whether you would have accumulated enough money to retire at the end of 45 years based on your retirement goals.

Running just one trial isn’t enough. To get a meaningful result, you have to run thousands of trials. To figure out your success rate, you divide the number of successful trials by the total number of trials you ran. In my example, I ran 5,000 trials (that means 5,000 sets of 45 year investment periods). An 80% success rate would mean that 4,000 out of my 5,000 trials were successful.

Monte Carlo analysis is useful because it incorporates the uncertainty of the stock market into your retirement planning. It has some limitations, but it’s the best we can do for trying to predict the future. The stock market doesn’t work exactly the way the model works, and there’s also the question of what a good result should be. Traditionally, a success rate of 80% or higher is “good” because there are so many assumptions built in to the model. Trying to go for a higher success rate means you’re placing much more importance on your assumptions being correct.

I found that saving 20% of your desired retirement income and increasing it by inflation each year would give you an 82% success rate to reach your retirement goals. That’s pretty good, but then I wondered what would happen if you saved even more. How much would your success rate increase if you saved even more?

The Results: The Diminishing Marginal Utility of Hoarding

So I proceeded to run a Monte Carlo analysis at different savings rates. I started at 0% and increased it by 5% for each new analysis all the way up to 100%. Here’s a graph of my results:

As you can see, saving 0% gives you a 0% chance of reaching retirement – which makes sense, right? Saving 10% gives you about a 60% success rate, and saving 20% gives you an 82% success rate. But do you notice the interesting part? As you begin to save more than 20%, your chances of successfully reaching your retirement goals go up less and less. After you hit that 20% savings mark you don’t get very much bang for your buck.

It might be easier to see what I’m talking about using this chart:

So when you go from saving 0% for retirement to saving 5%, you increase your chances of success by 37%. If you go from 5% to 10%, you increase your success rate by another 23% giving you a success rate of 60%. From 10% to 15% increases your chances of success by 13%, and from 15% to 20% gives you another 9% increase. Once you get to 20% though, saving another 5% only increases your success rate by 3%. Every little bit more that you save gives you a smaller and smaller increase in your chances of success.

This shows what I call “the diminishing marginal utility of hoarding”. In economics, the law of diminishing marginal utility says that for each additional unit you use you get less satisfaction than you did with the last one. For example, eating one chocolate bar tastes good. A second one right after doesn’t taste quite as good, the third a little less so, and so on. Eating seven chocolate bars in a row just gives you a sick stomach.

What we’re seeing here is the law of diminishing marginal utility applied to saving. Saving money for retirement is good. But once you get to a certain point (which depends on how long you have until retirement and how much you have already saved), saving more and more doesn’t increase your chances of success quite as much as it did before.

How Can This Be True?

Because Monte Carlo analysis is looking at thousands of possible scenarios, you’re going to have some scenarios where the stock market loses money for several years in a row. While that’s (hopefully) not as likely in real life, saving more and more isn’t going to help you much if that happens. You’ll just keep losing the money, and the impact is even greater if you already have a lot saved. So this phenomenon is partly due to the method we’re using, but it also illustrates a fundamental truth – being stingy doesn’t help you quite as much as you might think it will.

What God Has to Say about It

I was so excited to see these results because they help illustrate some of God’s wisdom about giving:

²⁴ There is one who scatters, and increases yet more. There is one who withholds more than is appropriate, but gains poverty. ²⁵ The liberal soul shall be made fat. He who waters shall be watered also himself.

Proverbs 11:24-25 (WEB)

Maybe you’re thinking I didn’t really prove that point, and you’d be right if you’re only thinking about dollars and cents. When Jesus talked about giving our money to the poor, He never said that it would make us rich in this life. When we give to honor God, we store up treasures in Heaven. This is precisely how one person can give away a lot of his money and become wealthier while another is stingy but becomes poor.

Being a stingy miser won’t give you a better chance of reaching your retirement goals. Once you’re saving enough, you have to be content that you’re doing what you should and hand the rest over to God. Hoarding money for yourself doesn’t help you that much in this life, and it will severely impoverish you in the next.

So how do you know when you’re saving enough? To find out, sign up for free updates to Provident Planning. I’ll be examining that question and many more that will help you prepare for a retirement that honors God and live a life that glorifies His name.

In Giving, Retirement, Saving

Should a Christian Have an Emergency Fund?

Corey — August 12, 2009

It’s wise to have about 6 months (or more, depending on your situation) worth of your living expenses saved up in an emergency fund. Almost any financial expert will tell you this is a good idea. But is having an emergency fund a good idea for a Christian? Doesn’t that mean you’re no longer trusting in and relying on God? Let’s look at what the Bible says about this issue.

Danger Ahead

Life is uncertain. Life is difficult. We can all agree on those two facts. Having faith in God doesn’t change the truth of those statements – it only changes how we deal with the difficulty and uncertainty of life. We all know we’ll hit snags along the way, and many of these snags will have financial consequences. Cars break down, people get sick, companies downsize, and disasters happen. Only the (figuratively) blind or delusional would deny those realities.

So how should we cope with the inevitable trials of life? Proverbs provides a good reflection for this question.

The prudent sees danger and hides himself, but the simple go on and suffer for it.

Proverbs 22:3 (WEB)

This verse is also found in Proverbs 27:12.

The New Living Translation says “A prudent person foresees danger and takes precautions.” Prudence and wisdom are strongly praised throughout the Bible as gifts from God and virtues of the righteous. They are something every Christian should strive for. Here, the Bible tells us that the prudent see dangers ahead and prepare for them. They get ready to handle the inevitable trials they will face. Those who do not prepare are called “simple” – naive, dumb, stupid, or foolish. If you know trouble is ahead, you’d be a fool not to get ready to handle it the best you can.

You Don’t Know What Will Happen

You might think, “Well, I’ve got a good job and my boss likes me, so I’ll be fine.” Or, “My car is pretty new. It won’t need repairs for a long time.” Or maybe, “I’m in good shape. I shouldn’t have any medical bills until I’m old.” While the preventative measures you take may reduce your chances of running into trouble, the truth is that you just don’t know what will happen. Ecclesiastes 11:2 is often used to promote the idea of investment diversification to Christians (and that’s a logical application), but we can see how it relates to emergency funds as well.

Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.

Ecclesiastes 11:2 (WEB)

This verse fits perfectly into the idea of diversification (even though it would have originally applied to agricultural practices). But the gist of it is that we should take appropriate precautions because we don’t know what will happen or what disasters may strike. An emergency fund is a very appropriate precaution against the financial difficulties or disasters we may face. Therefore, it is prudent for a Christian to have an emergency fund.

Take Care of Your Family

Without proper savings, financial troubles can be very strenuous on a family – often forcing you to make difficult choices between necessary expenses. Putting your family in a bind is neither wise nor loving, and the apostle Paul warned Christians to care for their family’s needs.

But if anyone doesn’t provide for his own, and especially his own household, he has denied the faith, and is worse than an unbeliever.

1 Timothy 5:8 (WEB)

It is a testament to the wisdom and providence of God when Christians take care of their family’s needs through hard work and good judgment. We have a responsibility to provide for ourselves if we can, else we will give non-Christians a reason to criticize Christianity. It’s another stumbling block we can put in the way of others. But taking care of our families puts us in a better position to give generously when the occasion arises and makes it much easier for love to be expressed without worry, anxiety, and other unnecessary burdens.

Don’t Trust in Money

It’s clear that it is wise to prepare for emergencies ahead of time, and an emergency fund is one way a Christian can exercise prudence in this area. However, it’s important that we don’t begin to trust in our emergency funds instead of God.

He who trusts in his riches will fall, but the righteous shall flourish as the green leaf.

Proverbs 11:28 (WEB)

We must always hope and firmly rely on God’s goodness and mercy and love to see us through the difficult times in life. Through His strength and power, we can overcome the emotional trials we will face. And through the blessings He provides and our prudent management of those blessings, we can save up to prepare for the emergencies and unexpected problems we’ll face. Trusting in God and having the wisdom to save up for the future work hand in hand to help us flourish as a green leaf.

We could try to keep our emergency funds at 2, 3, or even 5 years worth of our expenses, but time has shown that this isn’t really necessary. We can do what’s prudent and necessary (save 6-12 months of expenses as an emergency fund), or we can go overboard and have more faith in money than God. That’s the difference between trusting in riches and trusting in God. How far are you going to take the wise actions the Bible commends? Once you begin hoarding, you no longer honor God because you have become stingy and not willing to be generous. The balance is doing what is wise while still honoring the other areas of God’s plans for your finances – and the biggest aspect is generous giving.

So feel free and confident in saving up a wise amount for your emergency fund. But don’t take it so far that you begin to trust in riches instead of God.

In Saving

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