Garage Sale Tips- Buying Bargains and Selling Secrets

Learn how to find garage sale bargains as a buyer, and how to have a successful garage sale as a seller.  How to make effective garage sale signs.

Garage Sale Bargains- Buying at Garage Sales

Garage sale sign shows address,days of sale, and directional indicator
Image Source: Dr. Penny Pincher

Garage Sales

Garage sales are an opportunity for the seller to get rid of unneeded items and pick up some money.  The seller doesn’t need to transport any of the items- people will buy them and take them away.  For buyers, garage sales provide an opportunity to get useful items at a very low price.  For some sellers, the primary purpose of holding a garage sale it to get rid of items, so the prices can be very low.  Many garage sales have tables of items that are priced at a few dollars, or boxes of items for a few dollars.  Some garage sales even have free items available for anyone to take.

Yard Sales, Tag Sales, Moving Sales, Estate Sales, and Auctions

Related types of sales that provide opportunities for bargain hunting are yard sales, tag sales, moving sales, estate sales, and auctions.

A yard sale is simply a garage sale without the garage.  Items for sale may be displayed on someone’s yard rather than in a garage and on the driveway.

A tag sale usually includes higher quality items such as furniture, antiques and collectibles that are individually marked with prices.

A moving sale is similar to a garage sale, but is specifically triggered by someone moving and wanting or needing to sell items to avoid moving or storing them.  A moving sale signals some desperation on the part of the seller since time is limited.  Buyers may be able to have more bargaining power at moving sales.

Estate sales indicate that someone’s household items are being sold due to death, retirement, etc.  Items for sale at an estate sale typically include most if not all belongings of the owner.  The quality of items at an estate sale varies, but is often similar to a tag sale with many valuable items for sale.

An auction is a means of selling where none of the items for sale are priced.   The auctioneer takes bids for items individually by calling out prices.  When someone bids on an item, the auctioneer increases the price and continues taking bids.  When no more bids are forthcoming, the auction announces “sold!” and moves on to the next item.  Thus each item is sold to the highest bidder.  An auction can be held on the seller’s property or at an auction house.

How to find great deals at garage sales

What Bargain Items are Sold at Garage Sales

There are two categories of bargain items you can find at garage sales:

1. Things you need and will use and can get for a very low price
2. Things you can resell for more on craigslist, eBay or at your own garage sale

Top Bargain items to look for at garage sales:

• Bikes: especially name brand, kids or adult
• Tools: hand tools or power tools
• Tricycles for kids
• Leather clothes: especially leather jackets
• Antiques
• Musical instruments
• Unique art items for decorating
• Used hardcover books, a good price is $2 or less- if not moldy
• Used CDs, DVDs and video game discs, a good price is $2 or less- if not scratched
• Working video game systems, a good price is $30
• High quality kids toys
• Wagons
• Collectibles/collections
• Sporting goods: golf clubs, exercise equipment in good working order

Watch out for:

• Outdated electronics
• Broken items or items in need of repair
• Things you don't really need and can’t sell for a profit

Finding Good Garage Sales and Getting the Good Items

Garage sales that are selling high quality or valuable items are not usually a well kept secret.  These will be advertised on craigslist, in the local newspaper classifieds, or both.  Saturday is the prime day for garage sales, and Saturday morning is the peak time.  You can drive through neighborhoods on most Saturdays during garage sale season and find garage sale signs to follow.

Some sale advertisements and signs indicate that early birds are welcome or that early birds are not welcome.  Early birds are shoppers that arrive at a sale before it officially opens and attempt to snap up the best bargains.  It pays to be one of the first to arrive at a garage sale to have the best chance to find great deals.  If the ad doesn't say that early birds are not welcome and there is an item you are interested in, it can’t hurt to show up a bit early to check it out.

Negotiating the Price

Prices at garage sales are usually flexible, especially as the end time of the garage sale approaches.  Getting 10% to 20% off of the listed prices is pretty common for most items.  Offering to take multiple items can help obtain discounts from the seller, since one goal of the seller is to get rid of items they don’t want anymore.


Here's a guide to finding buying bargains at garage sales and selling them for a profit on eBay...

How to Have a Successful Garage Sale- Tips to Sell Your Items and Make Money

When to Schedule Your Garage Sale

The prime season for garage sales is May through September, with spring and early summer being the most active times.  Saturday is the prime day, with Saturday morning the busiest hours.  Some people start their garage sale on Friday afternoon or even on sell on Thursday afternoon, Friday afternoon, and then all day Saturday.  I prefer to focus my effort on a single day rather than spreading the sale out over multiple days.

How to Advertise Your Garage Sale

You’ll want your advertising for your garage sale to appear starting at least one day before your sale to give potential buyers a chance to take note and make plans to attend.  Some people study garage sale ads carefully and plan their weekends around hitting the best ones.   You want to make sure you get on their list.

More casual garage sale shoppers will check the newspaper classified ads or look on craigslist the morning of the sale.  If you advertise on craigslist, you’ll want to make sure your listing appears on the day of the sale, you can renew it and get it posted on the top of the list.

Another highly effective advertising technique is to mention your sale to neighbors starting a couple weeks ahead of time.  Some of your neighbors may be interested in your items, and they’ll spread the word to others as well.

When advertising your garage sale, it helps to be able to mention a few headline items.  If you say you are selling old clothes, paperback books, and VHS tapes, you probably won’t draw a big crowd.  It can bring people to check out your sale if you have a few interesting things to list such as antiques, vintage items, collectables, tools, etc.  Your goal in writing the ad is to make your sale sound promising enough to merit a trip.

Effective Garage Sale Signs

Many garage sale shoppers simply see garage sale signs while driving and spontaneously decide to stop.  You’ll want to place signs the day before- this will also cause some people to make plans to attend your sale.  Effective garage sale signs provide a date, address, and a directional cue and are posted along main roadways.  Signage with this information will have the best chance of convincing someone driving along that your sale is for real and that they can find it.  Some people use balloons or large signs to draw attention.

Buy a Garage Sale Kit- or Make Your Own

You can buy a garage sale kit that includes garage sale signs and price stickers (both blank and with printed with popular price amounts) at discount stores, hardware stores, and home improvement stores for less than $10.  If you want to save a few bucks, you can make your own cardboard garage sale signs for free and get blank stickers at an office store or dollar store for about $2.  Another option: get a cheap garage sale kit on eBay

Homemade Garage Sale Directional Sign
Image Source: Dr. Penny Pincher

Organizing Your Garage Sale

Prices

You’ll need to decide prices for your items.  This is sometimes easier said than done.  How much is a set of old golf clubs worth?  Some items may take a bit of research on eBay to set reasonable market prices.  You’ll want to mark the items with price stickers.    Consignment shops often do not accept items with garage sale price tags, so you may want to use boxes labeled with a common price for multiple items, or have a $5 table where any item on the table is $5.  This will save you the trouble of removing price stickers if you end up selling items at a consignment shop.

If you have fairly expensive items, such as over $100, it is useful to print out listings from eBay for similar items to help buyers accept your price.  Of course they won’t have to pay shipping if they buy it from you rather than on eBay.

Firm Prices or Negotiate Prices?

Are you willing to bargain on prices?  Many garage sale shoppers expect to get items for lower than asking price.  Expect offers 10 to 20% lower than asking price.  It is a good idea to set prices with a bit of room to negotiate- this will make it easier for you to close the deal with buyers.

Let’s say you have an item marked $4.50, someone offers you $4.00 and you decline and say that prices are firm.  That potential buyer may very well walk away.

Now let’s consider this transaction again with slightly different pricing that facilitates negotiation.  This time let's say you mark the same item at $5, someone offers you $4.00 and then you then suggest $4.50.  You’ll probably sell the item for $4.50 just like you wanted.  Everyone’s happy.  Leaving some room in the price to negotiate can help you reach a deal with buyers.

Garage Sale Preparation and Setup

Use display tables to arrange your small items, and arrange your larger items in your driveway or garage.  Displaying your items in a neat and organized fashion serves two purposes:

1. It will attract buyers to your sale.  People often drive buy before stopping to decide if a garage sale is worth stopping for or not.  You’ll want people driving by to see that you have some quality items for sale and that they will be able to easily look through what you have if they stop.
2. It will help you sell more.  If buyers can quickly see what you have, you’ll sell more

Cash or Checks?

You’ll need to decide whether or not to accept personal checks.  The risk of accepting a personal check is that it might bounce and you may never get the money.  The risk of not accepting personal checks is you may loose a few sales if a potential buyer has checks with them but not cash.  Also, it would be awkward to refuse a personal check from a neighbor.  Whether you are taking checks or not, some people will buy with cash.  Don’t forget to have some change on hand for cash transactions- small bills and coins.

Early Birds Welcome or Not?

You’ll need to decide whether to welcome early birds or not.  At my first garage sale a number of years ago, the doorbell rang an hour before starting time.  An early bird wanted to look at my coke machine that was for sale.  I was asking $125 and he offered $100 which I accepted.  At starting time, another buyer asked about the coke machine.  He was upset when I told him that it was already sold.

My advice would be to add “no early birds, please” to your garage sale advertisements.  This makes it clear to everyone what to expect.  Also, I think I could have sold the coke machine for the full $125 asking price if I would have waited…

How to Handle Rain on Garage Sale Day?

Since you don’t want your items to get wet, you have two options:   move the sale inside or take down your signs and postpone your garage sale to a different date.  If you have room in your garage or in your basement, you can proceed with your sale inside.  If the forecast is for rain all day, I would postpone since many buyers will stay home and you’ll sell more if you postpone.

This garage sale was forced inside due to rain- displaying items outside would attract more traffic
Image Source: Dr. Penny Pincher

What to Do with Items That Don’t Sell

It’s likely that not everything you want to sell at your garage sale will be sold.  Depending on what is left over, you could take the items to Goodwill for donation or take the items to a consignment store to sell.  If you have enough items left, you could plan to hold another garage sale.  You could sell some of the items on eBay- this will present your items to a larger audience.  Another options is to take unsold items to a local auction house to be sold.  After considering all of these options, there may be some items that you’ll need to throw away if you want to get rid of them.

How Much Money Can You Make at a Garage Sale?

Of course the amount of money you can make at a garage sale depends on what you have to sell and how many buyers turn out.  I have made hundreds of dollars at a 4 hour garage sale, and know people who have made over $1000 at a garage sale.  You can’t really control what items you have available to sell, but you can influence how many buyers show up through your advertising and preparation.  You have some influence over selling price as well though how you set the asking prices and how you negotiate.  Focus on the things you can control to have a successful garage sale!

Recommended Reading:

How to Sell Used Items at a Consignment Shop and Get Cash

How to Sell on Craigslist

Amazon offer: The Garage Sale Millionaire: Make Money with Hidden Finds from Garage Sales to Storage Unit Auctions and Everything in Between

Penny Pincher Journal

Copyright © 2013 Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

How to Sell on Craigslist

How to Sell on Craigslist

Selling on craigslist is much like placing a classified ad in a newspaper.  You create an ad that describes your item for sale and how to contact you to view or purchase the item for sale.

Placing ads on craigslist is free.  All you need is an e-mail address.  If you don't have an e-mail address, you can get a gmail or outlook (formerly hotmail) e-mail address for free.  You can also include photos with your ad.  This will help your item sell.

Anyone with Internet access can look at ads on craigslist.  Some people check listings on craigslist every day (or even more often) looking for bargains.  For example, people interested in antiques may frequently check for new items for sale in the antiques category on craigslist.

I have used craigslist to sell items ranging from recreational vehicles to household items to collectibles and antiques.  Here is how to sell on craigslist:

How to Post an Ad to sell on craigslist

It only takes a few minutes to post an ad on craigslist.

1. Go to craigslist.org
2. Select the city nearest you.  One of the rules of craigslist is that you can only post your ad in one city at a time.
3. Navigate to the best category for your item.  Look under the "for sale" banner and select the best category from the list, for example "antiques"
4. Click "Post" to start the process of placing an ad on craigslist
5. When prompted, choose a category for your ad, for example "antiques- by owner".  You may also see categories for sales by dealer, etc.  Just pick the one that most closely matches your situation.
6. Fill out a description of your item for sale.  On this screen, you'll enter the Posting Title, Price, Specific Location, your e-mail address, and description of your item.  See below for tips to describe your item go get responses from buyers.

Place your ad to sell an item on craigslist
Source: Dr. Penny Pincher

7. Upload pictures.  This screen allows you to select image files on your computer to upload to your craigslist ad.  You'll need to take digital pictures of your item for sale.  Using a computer or smart phone, you can upload these to be included in your ad.  Pictures are not required, but are helpful to get buyers interested in your item.  

Upload images to your craigslist ad to sell your item
Source: Dr. Penny Pincher

8. Publish your ad.  You'll have a chance to preview your ad as it will appear on the internet and you can click a button to publish it.  If you spot any mistakes in your ad, you can go back and make changes before publishing it.

Preview your ad, click publish to place your ad on craigslist
Source: Dr. Penny Pincher

9.  You will see a message that you have been sent an e-mail that you will need to open and click a link to activate your craigslist ad.  This e-mail contains instructions on how to:

• PUBLISH YOUR AD
• EDIT (OR CONFIRM AN EDIT TO) YOUR AD
• VERIFY YOUR EMAIL ADDRESS
• DELETE YOUR AD

Save this e-mail for future reference so that you can edit your ad as needed and delete your ad after your item is sold.

Tips to describe your item to sell on craigslist

Your item will sell faster if you can provide a detailed description.  Include the make, model, age, and condition of your item.  There are lots of items for sale, so potential buyers will skip over your listing if they cannot easily understand what you are selling.

Clear pictures help.  Craigslist allows up to 8 pictures, so try to get photos from multiple angles.  The first picture you upload is the one that will be featured and shown first when someone opens your ad.

I like to include measurements in the description when selling items such as furniture- if you don't include measurements, you may get lots of questions asking for the measurements.  It's easier to provide this in the description.

It is helpful to provide a specific asking price as well.  Make sure the price you enter in the listing description matches any price you may mention in the item description.  If buyers see two prices, they will automatically go for the lowest one- or even worse see room to negotiate down from the lowest price.  So make sure you only have one price listed anywhere in your ad.  It is a good idea to specify "cash only- no checks" to avoid misunderstandings later.

Avoid scams on craigslist

Some of the biggest risks on craigslist are scams where people will try to get money from you for a product they don't actually have.  Car selling scams are an example of this.  Someone will try to get you to send them money for a product they will send you later- then they disappear with your money.  When buying, always see the item for sale in person.

When selling, always get cash from the buyer.  This avoids any problems with bad checks.  For larger purchases, a cashier's check from a local bank is much better than accepting a personal check.

e-mail Trolling on craigslist

When you have an item listed on craigslist, you may get inquiries about your item that simply ask, "Is your item still available?"  Generic inquiries like this are likely sent by robots trying to harvest your e-mail address so it can be sold to spam mailing lists.  I don't respond to inquiries unless they mention something about the item for sale, or the buyer's location relative to mine.  What I am looking for is evidence that the e-mail was sent by a human interested in my item rather than a robot trying to get my e-mail address.

I am happy to reply to messages asking a specific question about my item for sale, or how far it is from the buyer's location to mine, etc.  But consider it a red flag when you get inquires that are so generic they could be sent to anyone selling something on craigslist.  I ignore these.  If you are concerned about missing a sale from someone who may really not know if your item is still available, you can add text in your ad on Craigslist that states that the item is available as long as the ad is posted.  With craigslist, it is easy to take down your ad when your item sells, or add a note that says "sale pending" if you have accepted an offer but not yet received payment.

Here are some examples of actual e-mails I received responding to craigslist ads.  If I had replied to these, my e-mail address would have been captured and sold to spam e-mail lists:

• "Do you still have the item forsale?. Hit me back with an email if its available. My email is connected to my android phone and i can respond immediately. Thanks. Philip"
• "Still avaliable? Contract me at [address-deleted]@gmail.com"
• "Amount??? get back to me at  [address-deleted]@gmail.com"
• "Do you still have the items for sale, get back to me with your phone # and email to contact you with asap."

Notice how none of these messages refer to the specific item for sale.  These messages could apply to any item for sale on craigslist.  Also, notice the incorrect grammar and misspelled words.    My advice is to simply delete this type of generic inquiry to a craigslist ad to avoid providing your e-mail for spam mailing lists.

How much information to share on craigslist? 

When you create your ad on craigslist, you will need to provide some contact information so sellers can contact you to ask questions and arrange to purchase your item for sale.  Craigslist can turn your e-mail address into an anonymous e-mail, so your real e-mail address is not posted on craigslist.  This will reduce the amount of spam e-mail you receive.  You will need to decide how much additional information to reveal to strangers on the internet.  I keep it to a minimum.  Potential buyers contact me through e-mail.  I can then decide whether to respond or not.  Once you respond, your e-mail is no longer anonymous- the buyer gets your real e-mail address at that point.

Selling safely on craigslist

I will typically arrange to meet the potential buyer in a public place to look at the item for sale if it is transportable.  This may be a parking lot or coffee shop.  I will share my cell phone number with a potential buyer to make coordinating the meeting easier.  If the item is not transportable, you may decide to share your address with the potential buyer.  I would recommend talking to the buyer on the phone first to decide whether to share your address or not.  If you have any concern for your safety, simply say you have another call coming in and end the call without sharing your address.

Avoid sharing too much information in your ad since you have no idea who will end up with that information. Buyers on craigslist are fully capable of using craigslist anonymous e-mail to make initial contact if they are interested in your item- they don't need your phone number and address to do this.

Dealing with Buyers- Closing the Deal

Don't be surprised if you get an offer for less than asking price when you meet with the potential buyer.  Another situation that may occur is that the buyer offers you a personal check, even though you specified cash only.  If your item is in high demand, I would recommend holding out for your terms- full asking price and cash only.  However, if you think you might have trouble find another buyer you may decide to compromise a bit.  

I have had great success selling items on craigslist- the best part:  it's free and you can change your ad whenever you want!

Recommended reading:

How to Sell Used Items at a Consignment Shop and Get Cash

How to Ship Sold eBay Items

Amazon offer: The Garage Sale Millionaire: Make Money with Hidden Finds from Garage Sales to Storage Unit Auctions and Everything in Between

Penny Pincher Journal
Copyright © 2013 Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

How to Get Rich

There are 3 primary ways to get rich:  inheritance, high salary, and investment.  We'll focus mainly on how to get rich through investment since this is the only way to get rich that is available to most people.

Pile of hundred dollar bills
Image courtesy of David Castillo Dominici via FreeDigitalPhotos.net

Inheritance

Inheriting money is probably the easiest way to get rich.  However, if your relatives are not rich, you will not get rich through an inheritance.

High Salary

Some people, such as actors and sports stars, get rich from making a very high salary for their labor.  This usually requires a great deal of talent, skill, and good fortune and can be achieved by only a few people under special circumstances.

Investment

Most people who get rich do so by owning something that increases in value.  The fundamental strategy to get rich is to make investments that grow in value over time.  The amount you can invest and the rate of return on the investment will determine how long it takes for you to get rich.
    

Risk and Reward

There is a relationship between risk and potential reward.  For example, you could start a small business or invest in a start-up company and end up with a very high rate of return.  However, there is a significant chance that you could lose money as well.   At the other end of the risk spectrum, you could put your money in a savings account.  There is essentially no risk of losing your money in this investment, but your rate of return would be very low, currently less than 1% per year.

Most types of investments have a risk level and rate of return between the high risk/high return of a start-up business venture and the low risk/low return of a FDIC insured savings account.  Stock market investments are popular.  Historical long-term return of stock market investments is about 8.8% including price appreciation and dividends.


Real estate is another popular investment vehicle.  Real estate property values depend on both local and national/global factors.  The local economy influences real estate prices.  If a community is popular and people are moving in, then the real estate market will be strong for residential and business property.  Factors such as interest rates and tax policy also impact the market price for real estate.  Since real estate prices can be volatile and depend on local economics, a real estate investment may be higher risk than a stock market investment.

How long does it take to get rich?

How long it takes to get rich through investment will depend on how much you can invest and the rate of return on your investment.  Let’s consider some investment scenarios that require various levels of skill and active management of the investments on the part of the investor.

Stock Market:
Let’s assume you get the historical average return of 8.8%.  A stock market investment does not require much skill or work on the part of the investor.  You could invest in an index funds or mutual funds and allow your investment to grow without daily intervention.

Real Estate:
Let’s assume you have some skill in real estate investment and can follow the hot markets.  This would take significant skill and a fairly high level of attention to your investments.  For example, you might invest money to buy a home in an up-and-coming neighborhood, fix it up and sell it.  You may gradually purchase some homes, rent them out, and sell them as they appreciate in value.  Let’s assume you can sustain a 15% average return on investment over time in real estate investments.  This will not only require cash but hands-on work as well.

Start-up Business Ventures: 
This scenario involves either starting small businesses or investing in small businesses- a risky proposition.  Let’s assume you keep your businesses growing and continue to start new ones to get a 30% return over time.  This would be a very impressive rate of return and would take dedication, hard work, and good fortune to achieve.  The business could be anything that could achieve a 30% rate of return, for example investing in and running a growing franchise fast food or service business.  It will require both cash and active participation of the investor to achieve a high rate of return.

Years to Reach 1 Million Dollars through investment
Source: Dr. Penny Pincher

The table above shows the number of years that it would take to acquire 1 million dollars through investment with the average rate of return indicated.  You can see that even with a small monthly investment of $50, you could become a millionaire in 24 years- if you can sustain a very high rate of return.  Unless you have good investment skills and are willing to be an active investor, the 8.8% annual rate of return is a more reasonable expectation.  At this rate of return with an investment of $1000 per month, you would reach 1 million dollars in 25 years.

Effects of Inflation

Years to Reach 1 Million Dollars through investment, adjusted for 3% inflation
Source: Dr. Penny Pincher

Considering that prices tend to rise over time, you will need more than $1 million in the future to buy the amount of goods and services that would cost $1 million today.  If we factor inflation at 3% (the long term average), we can see how this impacts how long it takes to get rich.  With our stock market investment of $1000 per month, it will take 32 years rather than 25 years to reach $1 million of purchasing power.

How do you get money to invest?

It takes money to make money through investment.  The easiest way to get money is to simply not spend the income you have coming in.  Through frugal living and careful budget planning, you may be able to use more of your income for investments rather than spending it on expenses.  Penny Pincher Journal has some great ideas to help you save money.  Another possibility is to get a second job to earn additional money to invest.

One way to accumulate ownership in an investment without cash is to use “sweat equity”.  Sweat equity is contributing labor rather than cash investment to gain equity in a business.  For example, an angel investor may invest $100,000 cash in a start-up to gain 50% equity, and the entrepreneur who runs the business day-to-day would put in $20,000 cash and full time labor for one year to gain 50% equity.

How to Get Rich

Like many things, getting rich sounds simple but is hard to achieve.  If you had $100,000 right now, would you invest it, or would you spend it?  Most people would be tempted to buy a new car or bigger house.  People on the way to becoming rich would likely invest the money and grow it into a larger asset.

Really, there are only 2 steps to  how to get rich:

1. Establish a budget so that you have money to invest every month.  You may need to reduce your expenses or obtain additional income.
2. Make regular investments over time that maintain a good rate of return.  This may require active investing to make adjustments to your portfolio.

How long it takes to get rich will then depend only on the rate of return and the amount you invest each month.

Recommended reading:

How to Make One Million Dollars by Driving a Used Car and Investing the Car Payments

How to Win the Lottery 

Penny Pincher Journal
Copyright © 2013 Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

How to Win the Lottery

How to Win the Lottery

Your best chance to win: Powerball or Mega Millions?
Image source: Dr. Penny Pincher

The only way to improve your odds of winning the lottery is to buy more tickets.  For both Powerball and Mega Millions, the odds of winning the jackpot is about 1 in 175,711,536 per ticket that you play.  That’s one chance in 175 million.  Pretty long odds.

The good news is that there are two aspects of playing the lottery that you have control over that can help you without buying more tickets:

1. Which lottery drawing you play 
2. Which numbers you pick.

Choosing the Best Lottery Drawing to Play

Lottery Ticket Scanner
Image Source: Dr. Penny Pincher

Each lottery drawing has its own set of tickets for a chance to win the jackpot.  The jackpot amount varies depending on number of tickets sold and whether or not anyone has won recently.  The jackpot continues to accumulate until there is a winner.  The size of the jackpot affects the number of tickets sold.  When the jackpot grows enormous, the lottery becomes front page news and many tickets are sold.

The Value of a Lottery Ticket

One way to decide the best time to buy a lottery ticket is by trying to estimate the “value” of a lottery ticket.  For example, if the jackpot is $175 million, and your odds of winning are 1 in 175 million, then the value of a ticket is $1.  This does not take taxes or inflation into account.  Federal and State taxes will reduce the lottery jackpot payout that you keep by about 40%.  If you prefer immediate payout rather than payout over a 30 year payout, this will reduce the jackpot amount by about 30%.  Keep these reductions in mind when you see the "value" of a lottery ticket.

Now let’s look at some real data.  This is data I requested and obtained from the lottery office for the national Powerball and Mega Millions lottery drawings over a 2 year period.  The graphs below shows the calculated “value” of a lottery ticket based on the jackpot amount divided by the odds of winning.

Mega Millions Ticket Value vs Jackpot
Source: Dr. Penny Pincher

Powerball Ticket Value vs Jackpot
Source: Dr. Penny Pincher

The Risk of Sharing the Jackpot

Based on this data, the best time to buy a lottery ticket is when the jackpot is largest.  The big Mega Millions drawing for $640 million and the Powerball drawing for $587 million look like the best ticket buys, with a value of over $3 for a ticket that costs $1.  One ticket buys a 1 in 175 million chance of winning the jackpot, no matter how big it gets.  However, a big jackpot leads to more tickets sold.  Why does this matter?  The number of tickets sold does not affect your chance of winning the jackpot, but it greatly effects the chances of sharing the jackpot.

The plots below show the number of tickets sold vs the size of the jackpot.

Mega Millions Tickets Sold vs Jackpot Value

Powerball Tickets Sold vs Jackpot Value
Source: Dr. Penny Pincher

We can calculate the odds of more than one winner based on the number of tickets sold and the odds of winning.  The plots below show the odds of only one winner vs the number of tickets sold. You can see that when the number of tickets sold grows to more than 100 million or so, the odds that you will have to share the prize is about 50%.  This significantly impacts the “value” of a lottery ticket.

Mega Millions Odds of 1 Winner vs Number of Tickets Sold
Source: Dr. Penny Pincher

Powerball Odds of 1 Winner vs Number of Tickets Sold
Source: Dr. Penny Pincher

How to Win the Lottery

The best drawings to play have a good “value” for the lottery ticket based on the jackpot size and odds of winning while also having a high probability of only one winner.  Looking at lottery tickets from the perspective of return on investment, this is the best time to play.  Unfortunately, the number of tickets sold does not seem to be published before the drawing, so the best you can do is look at historical relationship between jackpot size and ticket sales to estimate the number of tickets sold for the current drawing.

Best time to play to maximize ticket "value" based on jackpot size and odds of winning AND have low chance of sharing the jackpot:

Megamillions: Jackpot between $200-300 million

Powerball: Jackpot between $200-250 million

You want the lottery jackpot to be big, but not so big that the number of tickets sold make it likely to have more than one winner.  For example, the big Mega Millions jackpot of $640 million on March 30, 2012 was split 3 ways.  Not surprising since 531,721,271 tickets were sold.  This very high number of tickets sold made the most likely number of winners 3, effectively reducing the "value" of a lottery ticket for this drawing by a factor of 3.  The Powerball drawing on November 28, 2012 for $587 million had 2 winners- again, not a surprise since 563,131,974 tickets were sold.  The most likely number of jackpot winners for this number of tickets sold is 3.

Keep in mind that we did not include taxes or the cost of receiving an instant payout vs a 30 year payout when calculating the "value" of a lottery ticket in the graphs above.  When these factors are included, along with the risk of sharing the jackpot as more tickets are sold, the value of a lottery ticket is less than $1.  However, choosing which drawing to play can increase the value of a lottery ticket by 2x if you choose wisely.  It's worth thinking about.  If you're going to play, you might as well maximize the value of the lottery ticket you buy.

Which Lottery Numbers to Pick?

Play Powerball!
Image source: Dr. Penny Pincher

The other aspect of playing the lottery that you can control is the numbers you pick.  Most people play “lucky” numbers like birthdays, anniversaries, etc.  These numbers range from 1 to 31.  The Mega Millions and Powerball numbers on the lottery balls range from 1 to 56.  If you pick numbers in the range of 32 to 56, you are just as likely to win and are less likely to have to share the prize if you win since fewer people play these numbers.  However, many people use computer picks which choose from the full range of numbers.  So you will also want to use the strategy above to choose drawings that have a high jackpot, but not so high that the number of tickets sold makes multiple winners likely.

How to win the lottery without buying lots of tickets, or at least improve the value of your ticket:

• Choose the best drawings to play in order to maximize the value of a lottery ticket
• Choose the best lottery numbers to reduce the chances of sharing the jackpot

Recommended reading:

How to Make One Million Dollars by Driving a Used Car and Investing the Car Payments

How to Get Rich

Penny Pincher Journal
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How to Sell Used Items at a Consignment Shop and Get Cash

Consignment Shop- Sell Your Used Items and Get Cash
Image Source: Dr. Penny Pincher

Consignment shops, also known as thrift shops, sell items on consignment.  Here’s how consignment selling works:

1. You give an item to the consignment shop to sell.  You still own the item until it sells.
2. The consignment shop evaluates the item and decides whether to accept the item
3. The consignment shop sets a price for the item and places it on the sales floor
4. When the item is sold, the shop gets a cut (usually 60%) and you get the rest of the sale price
5. If the item doesn’t sell within a certain amount of time (for example 6 months) it is either donated to a charatible organization, recycled or thrown away, or returned to the owner

What types of items can be sold through consignment?  Almost anything of value can be sold at a consignment shop.  Some common items include:

• Clothes
• Furniture
• Tools
• Collectibles
• Seasonal decorations
• Books
• Sporting Goods

Inside a Consignment Store
Image Source: Dr. Penny Pincher

However, items that are not in demand will not be accepted for sale at consignment shops.  These items may include:

• Out of style clothes
• Damaged items, stained items, or items in need of repair
• 8 track tapes
• VHS tapes

Selling your used items at a consignment shop has the following advantages:

• It is easy for the consigner- just drop off your items and the shop does the work of dealing with buyers and selling the items
• Recycling- instead of throwing things away, this gives someone else a chance to use the items

The disadvantages of selling at a consignment shop:

• The shop gets a pretty big cut- typically 60% of the sale price
• The shop sets the selling price- not the consigner
• The consignment shop may not accept your items for sale
• It can take a long time to sell an item

Step-by-step instructions: How to Sell Used Items at a Consignment Shop and Get Cash

1) Start an account at the consignment shop
You’ll need to provide your name address, and phone number to set up an account and sign a consignment agreement.  Search the Internet or check the yellow pages for consignment shops or thrift shops in your area.

2) Bring your items to the consignment shop for evaluation
At some shops, you’ll need to make an appointment.  The store will sort through which items they will accept and which they will reject.  The rejected items will be returned to you.  You can take the rejected items to another consignment store, donate them, or recycle/discard the rejected items.

3) Collect your payment
When your items sell, your account at the consignment shop will be credited.  You may need your consigner account number in order to find out your balance and receive payment for your sold items.  Some consignment shops have account balances on-line, so you can check any time without a trip to the store.

Recommended reading:
Garage Sale Tips- Buying and Selling

How to Ship Sold eBay Items


Amazon offer: The Garage Sale Millionaire: Make Money with Hidden Finds from Garage Sales to Storage Unit Auctions and Everything in Between

Penny Pincher Journal

Copyright © 2013 Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

How to Make One Million Dollars by Driving a Used Car and Investing the Car Payments

You can make $1 Million by driving a used car instead of making car payments

The concept is that you can accumulate $1 million with the following process:

1. Drive a used car (or no car).  Therefore, you are not making car payments each month.
2. Instead of making car payments, invest the amount of the car payment each month
3. The investment grows over time and you continue to invest the amount of a car payment each month until the value of your investment reaches $1 million

Sounds simple enough.  But would it work?  How long would it take to reach $1 million by investing money rather than making car payments?

Part 1.  The Car Payment

We need to pick out a car in order to determine the amount of the car payment to use for the analysis.  Why not the new Lincoln MKZ with retractable roof?

Lincoln MKZ
Image courtesy of Mariordo - Mario Roberto Durán Ortiz CC-BY-SA via Wikimedia Commons 

Let’s use Lincoln’s build and price tool to figure out the sale price and then the car payments.  Here are the options we'll include:

• Hybrid (same price as conventional motor)
• Add Nav system package for $3000
• Retractable roof option for $3000

Net Price: $42,965

Car payment: $811 per month.  

This is the car payment for the MKZ with 60 month financing at 5% APR.

Part 2. Invest the Car Payment

But rather than buying a new Lincoln MKZ and making car payments of $811 per month, we'll invest the money instead.  

Further assume that we will not make car payments in the future either and continue to invest this amount of money.  This would be like someone buying a new car every 5 years and getting a new car loan each time rather than using any of the residual value of the 5 year old vehicle toward purchasing the next new vehicle.  Not an unreasonable assumption- the person may keep driving the 5 year old vehicle and not trade it in, or could sell the 5 year old vehicle and pay off higher interest bills instead of putting that value toward the purchase of the next new car.  So we'll assume these $811 per month payments go on indefinitely

.

How much return will we get on our investment?  No one can answer this with certainty, so let's use the long-term historical return of the stock market since 1929, including the crash, to present.  Using a large set of data that represents the modern economy seems like the best we can do to estimate long-term future rate of return.  The stock market return over this period was 8.8% (4.6%, price appreciation  plus 4.2% dividends).  So we'll assume we'll get 8.8% return on investment over the long haul.

Part 3. Reach $1 Million Over Time

Since we know how much money we are investing and the rate of return, we have all of the information we need to figure out how quickly we can get rich by driving a used car and investing the car payment.  The answer:  27 years.

Investing Car Payments:  Reach $1 Million in 27 Years
Image source: Dr. Penny Pincher

What about Inflation?

The purchasing power of money generally tends to decrease over time.  For example, when I was a kid you could buy any candy bar in the store for 25 cents.  Now, candy bars typically cost 69 cents of more.  This is an example of how purchasing power of a money has decreased due to inflation.  Inflation doesn’t effect all prices equally, but if you want in the future to be able to purchase $1 million worth of goods, you’ll need an amount of money greater than $1 million in the future.

Note for this analysis, the cost of the car does not change over the years.  We could ratchet up the amount of the car loan every 5 years to include the effect of vehicle prices going up over time, but this detail was not included in the analysis.

The long term inflation rate is about 3% per year.  The effect of inflation accumulates  over time.  Let’s run the same analysis, this time adjusting the future value of your investment for inflation.

Car payment investment reaches $1 Million of buying power after 35 years, adjusted for inflation
Image source: Dr. Penny Pincher

This answer: in order to accumulate $1 Million of buying power in the future, you would need to invest your car payment for 35 years.

Conclusion

• Driving a used car, or going without a car, is definitely less expensive than making payments on a new car
• Investing car payments is not a get rich quick scheme:   it would take 27 years of investing car payments to reach $1 million, 35 years if you account for the effect of inflation on the value of money
• If you started this scheme at age 18, you’d be a millionaire at age 45

Recommended reading:

How to Get Rich

How to Win the Lottery

Penny Pincher Journal

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