Is Cereal a Rip-off?

Is Cereal a Rip-Off?

Today, I will look at the value of a box of cereal.  How much food are you getting?  Corn Pops are very simple, so it is easy to figure out how much corn is in a box of Corn Pops.  Is cereal a rip-off, or a good deal?

How Much Corn Is in This Box of Cereal?
Image Source: Dr. Penny Pincher

Corn Pops Really Are Popped!

I made an interesting discovery yesterday while eating breakfast cereal with my kids.  I did a little research, which involved reading the back of a Kellogg's Corn Pops box.  Did you know Corn Pops are actually "popped" corn?  I always thought that corn pops was made from corn flour and shaped through extrusion or something like that.

If you look closely at the corn pops, it make sense that they are puffed up corn kernels.  The back of the box says the corn kernels are cracked in half and then "popped".  Then some sugar is added, of course.

Corn Pops are "popped" corn!
Image Source: Dr. Penny Pincher

Eating something that is literally a whole grain seems pretty healthy, and the fact that Corn Pops are sweetened using sugar rather than high fructose corn syrup seems like a good thing.

How Much Corn Is In A Box of Corn Pops?

Since I am a Penny Pincher, an obvious question comes to mind:  Are Corn Pops a good deal?  People often complain about the high cost of cereal.  Since Corn Pops are simply made from corn, it will be pretty easy to check the cost for the main ingredient in this cereal

It Is Easy to See That Corn Pops Are Puffed Up Corn
Image Source: Dr. Penny Pincher

You can get a 12.5 oz box of Corn Pops for $2.33:  Corn Pops Cereal, 12.5 Ounce

Being from Iowa, I know that corn is selling for about $4 per bushel.  So how big is a bushel?  A bushel is 2150.42 cubic inches or 35.24 liters.  That is a lot of corn for only $4!

My 12.5 oz box of Corn Pops measures 7 7/8 inches wide by 12 3/16 inches high by 2 5/16 inches deep.  This works out to a volume of  221.95 cubic inches.  I'll be generous and assume that the entire volume of the box is filled with Corn Pops, even thought there is some packing inefficiency.

So even before considering that the Corn Pops cereal is puffed up, the cost of corn to fill a box of cereal would be $4 x (221.95 / 2150.42) = 41.3 cents.

I would estimate the the Corn Pops are increased in volume by at least a factor of 2 after they are "popped".  Since less corn is required, this would bring the cost of the corn to make a $2.33 box of Corn Pops down to only 20 cents!

Based on this, it is clear that cereal has a pretty significant mark-up.  I understand that processing the corn and sugar into cereal, packaging it, and transporting it costs money and this cost is reflected in the price.  But a mark-up of about 10x does seem pretty steep.

On the other hand, paying $2.33 for a relatively healthy box of cereal seems like a pretty good deal compared with other food that you could buy.  So is cereal a rip-off?  I'm going to strike a compromise:  I'll keep buying Corn Pops, but I'll complain about how expensive they are!

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A Dishwasher For Billionaires

A Dishwasher Fit for a Billionaire?

Dishwasher for Billionaires
Image Source: Dr. Penny Pincher

Yesterday, I was loading my dishwasher just after dawn on a beautiful August morning.  Light was streaming in from the sunrise, and my stainless steel dishwasher was glistening.  I have a bit of history with this dishwasher...

This is a dishwasher that I installed myself.  We tore out the old cabinets and removed the old plumbing- all that was left was 2 copper pipes and a drain pipe sticking out of the floor.  After installing a new sink base, I used a torch to sweat on new shut-offs and installed a new dishwasher all by myself.  I was so relieved when I turned on the water and in my plumbing installation was not leaking.

Then trouble struck.  After only running one load of dishes, the dishwasher would not turn on and reported an error code.  Not only that, but the tub of the dishwasher was leaking too.  The appliance repairman subtly suggested that we get a different one instead of trying to repair this brand new unit with so many problems.  If you want the whole story about the lemon dishwasher, I wrote an article about it at HubPages.

Anyway, I hauled the carcass of the faulty dishwasher back to Lowe's and got my money back.  I decided to go with a different brand from a different store.  I got an awesome Bosch dishwasher from an independent appliance shop.

The new dishwasher has worked perfectly for over 7 months now.  It is super quiet, has a stainless steel interior, a nice third rack for small items, and the middle rack is also adjustable.  I ran a lot of loads to "test" it before sharing it with the rest of my family.

So what does this dishwasher have to do with billionaires?  As I was loading it and it was glistening at me, reminding me of how it came through when I really needed a dishwasher, I thought to myself,

"Even if I were a billionaire, I wouldn't want a different dishwasher."

Below is a link to the dishwasher I got on Amazon.  Some of the reviews complain about the drying capability, but this is an energy efficiency feature.  You cam just crack the door while the dishwasher is still hot after running, and the dishes will dry without using any energy.  I would rather save money on my electric bill than pay to get the dishes dry quickly.

Bosch SHP65TL5UC 500 24" Stainless Steel Fully Integrated Dishwasher - Energy Star

What Else Is Fit for a Billionaire?

This thought of keeping the exact same dishwasher even if I had billions of dollars and could easily get any dishwasher I wanted to replace it made me think- what else would I keep, even if I suddenly became a billionaire?

I would keep my current house and vehicles.  The vehicles are well-maintained and do everything I want from them.  My wife's car absorbed the force from being rear-ended by a big Dodge Ram pickup truck and kept her safe.  My son really likes his first car, and I am just getting started owning my 10 year old Toyota Highlander.  I would replace the windows on my house and upgrade the floors, but the location and yard is great.  I can think of lots of nice places to visit, but I can't think of a nicer place to live.

One advantage of keeping my same stuff if I became a billionaire is that it would help me blend in and avoid attracting unwanted attention.  Being a billionaire does have some down sides.  I have always thought that fortune would be much better than fame if you could choose one.  Now you know why I use a nom de plume.

Sure, I might do some traveling and maybe even get a vacation home somewhere if I really had billions of dollars, but I already have pretty much everything I want.  OK, I would also get a Class A motorhome.  Not that I have thought about this much, but it would be 40 foot diesel pusher with 3 slide-outs and an outdoor kitchen.  Plus, I would go ahead and put in a swimming pool at home.  But I don't think I would buy that much more stuff.

I think the biggest change I would make would be how I spend my time- I would no longer be concerned about making money... or would I?  If I had billions of dollars, I would probably be working hard at keeping track of all of that money and trying to invest it wisely.  I could hire people to help manage all of that money, but I would still need to keep track of my people.  So, I suspect that I would actually spend a lot more time thinking about money as I do now.

Maybe being a billionaire wouldn't be that much better than my life now.  When I'm loading my dishwasher, I can't tell the difference.

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Best Car for a Teen Driver Under $5,000

Choosing a Car for My Teen Driver, Again

A couple years ago, I wrote a post about choosing a car for a teen driver.  I decided to buy a car for my son before he turned 16 so he could practice driving in winter conditions with the same car he would be driving on his own someday.  Here in Iowa, teens can get an Instruction Permit to drive with parents in the car starting at age 14.

It would have been cheaper to have him share my car or my wife's car while he was learning to drive, but that would not have worked out for very long.  We were planning for my son to drive to school on his own and take our youngest son as well.

The car we picked out for my oldest son is working out very well so far and now it is time to do it again.  My youngest son will be turning 16 in about a year.  He has driven some with the cars we have, but I am starting to decide what kind of car to get him.

Of course I could make my oldest son and youngest son share a car to save money, but soon my oldest son will be off to college and I think it would be good to have my son get some experience driving the same car that he will be driving with a parent in the car.

Best Cars For Teens Under $5,000

Our price range is under $5,000 again to avoid making car payments.  We are looking for the usual features: safety, reliability, enough room to haul stuff to college one day.  Even in high school, kids have all kinds of stuff they need to haul around- musical instruments, sporting equipment, science projects, etc.

I would give bonus points for a car with all-wheel drive to get around better on snow and ice.  I am not that worried about fuel economy since my kids will not be driving very many miles, and all of the cars we are considering are small vehicles with small engines.

There are lists around of good cars for teens, but these lists usually have a much higher price range than I could afford and look at much newer models than I can consider.  Finding a good car in the under $5,000 range takes some patience and willingness to go with a good find if it comes along.

I want my son to be excited about his first car, so I am interested in his preferences for color, style, etc.  As long as we get something that is under $5,000 and is safe and reliable I will be pretty happy.  We will be looking at a car about 10 years old, around the 2005 model year to meet our budget.  Based on my preference for something with a lot of cargo room and all-wheel drive, here are some of my favorite models to consider:

Pontiac Vibe / Toyota Matrix

Pontiac Vibe / Toyota Matrix

The Pontiac version is called the Vibe and the Toyota version is called the Matrix, but they are very similar.  The Vibe / Matrix is a 4 door vehicle with a hatchback.  This makes it useful for hauling lots of stuff around.  All-wheel drive is an option, so I might be able to find one that has this.  This model went out of production in 2010, but that doesn't matter much since I am looking for a 2005 or so model year.

Honda Element

Honda Element

My wife and I used to drive a Honda Element years ago.  It has tons of room.  The rear doors are hinged at the back, so you can really open it up to get cargo in and out- plus it has a hatchback.  The Element we had came with all-wheel drive, so I know that is an option.  The main downside of the Element for us was that it only had 4 seats and we wanted to have 5 passenger capability.  The Element went out of production in 2011, but there are still plenty for sale.

Chrysler PT Cruiser

Chrysler PT Cruiser

The PT Cruiser is a 4 door hatchback with retro styling.  This car has a lot of cargo room.  Some models have a turbo engine, which is recommended since one of the main complaints about the PT Cruiser is that it is under-powered.  PT Cruiser does not have an all-wheel drive option.  The PT Cruiser went out of production in 2010.  Some people like the styling of PT Cruiser and some do not- I think they are cool-looking and much more practical to own than a classic car.

Volvo V70 Station Wagon

Volvo V70 Wagon

The Volvo V70 has 4 doors and a hatchback.  Volvo has a good reputation for safety, and the V70 has an all-wheel drive option.  I am not sure how this will rate with my son for style, but I think this would be a good reliable car with lots of cargo capability.

Subaru Outback

Subaru Outback

All Subarus are all-wheel drive, so this is covered.  The Subaru Outback is a station wagon form of either a Subaru Legend or Subaru Impreza.  With 4 doors and a hatchback, an Outback would be good at handling some cargo.

Which Car Will We Choose For Our Teen Driver?

I think any of these would be good choices, and I am sure there are other good options as well.  I will work with my son to find out what he prefers and then zero in on a particular model to find one in great condition, with the options we want, and within our budget of $5,000.  And hopefully the right color, too...

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Personal Finance Quotes to Help You Save Money

Personal Finance Quotes

Seneca
Image Source: CC-SA-30

I decided to start collecting personal finance quotes and quotes about life in general that I think can be useful to people on their personal finance journey.  I plan to keep adding to this page as I come across useful quotes to add to my collection.  After each quote, I will make some comments about where I heard the quote and how this can help inspire penny pinching.


"It is not the man who has too little, but the man who craves more, that is poor." Seneca

This quote really covers the ideals of living a frugal lifestyle pretty well.  Some people who have a lot of wealth choose to live simply, spending little money and having few possessions.  Many people who have adopted simpler lifestyles report that they are happier living with less.  The difference between what you have and what you want is a big factor in happiness, more so than how much stuff you have...

Seneca was a Roman philosopher who lived from 4 BC to 65 AD.  Clearly, people have been thinking about possessions and happiness for a long time!


"You loan your friend your money, you gonna lose your money and your friend."  Buddy Guy

Buddy Guy is a legendary American Blues musician.  I heard this quote from him during an interview on NPR.  He said he has a sign in his club with this quote on it.  Sounds like great advice to me!  Speaking of great advice, here's some advice from someone who has a lot of success following simple principles:


"It is not necessary to do extraordinary things to get extraordinary results."  Warren Buffett 

This quote seems to apply to a lot of advice on saving money- it does not really take extraordinary effort.  If you work at it, you can find ways to cut expenses and end up with a little extra money to invest every month.  The extraordinary part is the results- even someone with a modest income can become a millionaire over time.  If you could save $500 per month from your budget every month and invest it, you would be a millionaire after 33 years with a historical average return from stock market investment.

"Someone’s sitting in the shade today because someone planted a tree a long time ago."  Warren Buffett

Another one from Warren Buffett.  Obviously he is talking about the power of growth over time for investments.  The sooner you can start investing, the more time you have to benefit from growth, and maybe you will have plenty of time in the future to relax in the shade of a tree and not worry about money.

"Life is full of contradictions and strange things."  Yossi Kuperwasser

I heard this one on a news story about strange alliances in the Middle East.  The guy being interviewed, an Israeli Defense expert, was speaking with a very heavy accent, and the reporter asked him a question in English.  He responded with this quote, which I think is great.  I figured it was a famous quote and tried to look it up, but apparently he came up with this on the spot.  Impressive.

One example of a contradiction that comes to mind for me- breaking my budget and buying a very expensive puppy a couple years ago.  As a result unplanned expense, I started writing about ways to save money- and I have made many times more money from my blog and books than the cost of the puppy!


"Normal is getting dressed in clothes that you buy for work, driving through traffic in a car that you are still paying for, in order to get to a job that you need so you can pay for the clothes, car and the house that you leave empty all day in order to afford to live in it."  Ellen Goodman

I think this quote describes life for a lot of people.  Why do you need the car- to get to work.  Why do you need to work- to pay for the car...  The good news is that if you do things right, eventually you can pay for the house and the car and even have time to do what you want.


"Well done is better than well said."  Benjamin Franklin 

This is well said...  Ben did a lot of things well too.  I don't need to add anything to this one.


"The future depends on what you do today."

Mahatma Gandhi

I don't know if Gandhi was thinking about personal finance when he said this, but it certainly applies to taking control of your budget and achieving financial independence!



"When life gives you lemons, take them.  Free stuff is awesome!"  Dr. Penny Pincher

Of course I had to put in some of my own quotes....  The example above of turning an unplanned expense into the inspiration to make extra money is a good example of taking the free lemons.  What else can you do?


"The easiest way to get money is to spend less."  Dr. Penny Pincher

Maybe 2,000 years from now people will be quoting this...  I think it is true that the easiest way to get more money is to cut spending.  Most people can easily identify expenses they can cut and immediately have more money in their pocket.  The downside of getting money by spending less it that there is a limit to how much less you can spend.  I said it was the easiest way to make money, not the way to make a lot of money.

That being said, even a little extra money can add up to big money over time.  If you can cut your spending and invest a little money very month instead of spending it, you could end up with real wealth.  Here is an investment calculator you can use to see how long it would take to reach your goal if you can find a little money to invest every month.


"Most people drink bad coffee, and pay too much for it.  I'm not sure which is worse..."  Dr. Penny Pincher

I could go on for a long time about how to make great, world-class coffee really cheap at home.  In fact, I have even written a book about this!  We all know you could improve your financial situation by saving the money you would normally spend on coffee.  I don't mind spending 60 cents a day to get a cup of really good coffee that I make at home.  Buying coffee at a coffee shop is expensive enough that I almost always avoid this- plus I can make better coffee at home.  Buying expensive BAD coffee at a convenience store or fast food place is the worst case scenario...

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10 Things You Don't Need- Guest Post @ Frugal Fanatic

10 Things You Don't Need- Guest Post

My Guest Post at Frugal Fanatic!

My guest post is up today at Frugal Fanatic!  The subject is 10 Things You Don't Need.  This piece talks about some things you can easily cut to reduce your expenses and have more money left to pay debt or invest.

Addi did a great job formatting this, and I like the photo with the title.  Thanks for featuring my post!

Check out the post here to learn 10 things you don't need:  10 Things You Don't Need.

Here's a clue in the photo below about #1 on the list:

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Top 3 Ways To Build Wealth With FREE MONEY

Yes, There Really Is Free Money!

The other day I was paying a bill for a visit to the doctor's office.  The bill was unexpected and was for over $100, so this was painful.  I set the bill in front of me as I had my morning coffee.  I wanted to examine the bill to see if there were any extra charges included that I could ask to have removed, but there was almost no information on the bill other than the amount that needed to be paid and the due date.  After thinking about the bill for awhile, I realized that I could use my Health Savings Account (HSA) to pay all of it instead of taking money from my very limited checking account.

I had forgotten about my HSA.  My contribution comes out of my paycheck every time and I don't even see it.  My balance had reached nearly $2,000.  This is a nice cushion for health care expenses.

This got me thinking about free money and how I am using free money to build my wealth.

Health Savings Account- Get 34% Free Money

The Health Savings Account is a program where you can put pre-tax money into a dedicated savings account and use it for health expenses.  The "pre-tax" part is where the free money comes in.  The Federal income tax rate is about 25% and the state income tax here in Iowa is about 9%.  This means that I gain about 34% on money that I put into the Health Savings Account- not bad.  So if I put in $1,000, about $340 of this is free money- it would have gone to taxes otherwise.  My HSA plan even allows you to invest the money in the HSA into investment funds so it can grow until you need it for health expenses.

401k Plan- Get More than 50% Free Money

There are some other sources of free money that I am using to build wealth.  The big one is my 401k program at work.  My employer will match retirement contributions at 50% up to 4% of my salary.  So if I put in $2,000 and my employer will put in $1,000 of free money.  I like free money and always contribute enough to get the maximum employer matching funds.

The other free money aspect of the 401k plan is that you contribute pre-tax money, and the money invested grows without taxes, at least until you take it out.  Unfortunately, you have to pay taxes on the gains when you withdraw from a 401k fund.

I also contribute to a ROTH IRA investment using post-tax money.  This is money that I have already paid taxes on, but I will not need to pay taxes on my ROTH IRA funds when I take them out someday.  I like the idea of not paying taxes on my gains, so I have some ROTH retirement investments in addition to my 401k investments.

529 Plan- Get Free Money For College

Another way I am using free money to build wealth is my 529 plan contributions.  A 529 plan is a way to save for college that provides some significant tax benefits- more free money.  Gains on investments in a 529 plan are not taxed.  In addition, Iowa and many other states offer state income tax offset for contributions.  This is a great way to save money for college and take advantage of free money for college.

It Takes Money to Make Money...

All of these ways to get free money require investing your own money to get the free money.  For the Health Savings Account, you need pre-tax funds to contribute.  For the 401k plan, you also need pre-tax funds to contribute, and for the ROTH IRA you need post-tax funds to contribute.  And for the 529 education program you need post-tax funds to contribute.

Where can you get money to contribute to take advantage of the free money?  You may need to pinch pennies in your budget to free up funds to contribute to these programs.  One of the reasons that these programs provide free money is to encourage people to save and build wealth.

Find ways to save money on things you don't really need and put this toward saving and investing- and get your free money.  You can start small, with only a few dollars each month.  The important step is to get started and watch your account balances grow over time.

If you need some ideas on how to get money to invest, here is my free book: 101 Ways to Spend Less Money Now.

Penny Pincher Journal

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The Trouble with Having an Emergency Fund

Emergency Fund- Bad Advice?

I have read on many personal finance blogs that the way out of debt starts with building a cash emergency fund, with a goal of being able to cover several months of expenses using your emergency fund.

Although this may work well for some, for me there are several problems with this approach.

First off, I don't want to park this kind of cash in a savings account making 0% interest!  Let's say several months of living expenses amounts to $10,000.  If you keep this in savings account for 30 years at 0.85% interest, you'll end up with $12,903.  If you invest this money instead and get an 8% return, you'll end up with $109,357.  So having the cash emergency fund would cost you around $100,000!  You can run the numbers yourself on my savings calculator.

Not everyone who recommends having an emergency fund recommends keeping $10,000- I just wanted to pick out a number to make my point.

The next problem I have with building a cash emergency fund while you have credit card debt- if you have credit card debt at 20% interest, paying that down seems to me to me to be the best use of any available funds.  It would be hard for me to look at money sitting in a savings account and not pay down high interest credit cards.

My third major problem with advising people to build up lots of cash and keep it around- it would be tempting to spend it!  Even if you have credit card debt, if you have $10,000, or even $2,000 sitting in a savings account, I think many people would be tempted to spend it if the right opportunity came along.  Maybe a fun project car to fix up, or getting in on a special vacation offer, etc.  If you have $0 savings and mostly maxed out credit cards, it is harder to spend more money and you won't forget that you are in debt.  If you have money sitting around not being used, I think it would be at risk for unplanned spending.

In Case Of Emergency...

So, what if you don't have an emergency fund and a financial emergency comes along?  No matter how much you have in an emergency fund, something could happen that would take more money than you have saved up.  In this case, you would end up using credit or borrowing from your retirement fund to pay for the emergency.

This is not good, but I think most people would be further ahead focusing on paying down credit cards and building investment funds rather than parking cash in an emergency savings fund.  Hopefully that emergency won't happen, but if it does happen while you are still paying down credit card debt, you'll have some funds build up in investments and some credit cards paid off that will be resources to get through the emergency.

Is Putting Money In an Emergency Fund Bad Advice?

I discussed my concerns about emergency funds with a popular blogger, Chris Peach at Money Peach.  He replied that from the math perspective, my objections to advising people to set up an emergency fund make sense.  But from a behavioral perspective, getting people to develop the discipline to save money and watch that savings account grow is powerful and can change behavior.  Plus having a cushion can help people avoid charging more on their credit cards.

I think Mr. Peach had a nice comment when he said I can be right on my blog and he can be right on his blog.  Nicely said.  From my perspective, setting up an emergency cash fund when you could be paying down high interest debt or investing with a historical average return of around 9% doesn't make much sense.  But if you are trying to change your behavior and get away from depending on credit cards, maybe setting up an emergency fund could help.

Even with my reservations about putting a lot of cash in an emergency fund, I do keep cash around.  What if the electronic networks go down and credit cards don't work for some reason?  I like to have enough cash to cover a couple weeks of food and gas at least in case of a disaster.

In conclusion, having cash at home or in a saving account has a cost.  If you have credit debt, you could be getting a 20% return on the money.  If you invest in stocks, you could be getting a 9% historical average return over the long run.

From the perspective of optimal financial results, I would recommend people with credit card debt to pay into an emergency fund only if this will help control credit card spending.  Otherwise, use all available funds to pay down the high interest debt and at the same time invest some money in stocks.   I would suggest saving up enough cash to cover basic expenses for a few weeks to survive a disaster.

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