Friday, January 02, 2015

Penny Power 2014: Now With More Power

Every year on New Year's Day I like to crack open a jar of coins that I collected all through the previous year, see how much is there, and then find a productive home for it. 

I think I may have skipped the tradition on January 1st of last year, or I just didn't blog about it (like I haven't blogged about anything for a long time...).

This year I went a bit beyond the standard program, which was only putting found coins in the jar. The main reason for that was that for the longest time I haven't used cash, only electronic payment methods, so I never had any pocket change that I hadn't found somewhere. Since I've been using cash more often as of late, I have more change, and lots of it ended up in the jar. I also put money from recycling aluminum cans in there, which provided a significant boost.

Quite a bit! Fortunately, the lid of this jar can count the coins going into it, so I already know that between coins and bills, this year the total is $97.35. In years past it was more like $12, so I have a decent amount to work with this time around. Too bad the jar can't wrap the coins, too...

One other thing I did with the contents of the jar was to go through it and look for any silver-containing coins. Get to know the minting dates of silver coins and keep an eye out for them! As "legal tender" their transaction value is only their face values, but the melt values of the coins can be significantly more

Unfortunately, I did not find any in my collection. I came close among the quarters by just one year, but "close" in this case means "not at all." Oh well.

The oldest coin I saw in there was this nickel, minted at the Denver mint in 1955:

This coin may hold some value to collectors, possibly between .85 cents and a $1.35, but considering how many are available for sale online already, it's not something I'm going to spend any time on. 

Consider this though: at the time this nickel was minted sixty years ago this year, it was worth five cents. Thanks to inflation, it now takes forty-four cents to equal the same amount of purchasing power, a loss of value of 781.2%. (Try this inflation calculator to see the loss of purchasing power of U.S. currency over time.)

So then, what to do with these funds...

My first option is to toss them into a portfolio of dividend paying stocks that I own, the specific purpose of which is to generate near-term income. This is a "non-qual" account (meaning it's not a retirement account) that at present has an after-tax yield of 8.05%. I contribute regularly to this account as a "side business" diversification effort, since these days I have nearly all of my eggs in one basket, my current business.

My second option is to add them to my cash value life insurance policy. Unlike my dividend portfolio, this account is not taxable (but also not a retirement account, so the cash in it is accessible), presently earning a tax equivalent yield of just about 5%. It has a guaranteed minimum rate of return of 3%, it can't lose value due to market fluctuations, and it pays and compounds interest daily.

My third option, something I'll probably write more on at a later date, is quite exotic: Entropia Universe. This is a real cash economy MMORPG, within which it is possible to make some money. It's tough to do, however, and there are fees for depositing and withdrawing funds (not to mention minimum withdrawal amounts that set the bar rather high for receiving money back from the game). Within the game, there are "land deeds," which are essentially shares of the game, that pay a weekly dividend. Based on the most recent dividend and present asking price of these deeds, they pay a 13.36% yield (this is exclusive of transaction fees). I've slowly been building the weekly revenue my avatar is earning, and at present I am receiving an 11.47% yield on the total value of my avatar.

I could pay off some debt with the money, too, but at the moment all of my balances have interest rates that are lower than the after-tax yield I can get on a number of investments, so there's not much incentive there.

Finally, come spring time I will be starting a couple new side businesses. One of them may begin generating revenue almost right away, but the other one will not return a penny to me until next fall.

I'll have to think on this for a bit. There will definitely be time for that: I'll be busy rolling these coins for a while, after all...

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