My Objective: To Take $2.4 Million from the Stockholders of KCPL Over the Rest of My Natural Life Expectancy

Ever think of investing in Kansas City Power & Light (GXP)? It pays a 3.80% dividend. You could then use those dividends to pay for your personal power usage.

They're on my reading list, and have been for awhile, but I've never gone so far as to buy shares since something cheaper or of better quality was always higher up the list. Whenever the 2013 annual report comes out, it will be on my desk at some point.

That's one of my goals! To eventually have enough shares of the power company that the dividends pay for my power usage. About 20%-25% there now when buying on price pullbacks as part of my investment policy.

How does one go about avoiding being penny wise pound foolish ?

The best method I've ever seen was laid out in a book called The Millionaire in the Mirror. Normally, I loathe gimmicky titles, but it's one of the best, actionable "how to" life management books for those who want to amass money, or achieve any other big life goal, I've ever read. I cannot recommend it highly enough. I went through a period where I'd buy it for anyone around me who even expressed a remote interest in it.

The short version is this: Bedell suggests creating a hierarchy of potential projects or activities, then sorting them by what would have the biggest impact adjusted for the time and effort necessary to pull it off. That way, each item off the checklist has a disproportionate influence for the positive on your life. It radically shifts the paradigm through which a person sees time / payoff calculations. An example: I now gladly pay around $2,000 per year to have my lawn maintained and snow shoveled because the time it would take for me to do those tasks is better spent figuring out ways to make more money. If I come up with one good idea, I'll be collecting checks for years, perhaps decades. I also don't have to deal with the capital outlays, storage, and maintenance of the equipment.

That one seemingly small action has produced a lot of wealth because it allows me to focus on the higher returning projects on my desk. If I tried to "save" the $2,000 per year by doing it myself, I'd cost myself a lot more in the end. For other people, they think best when they are outside doing physical labor like this, so it would be a misuse of funds.

Bedell's method makes you optimize how you live in a way no other strategy does. Buy it. Go through it several times. Periodically revisit it. It's in the top fraction of 1% of books I've ever read.

Joshua,

What if you start thinking of that shoveling time as an exercise? You can listen to one of trillion interesting talks while you are doing it(if you choose to) or just spend time contemplating and resting your mind, get a great exercise, sweat a little and in the process also get good old fashioned physical exertion and satisfaction of doing something that makes your surrounding nicer looking and/or safer. Keeping your body and mind in shape is daily chore (if you choose to see it as such) or daily pleasure (keeping the most important assets you will ever have in shape and running smoothly). What if in reality you are spending more time with video games or TV shows instead? Or with insomnia because you did not have physical release of energy(speculating here just to highlight the point)? Maybe there is more than just money/time equation when doing cost benefits in this case.

Thanks.

That's definitely something you have to protect against - it does no good to free up your time if you're just going to waste it.

Personally, I found that for me to I get around the pitfall, I have to track my output and daily activity, down to the computer programs I run so I can do periodic reviews to make sure I'm being efficient. With a few clicks, I can tell you how many minutes I spent on the phone, every program I ran, whether I worked out that day (which exercises), which companies I analyzed, whether I played video games, etc. I automate a lot of it so there is very little on-going maintenance work, probably less than 3 minutes a day. It's all accessible from the iPads, Samsung tablets, Macs, and PCs so I can get to it anywhere.

For me, the secret was to give up the 34 hours a week the average American spends watching TV. It's amazing how much you can fit in when you don't have that time sink in there.

I also arrange my time to maximize efficiency. For example, for the little bit of television I do watch, I'm putting a television in my home gym so I can watch Korean dramas while I run or bike. That way, I'm only watching if I'm doing something productive most of the time.

Living in the Midwest, I can't ever imagine shoveling to be an exercise I'd want to enjoy. The temperatures are just too brutal. Case in point: At this moment, it's the middle of the day, the sun is out, there isn't a cloud in the sky, and it feels like -1 degree Fahrenheit (-81.33 degree Celsius) according to the Weather Channel.

Oops.. That should be -18 Celsius, not 81. I definitely wouldn't advise being outside at -81 C (-114 F) 😉

Fixed 🙂

I want to second this. Joshua, you once said saving the money the book costs would be the worst investment one could ever make. That stuck with me. So I bought it. I read it. I got it. And that is what kicked off my meteoric rise from unemployment and foodstamps to employed, to managing the company, and then buying the company all inside of 18 months. It's a book about maximizing leverage in your life and career. Saving the money I spent on the book (and let's even say making a wage for each hour spent reading it) and investing that in the hottest fund/stock in the market would still be the worst investment I could have ever made.

Thanks for the book recommendation, I just ordered it. I really enjoy this site, I've spent many hours reading the valuable information. But you probably already know this 🙂

I want to second this. Joshua, you once said saving the money the book costs would be the worst investment one could ever make. That stuck with me. So I bought it. I read it. I got it. And that is what kicked off my meteoric rise from unemployment and foodstamps to employed, to managing the company, and then buying the company all inside of 18 months. It's a book about maximizing leverage in your life and career. Saving the money I spent on the book (and let's even say making a wage for each hour spent reading it) and investing that in the hottest fund/stock in the market would still be the worst investment I could have ever made.

One slightly different way to save/make money I've found: keep track of class action lawsuit settlements, and claim any that you can.

If you visit a site like http://www.topclassactions.com/ once a month or so, you'll see class action settlements on different products that you might be eligible for. Follow the open class action settlements links, submit your claim forms (but be truthful! Only claim for products you did buy/are eligible for!), and then after a few months you'll receive some type of check. Even if it's $5 here or there (actually I once got one for over $100 from a TurboTax settlement), you can add it to your investment account and let it grow. And since the settlement is for a product you did purchase, it is technically YOUR money, and you should claim it (otherwise a company that did something illegal gets away with it). Easy money that is yours, invested thanks to 5 minutes once a month....

I signed up for Kardonick v. JPMorgan Chase only after I saw the court documents myself, and everything else seemed legit. Got a check for $75 a few months later, which I ironically deposited right back in my Chase account :p

Do you have any tips for separating scams from legitimate lawsuits? Don't want to hand over my personal information on a silver platter for nothing...

Joshua, Do you take any interest when people like Icahn come out and talk about Ebay or Dan Loeb and his major position in Dow or do you consider that to just be noise? I thought it would be a pretty fascinating post to see your breakdown of those companies in comparison to what these managers publish.
A corollary to that question is if you consider "drafting" behind the big managers to ever be an appropriate strategy?

And where would you draw the line about which manager to coattail. For example, it may be obvious to draft behind Buffett and Munger (IBM, Exxon, Wells), but should you also coattail Todd and Ted (DaVita, DTV)?

Take a look at the history of Herbalife. Ackman comes out and announces publicly he is short, and the stock price plunges. Ichan then steps in at the bottom, announces publicly he is long, and the stock price skyrockets. They both win off the backs of those who follow. I Personally find it to be too noisy.

I wrote back to you this morning, and now it has completely disappeared. I can't find it, anywhere, but I'm guessing it was somehow wiped out when I had to do a database repair this afternoon. It was much more detailed than this but here is the summary:

1. No, I largely don't pay attention. If it the intrinsic value were already in my calculation, the fact someone was stepping in to unlock it, or potentially unlock it, wouldn't change anything. Maybe rarely real value can be unlocked, or a big story would encourage a closer look, but it's largely inconsequential. Either it will happen, or it won't, so if it does, you analyze it then. Otherwise, it's just conjecture. I suppose if you were trying to trade derivatives, short-term moves caused by such catalysts could mean a great deal to you but that holds little interest to me. I like finding things that are going to pump out money for a long, long time and buying as much as I can. In the long-run, the wealth from those operations are much higher and more tax efficient than a quick buck (often fully taxable at the highest income rates because it's short-term) from some activity.

2. I think it can be valuable to look at managers you admire or respect and see what they are doing just to get research ideas, but I can't ever imagine a person buying, selling, or holding any sort of asset because someone else did. You'd be putting yourself at a tremendous disadvantage given the time lag between reports, and taking on risks you didn't understand. Were I some inexperienced investor out there, I'd just go with a low-cost index fund, instead.

Thank you for the reply. The strategy mainly appeals to me not due to my inexperience, but more around the amount of time I can devote to research after working a full-time job, among other responsibilities. Using these managers seemed like a potentially intelligent way to filter for good ideas, but it's probably not the best short-cut.

Do you have any advice on how you start your screening process both from a theoretical standpoint as well as the practical pieces, such as software you use, etc... As the easy ideas and large caps seem to be more fully valued, filtering small-caps seems like a time-consuming task.

I'm all over the place. Sometimes, I get it in my head I want to read about a specific company, then that ends up leading to twelve other companies that are some how tangentially related. Often, if I see something that interests me, I'll write down the name of the business and research it (e.g., when I was playing golf with my brother, I noticed a sand rake in the middle of the course. I went up to it, examined the company name, and wrote it down to research at a later time.) Sometimes, I flip through Value Line reports going page by page to see if anything interests me, thousands of companies a year. Sometimes, I'll use stock screens. Sometimes, I'll check analysts databases, such as Morningstar, to see what they are identifying as undervalued companies. Sometimes I'll look at specific industries if I notice they've been doing very poorly for awhile and then try to find the best companies in those industry.

The rest of the time, I refer to my shopping list. When I come across a truly unusual business with huge returns on capital, strong brand protection, unrivaled distribution, and little to no risk of change from technology, I value it and put it on a roster. There aren't many companies like that in the world - things like Coca-Cola, Clorox, Diageo, Brown Forman, McCormick, etc. Whenever one of them is cheap, I notice because I'm almost always watching them. Sometimes, I'll go years without being able to buy a single share. I've still, to this day, never purchased 1 share of Brown Forman though I'd love to put up to 15% of my net worth into it.

That's what I'm really doing most of the time ... looking for new names to add to my shopping list, which is less than 1% of the businesses in the world. That way, when I get a chance, I can buy a ton of ownership and park it for the rest of my life, extracting dividends from enterprises that are capable of surviving another Great Depression. Those businesses receive primacy over everything else, even cheaper companies, if they're reasonably attractive. I'd rather buy McCormick at 12x earnings than Ford at 7x earnings even if the latter does much better than the former in a 3-5 year timeframe. Why? I'm going to hold McCormick, most likely, for the rest of my life. They've been supplier of cinnamon, spices, and herbs to the world for going on two centuries with almost nobody able to compete with them. It's a tremendous company I want to pass on to my children and grandchildren.

As usual, the gold is in the comments. 9 months later my question was rewarded with a fantastic answer. Thank you.

...there really needs to be some system for finding comments. I think this comment could be very useful for people understanding how to actually find companies. I think naturally, most people have an overreliance on stock "tips," because they don't have a process.

Money saving trick #2583: Saran®-wrap condoms.

Don't forget the rubber bands.

We make those too.

I have the hunch that would turn out to be a very expensive condom. You'd be paying for it for 18+ years ...

We applaud Dow's Chemical's efforts to save their customers money!

Saran wrap hasn't been medically proven to reduce the risk of STD transmission.

...yet.

If you live in an area where the tap water is really cold, a passive tempering tank will help a lot. This will preheat the water passively to room temp before going into your main heater.
http://waterheatertimer.org/Tempering-tank.html

Thanks for the suggestion. I'll look into this.

Not quite sure that will work as the energy required to warm up the water in the tank must come from the surrounding air around the second tank. This would drive up costs required to heat the surrounding air. Now if your furnace is more efficient than your hot water tank then ok, but not likely. Also most water lines are intentionally buried underground to be below the frost line as frozen lines fail. Therefore if the second tank is located in a unheated room (garage) it would freeze causing all kinds of problems. I've heard that nat.gas on demand hot water "tanks" are efficient as are solar heaters in warmer climates.
PTGG

The idea is to put it in a typical unfurnished basement, where ductwork/flue leakage can be recovered (the temp of the basement will drop slightly but who cares), not in an unheated garage.

I buy all my electronics refurbished ever since a legitimately-new laptop I bought had a dead pixel right out of the box. It's saved me thousands over the years. I figure I'd let someone else pay the premium for the "new" label and the fancy packaging.

Caveats:
1. Manufacturer refurbished conveys higher confidence than seller refurbished.
2. If the seller provides a warranty similar in duration and scope as the warranty that comes with a new device, then the seller has high confidence in the refurbished device's reliability. I only buy if there's a warranty attached.
3. About 2/3 of my devices arrived with no fingerprints, blemishes, or any indication that it wasn't new except for the plain packaging. About 1/3 of the devices had minor scuffs on the outer casing. None have had impaired functioning.

Best and most practical advise is: 1- be conscientious of your choices and 2- choose your battles. We should be thoughtful where and when we spend money, but also understand that some things that are unnecessary for one person give significant returns to another.

We all have a list of things we save, or are tight on, because it works for us personally. As for thinking about it like josh, time use of money, while I appreciate the analogy, it quickly can become ridiculous too. For instance, wrt energy savings. If I skip showering every other time, over a lifetime of investing that savings in stock, I could have $340,000 when I'm 80. Whoopee! Or if I milk my socks and underwear, keeping them an extra 6 months with minor holes in them...you get the idea.

So this process becomes a deeply personal one, as there are so many choices and approaches that relate to lifestyle and ones psychological make up. Having said that, these are my PERSONAL faves:

1- I love getting free flights. I use American as they fly many places and coop with smaller airlines. I work the "open a new credit card" circuit pretty hard, as you can get 20-50,000 miles for a few purchases. I open card, meet the requirements, get the miles, close the card. I've tried a few of the open a bank account offers with mixed results. Opening/closing bank accts is a major pain in the ass compared to credit cards. I don't tolerate hassles.

2- coffee. Since college, when a roommate had the wisdom (and resources) of having an espresso machine, I have loved coffee. But I HATE paying rip off cafe prices, especially for espresso based drinks. So I always have lattes at home with a fantastic Italian machine (Rancillio, with proper grinder) I invested in. When I meet people at cafés socially, I'll always buy drip, as I never have it at home. Now beans, that a different story. I spoil myself. SF is a third wave coffee place, so the most interesting artisanal and local roasters are expensive. But, I have disciplined myself to try and keep it at under $20/pound! You Midwesterners, a tip: try cafe intelligencia. They are Chicago based, and the black cat espresso is divine!

3- eating out. As I basically don't have a job and mostly manage/maximize my investments, I find it a must to go out in the middle of the day. I always eat lunch out, and sometimes I'll splurge. But I still look for value! Cheap lunch (burrito at an authentic taqueria) $7. Hipster artisanal lunch:$14. And the occasional sushi (place I go is great and has a good sushi combo): $23. All good value for what I get. Lunch, and a nice hour walk in different neighborhoods (free, of course) get me so much value: I eat, I exercise, and enjoy urban stimulus all in one shot. Value!

Amazing...

I found this site looking for quality dress shirts and then found much on investing and personal finance. My quest for quality was a result of my existing shirts falling apart within nine months of purchase. I was looking for better build - and found better build, better quality, and a better look. Many thanks.

Then I poked around and found personal finance and investing. Very valuable. I follow much the same guidelines as you and post on other sites about managing risk while gaining reward. I never want to be the chap losing 30+% in the market because I was 'due for a turnaround' or whatever.

Now, I find this. Way too funny. I have been tracking electricity waste for three years now. And, like you, it really will not affect the bottom line much. It is, however, aggravating. Right now something is chewing about a hundred Watts of power every hour of every day without giving me anything in return. Hope it isn’t the fridge about to blow out.

Anyway,
great site.