Financial Uproar

I’m too damn cheap to get a subscription to the Economist, even though it is, by far, the best financial/news magazine out there. Since I’m frugal cheap, I’ve discovered a solution. If you sign up to be a member of the website, The Economist will give you access to 10 articles a week. Then you can subscribe to the RSS feed of the section of the magazine you want, which gives you a little preview of each article. That lets me read a chunk of the magazine for free each week. Sometimes, I’ll share the most interesting articles on the Twitter. You’re welcome.

Why did I just spend 102 words telling you about The Economist? Because last week’s edition had an interesting article in it, about the growth in selling to America’s poor. Basically, the article talks about how many Americans are struggling to make ends meet, and how they have to scrimp and save in other areas in their lives to afford expensive things like college and health care.

Profiting from poverty is surprisingly easy. Take McDonalds for example, a company that’s been doing quite well lately. Working poor still want to go out for dinner, for whatever reason. Because they don’t have much disposable income, they find themselves at the golden arches, probably ordering crap off the dollar menu. Everybody’s happy, especially McDonalds’ shareholders. The same principal applies to Wal-Mart, Target and many other businesses.

Is this a trend you should invest in? Here’s a few ways that you can, in areas you might not have realized.

Financial Services

One estimate that I’m too lazy to look up and link to put the number of underbanked Americans at over 80 million. Obviously, most of these underbanked Americans are poor. After all, what use does a poor person have for most financial products? They aren’t investing. They aren’t really using credit either. They just exist, spending their money as soon as they get it.

Saying that, there’s an opportunity there for an astute company. These people still need paycheques cashed. Immigrant workers will need to send money back home. But they’re not financially savvy enough to use most services banks offer. There’s money to be made from these people, currently being made from payday loan places and cheque cashing shops. We all know the fees on these things are outrageous.

Where will these people go in the future? Wal-Mart is trying to make inroads in this market, they’re starting to move more aggressively into credit cards. Many people (myself included) think it’s only a matter of time until they become a financial services company alongside a retailer. After all, they can’t keep growing forever.

Internet Pawn Shops

Nobody wants to admit they’re short of funds. The walk of shame into the pawn shop to pawn your crappy TV is probably the worst thing ever. Luckily for everyone, the pawn business has evolved.

Rather than dealing with a local dealer, pawning stuff has moved onto the internet. The online pawn shop sends you an envelope, (from Fedex, who owns the thing) you send in your gold jewelry, nice watch or electronic, and you get your loan.

The beauty of the process is the anonymity of the whole process. Pawning something is embarrassing. Nobody wants to do it. Moving the whole process online will help grow the industry. Plus, an internet based pawn shop won’t have the overhead that a bricks and mortar shop does, meaning the person who pawns something gets more, and the store makes more too. It’s a win-win for everyone.

Different Ways of Getting Stuff

You’re a member of the working poor, and you want a big TV. You have no savings and no credit. All you want to do is watch the football game on the big screen each Sunday. Since poor people generally don’t care about their finances, they decide to rent the TV. It’s expensive, but both the renter and owner are happy with what they get from the transaction.

Don’t laugh. This is happening in all sorts of industries. Pay as you go cell phone packages are experiencing all sorts of growth, both from lower income people and older people who don’t use their phone enough to get value from a $50 a month plan.

There are websites that offer everything from book trades to video game trades to places where people can buy cheap used stuff. All of these sites will do well in poorer economic times where people just can’t afford to replace their used books or DVDs as quickly as they’d like.

Direct Energy is even trying out a pay as you go program for electricity. Who knows what the future will bring in these industries.

Readers, what areas do you think will do well because of the poor? Are the poor really that lucrative of customers?

Camping might represent everything that’s wrong with society. I’m not even exaggerating to make a point, like I sometimes do. What a stupid thing to do.

When I talk about camping, I’m not talking about packing up a truck, pitching a tent, and sleeping on the ground. For the purpose of this blog post, let’s refer to that as “tenting it.” Tenting it I totally get. You need a campfire while tenting it, or else you starve (or eat cold ravioli out of the can, which is never fun). You’re protected from rain in the tent, but not cold, or bears, or anything else that you probably don’t want to come across in the middle of nowhere in the woods. That’s the fun of tenting it, being in the woods, being left to fend with nothing but a few supplies and your own devices. That’s what camping should be.

Instead, we have this.

Look at this campground, which is a very generous name for this flat piece of grass near the highway. Look how close all those RVs are to each other. What fun! You get to escape the city, and your ass neighbours, only to drive a few hours and part your RV right next to some new ass neighbours. Not only that, but you pay for the privilege to get the comforts of home like power and water. Like $40 a night. What a bargain!

Since only suckers buy a new car, let’s apply the same principles to RV and trailer buying. After exhaustive internet research (read: 3 minutes on autotrader) I found plenty of nice, slightly used trailers for between $15 and $20k. Since I’m feeling generous, let’s assume the average cost on one is $16k. I’m also going to be generous and assume they only depreciate 7% a year, rather than the 10% number that’s probably more realistic for slightly used units. I’m betting the first year’s depreciation is more like 25%.

Over 5 years, owning that $16k trailer will lose you a little less than $5k, just from depreciation alone. Nice work there, camping moron. But wait, there’s more!

You’ll need to own a truck to pull said trailer. Let’s assume you want to own a truck anyway, because you live in rural Alberta and are compensating for something. Truck mileage can drop as much as 50% when towing a heavy load. For the sake of putting a number out there, let’s say the average truck gets 15 miles per gallon while towing a trailer. In comparison, my little Ford Focus gets 36 MPG. If we both drive 200 miles to our destination burning fuel that cost $4 per gallon, the camper has spent over $60 more in fuel. And I’m being generous, assuming the camper assumes no additional vehicle costs because they own a truck anyway. Many people I know own an older truck just for the purpose of towing their trailer. And RVs get even worse mileage. If you’re really quiet, you’ll be able to actually hear the RV sucking up gas the next time you see one. (note: not really)

So the camper tows their trailer to the nice nature reserve crowded campground. They pay upwards to $40 a night for access to water and power, so they have creature comforts like hot water and heat if it gets cold. Meanwhile, I can stay at a hotel (albeit, probably a crappy one) for double the price. And they make my bed for me. And maybe hostels aren’t your thing, but I can get a bed, all taxes included, for $40, in the middle of any major city in the world. Why would you camp again?

The last time I went to a campsite, I wanted to strangle a hobo. The site was as crowded as the one in the above picture. Trailers and RVs were everywhere. You had to make small talk to morons you just met. People were loud and annoying, either because they were drunk or because there were kids around. You had to eat at a picnic table, none of which are not made for anyone taller than 5’6 and weighing more than 92 pounds. There’s a campfire going for no conceivable reason since everything is cooked on propane grills. Every effort is put into place to bring the comforts of home out to the wilderness, without anyone actually realizing the whole point of going out into the wilderness is to do WITHOUT the comforts of home.

By the time you factor in depreciation of the unit, the extra fuel required to get to the campground, the cost of hooking up to said campground, you’re just as well off to stay in a hotel and eat out every meal. Plus, there’s additional costs we haven’t even considered, like the interest paid on the purchase of the trailer and the cost of supplies for it. People often cite the cost advantage as a reason for camping, which is complete bunk.

So yeah, if you like camping, I’m probably not going to like you. Man conquered nature, why willingly go back to it?

Special Note: Stay tuned for tomorrow’s post readers, the one where I finally shed my anonymity. It’s gonna be epic mildly entertaining. There might even be a picture on the about page, since I know how all of you ladies are looking forward to that. That’ll be accompanied with a somewhat major announcement. So, yeah, I think you’re going to want to come here tomorrow.