If you’ve considered selling some of your unused gold jewelry for some cash at $900+ an ounce, you might be in for a very rude awakening. Selling gold jewelry is pretty easy, even if you spend the extra time to avoid the scam artists and rip-offs, but the reality is that whatever you sell will be melted down and the gold will be reused. Since it will be melted and reused, you will only be paid for for the gold in the piece minus whatever markup and fees that the buyer has. $900 an ounce sounds pretty good, but you won’t get anything near that for typical pieces of jewelry.

How Much Is It Worth?

Well, you basically are getting the spot price of gold minus a cut if you go the gold route. 24-karat gold is pure gold. You’ll get the full weight of the piece if it’s 24K gold. 18K is 75% gold, etc. Anything with 10-karats or more will have a stamp on it, anything less and you’re probably out of luck in terms of selling it as gold.

If the piece is especially ornate or shows craftsmanship, it may be worth more than its weight in gold. In those cases, you’ll want to get it appraised and try to sell it as a piece rather than as gold. It requires more time and more effort but you might get a lot more.

Where To Sell It?

Here’s where it pays to shop around, just as if you were buying it in the first place. Think of it as comparison selling. You’ll likely get the least at pawn shops and probably the most at jewelry stores. Try to go with someone with a reputation, that way you know you won’t get cheated on the scale or something else. Reputation in the jewelry business is everything.

One thing about all those infomercials or magazine advertisements of companies asking you to ship them your gold pieces for cash, avoid these unless you can verify their reputation. Sending anything through the mail is risky, sending hundreds of dollars to a stranger is simply foolish. As you can expect in any industry dealing with high dollar items, there’s plenty of fraud so you always have to be on your feet.

Selling Process

There’s some lingo involved in selling gold and here’s a primer so it doesn’t fly by you in a rush. Precious metal jewelry is measured in either pennyweights (DWT) or in grams (GR). An ounce of gold is a troy ounce and there are 20 pennyweights or 31.1 grams per troy ounce. When you go to sell, the buyer will tell you the price in dollars per pennyweight (that’s their daily price) as well as the weight of the piece prior to the transaction. So, if you bring something in that weights 10 pennyweights and they’re paying $45 per pennyweight, then the 10.0 DWT piece at $45/DWT is a $450 sale. They may also have higher daily prices based on volume and avoid buyers who won’t tell you this beforehand.

That’s basically it!

Here are some useful resources if you’re considering selling gold jewelry:

• How to sell your old gold jewelry
• Should I Sell Grandma’s Locket?
• Q&A What’s the best way to sell gold jewelry

(Photo: Pink Moose)

One of the most fascinating stories I read in Predictably Irrational, by Dan Ariely, was that of Tahitian Black Pearls. It’s amazing because what happened with black pearls has happened with so many other products through the ages, you’d think we’d learn to recognize it… but we don’t! While I won’t reveal the whole tale, Emily Bobrow’s review, which appeared in the New York Observer, remarked that in Predictably Irrational…

We learn that James Assael, a postwar ‘pearl king,’ had little luck in unloading the gunmetal fruits of black-lipped oysters when he first introduced them to America in the 1970’s. But then he convinced his buddy Harry Winston to display a string of these lovelies in his Fifth Avenue window, together with an outrageous price tag. The rest is history.

For those who don’t know, black pearls are supposed to be very expensive.

The story of the rise of the black pearl is an example of an idea Ariely hits upon frequently in the book. Again, from that review:

“We don’t have an internal value meter that tells us how much things are worth,” Mr. Ariely explains. Instead, we rely on context and relativity (is this scarf better or worse than the scarf sitting next to it?), which makes us gullible consumers.

Are there more examples out in the wild? There are plenty.

Bottled Water

This is by far my favorite example because it’s one that only recently became popular. Bottled water is one of the most ridiculous marketing inventions of the last ten years, even more ridiculous than a Pet Rock. Bottled water, in blind taste tests, is no better than tap water despite the ridiculous price difference. You can buy a thousand gallons of tap for the price of a single bottle. Americans spend $30 billion a year on bottled water, according to San Francisco Mayor Gavin Newsom.

In countries where you cannot drink tap water, bottled water is more reasonably priced. My wife and I recently went to China and found that bottled water was mere cents compared to dollars here in the US. While you have to account for cost of living, the main reason bottled water was cheaper there was because it’s a necessity rather than a perk or status symbol. You couldn’t drink the tap water, you had to buy bottled water. Americans overpay significantly for bottled water.

If you buy bottled water in individually-sized 12 oz. bottles, I’m sorry but you’re a fool. If you like the convenience, buy a reusable bottle. You save yourself some money and you help out the earth.

“Enhanced/Fortified” Water

If bottled water was the first listed, enhanced water has to be close behind it. These are bottle waters fortified or enhanced with something special, like 50 Cent’s vitamin sweat or Michael Phelps’ pool water. Unfortunately, they’re also nearly all marketing hype. Check this out from the Consumerist.

Diamonds

Okay enough with the water, after water comes one of the biggest scams ever - Diamonds. Diamonds are forever and they’re rare, at least that’s what DeBeers would like you to believe. The reason they are rare is because the DeBeers diamond cartel owns practically all the mines and has inflated their prices by restricting supply (they recently settled a diamond class action lawsuit regarding this).

We can make perfect diamonds in a lab, so why are nature-made diamonds so expensive? DeBeers & Marketing FTW!

Wines & Spirits

Wines and spirits, and the beverage market as a whole, is just one big marketing machine churning out one brand after another. It’s been shown that the more expensive the bottle and the fancier the label, the more we end up enjoying it and the more likely we will pay. We have been conditioned to believe, especially in wine and spirits, that the more expensive bottle is the better one because many of us aren’t wine experts. Price is thus our proxy.

Dr Rangel gave his volunteers sips of what he said were five different wines made from cabernet sauvignon grapes, priced at between $5 and $90 a bottle. He told each of them the price of the wine in question as he did so. Except, of course, that he was fibbing. He actually used only three wines. He served up two of them twice at different prices.

The scanner [it was a functional magnetic-resonance imaging device that showed blood flow to parts of the brain] showed that the activity of the medial orbitofrontal cortices [an area of the brain that previous experiments have shown is responsible for registering pleasant experiences] of the volunteers increased in line with the stated price of the wine.

The pricier the wine, the more we enjoyed it. Crazy huh?

Coffee

For the longest time, Starbucks was the darling of many an MBA case study as being able to take a commodity type good, coffee, and turn it into a rich experience people would be willing to pay $4 a cup for. You can make coffee at home for a few cents per cup but people were willing to drive to a Starbucks in order to enjoy a $4 cup of coffee given a fancy name… all because of marketing.

How did they do it? They made Starbucks a brand about coffeehouse experience, rather than the coffee, and people bought into it. Don’t get me wrong, I have much respect for Starbucks and what they’ve been able to accomplish but the people paying for coffee each morning on their way to work are buying into the experience and not the coffee. You could argue that Starbucks coffee is better, but is it 100x better? 50x better? They successfully made the purchase more about the experience than the commodity good they were selling. When a business does that, they win.

Any Others?

Do you know of anything that comes to mind that fits this list? It seems as though everything on here was either jewelry (pearls, diamonds) or beverages (water, coffee, liquor), are there any others that I missed? I thought about throwing the iPhone on here, because that certainly benefited from marketing, but electronic components are expensive and their business plan is to profit from the recurring monthly service fees. Let me know!

(Photo: Black Pearls by jacbt, Diamond Ring by salreus, Wine Aisle by pgoyette)

Wow, June was a little rough. Net worth fell approximately 5.0% on account of two major reasons: quarterly estimated tax payments and retirement accounts. Outside of those two, which really consists of not much else, everything is progressing as expected. Neither income nor expenses, outside of the roof, had drastically changed. We don’t track our expenses as closely as we probably should but we have, at least qualitatively, gone out to eat less.

Eating Out

We’ve gone out to eat at restaurants less frequently for numerous reasons. First, gas prices have increased the cost of my wife’s commute, which is mitigated by my commute. Second, it’s far healthier to eat home on all accounts. You eat less and what you eat is healthier for you. Third, we need to learn how to cook better which only comes with practice. Eventually, whenever we have kids, eating out will no longer be an option (again, from the health and cost perspective) so it’s better to learn how to cook now than learn under the gun.

Estimated Taxes

Estimated taxes are paid quarterly, for the most part, and so the month in which those payments come due will be times when my net worth will see an “artificial” drop. Technically, that’s not accurate, it’s the other months that are artificially inflated, but you know what I mean. This is one of those cases where understanding the underlying cause explains away any concerns I might have, at least with this reason. Retirement is a totally different issue.

Retirement

Everyone knows that retirement accounts are long term. I know that when I log into my IRA’s, I can’t touch that money, unless I wish to pay a penalty, for another 40 years. However, it’s really difficult to look at the Dow drop 300+ points and not think about how one of our largest account balances is in an account pegged to that metric.

Retirement accounts took a 4.41% cut across the board, the largest single month change in my short adult life. I will do exactly nothing in response, though Todd Harrison, founder and CEO of Minyanville.com, who was a former trader at Galleon Group, Cramer Berkowitz, and Morgan Stanley, is in all cash. (there’s more to it but that’s the headline idea) A lot has happened in the last 10 years, there’s a lot more that will happen in the next 40.

The one thing I won’t be doing is adding to positions outside of the regularly scheduled retirement contributions. I think we already have enough invested in the stock market for our comfort level and unless we settle on our other long term investment goals (kids, college, home), we won’t be adding to our taxable brokerage account.

Actions from May

In May I listed three “action items,” I merely said it was looking towards the future, and I think it’s important to revisit them to see where we’re at. Think of it like my own little checklist of important things to do and where we’re at with them. I want to thank everyone who leaves comments with advice, suggestions, etc. because it definitely helps me out in many of these areas. I don’t have experience in a lot of these things and your insight, even if it’s what you did or what you’ve, is a tremendous help.

• Jewelry Insurance: A year after first discussing it and a few weeks after putting it into a monthly review, I finally got jewelry insurance for my wife’s engagement ring. If you read the article when it first was posted, I invite you to go back and read the comment Tim left as it covers many points I missed or misunderstood.
• Auto insurance: I mentioned earlier this week that being married doesn’t affect car insurance premiums and readers pointed out it was the multi-car discount, not the marriage aspect, that decreased premiums. The process will now be to get car insurance and register the car in Maryland, which includes paying the 5% tax. There may also be a penalty involved because you’re supposed to register a car within 60 days of moving to Maryland (you get a credit for taxes paid elsewhere), so we will see how that plays out.
  One interesting point, when I requested a quote, they lowered my six month premium from $282.60 to $203.30 even though it was a sample quote. This reflects something Dedicated said in a comment: “The discount comes from the wife expectance to drive a portion of the time on the mans vehicle. Thus, his rate goes down.” Cool! The addition of the new car only increased the six-month premium to $355.40. The insurance doesn’t include collision and comprehensive coverage.
• Water heater, Roof: The roof replacement is complete and the charge is sitting on our Citi CashReturns card, due next month. We opted for the 1.2% cash back over the six months 0% financing. 1.2% cashback is $53.40, 6 months 0% financing in a high yield savings account earning 3.50% is about $56 - not worth the effort. Water heater is still pending… the prospect of a tankless option is more and more attractive as energy prices increase.

Looking to the future:

• Further Consolidation: My wife and I still has some accounts floating around out there that have since outlived their usefulness. I made a big push to the last few months to consolidate as many accounts as I could, so we will have to keep plugging along. Consolidation sounds easy enough, they’re just activities that take longer than you expect.
• Getting A Pet: Every once and a while my wife and I watch my parents-in-law’s two Scotties. They’re adorable, lots of fun, and they poop everywhere (most of the time outside). My wife thinks I need more companionship during the day, the SAHMs at the gym don’t count, and so we’ve discussed getting a dog. Right now we’re leaning towards adoption from a local pound because there are so many there, it makes no sense to look elsewhere. An added benefit is that often those dogs have had their shots and are current on everything. Before pulling the trigger, we think it’s important to look at the finances just to be sure.
• Continuing Education: One of the longer term goals we have is for my wife to return to college and get her Masters or a Ph.D. Many programs offer tuition assistance or funding, but some don’t. Plan for the worst, hope for the best. This is one of those farther in the future type things, but one of the reasons why we bought those Series I bonds was because earnings are tax free when used for education. Just something to keep in the back of our minds.
• Kids: Ahhh just kidding, not yet.

Over a year ago, I wrote about how we were going to get my lovely wife’s engagement ring appraised and insured that weekend. Well… ha ha, as all things are, it took a little longer than anticipated but we finally got it appraised in May and insured last week (yeah yeah, over a year later).

We eventually had it insured through Jewelers Mutual Insurance, recommended by the appraiser at Edward Arthur (where the piece was appraised). I had called up Traveler’s, our homeowner’s insurance policy underwriter, and received quotes that were similar priced. The logic was that, given the same premium, we should go with a company that deals with jewelry related claims on a regular basis rather than a general insurance company. Another reason was that in this case, a jewelry loss would have no effect on our homeowners insurance premium.

Replacement vs. Dollar Value Coverage

The type of insurance we purchased was for replacement coverage. That meant that if we did suffer a loss, JMI would replace our covered jewelry with something similar or better. The other option is where you get the dollar value of the appraisal. So if your piece was appraised at $5,000 and you somehow lost it, you would be compensated $5,000 for your loss.

Premiums

As I was filling out the form, I started playing with the deductibles, coverage amounts, and “other factors” to see how they would affect the premium. For the sake of simple math, I put in the dollar value of the piece of be $10,000 and found that the difference between a $5000 deductible and a $1000 deductible was a mere $7 a year (8%). The premium went from $84/year for the $1000 deductible to $77/year for the $5000 deductible, though that does represent an 8% difference. This may seem like very little but the reason is because the item covered was an engagement ring/wedding band set that is worn daily. You could have no safe or an 80 lb. anchored floor safe with a digital lock, sharks with lasers, and your premium would not change because the piece is worn daily. (I made up the sharks part, but it’s likely that would have no effect)

That’s when I decided to have some fun and put in a $10,000 necklace that is worn only for special occasions. If you had no alarm, no safe, and just kept it in a hiding place while you weren’t wearing it, the premium would be $131 for a $1000 deductible and $120 for a $5000 deductible (9% difference). However, in changing the “other factors,” the premium didn’t change at all. Keeping the necklace at a safe deposit box at a bank still had a $131 premium. You could have an armed killer robot guard wear your necklace while you weren’t wearing it and it would still cost you $131 a year. It could be that those factors don’t affect the application’s calculator, since they are subject to verification, but it seemed like they should add a note if that was the case.

Unscheduled Jewelry Insurance

The items that you specify for coverage go on a “schedule.” Usually you have your more valuable or expensive pieces put on the schedule because you’ve had them appraised and would like insurance. Unscheduled is everything else and you can get a catch-all coverage for all those. At JMI, the coverage was $1000 with a $100 deductible for $15. If you wanted more coverage, it’s essentially at those intervals ($2000 of coverage with a $100 deductible cost $30/year). We didn’t elect this coverage.

Application Process

The application process was a piece of cake. You can submit all the details online through a slick Flash-like form and then email, fax, or postal mail your appraisal forms to JMI for verification. Within ten minutes we had coverage, very technology friendly so far.

Knock another one off the checklist, albeit a year-plus from when we put it on.

(Photo by dbking)

Last month was the return of these monthly net worth reviews and the first time, probably since when we bought our house (closing costs are brutal), that our net worth decreased across the month (taxes are brutal too). This month, we saw our net worth increase by a healthy 8.6% helped along by a mild recovery in the stock market (1.39% increase in retirement assets).

Last month I talked about three things in the future - roof replacement, water heater, and diversification of our investments. The roof is set to be replaced on June 16th, contingent on good weather, at a cost of $4,450. The roofing company offers a six month same as cash option but I think we’re going to put it on the Citi CashReturns card for the 1.2% cashback since interest rates are so low (it’s nearly a wash after taxes, so we figured for simplicity the credit card option was better). We knew the roof needed to be replaced so we were prepared, there won’t be any other financial impact (other than the -$4,450 to the bank account).

As for diversification, my lovely wife and I had a chat about the future on a recent walk around the lake. We plan on outlining major milestones over the next thirty years, as best as we can guesstimate, and then adjust our financial plan to meet those milestones. I’ve come to the realization that after you’ve maximized your 401(k) and Roth IRAs, you have to begin saving for specific goals. We already have a house so that’s one significant goal achieved, so we have to determine the other milestones on the list (such as education) so we can chart a path forward. One idea I had was to use target retirement funds to simplify saving for specific goals.

Looking to the future:

• Jewelry riders and homeowners insurance. We got an appraisal for my wife’s engagement ring and need to add a jewelry rider to our homeowners. I called them up and got a quote for $100 a year for total coverage from our current insurance provider, Travelers, and a quote of $105 from an independent jewelry insurer, Jewelers Mutual Insurance Company. Why haven’t I pulled the trigger? I actually wanted to contact Erie Insurance and figure out whether it’s worth it for us to go with them for homeowners. In thinking about it, I should probably mail off the independent jewelry insurance form and then talk to Erie.
• Auto insurance for my wife may be a little tricky. The title for her car lists her and her father as co-owners, which allows her to be on her parent’s auto insurance. The auto insurance now has four vehicles listed, which probably isn’t good. We should be on the same policy, now that we’re grown ups :), but the sticking point is that putting the insurance in Maryland may force her to register the vehicle in Maryland - that’s a 5% tax on the blue book value of the car ($500). We will have to investigate further.
• Water heater is still on the radar but now on the back burner with the roof. We actually just bought a really nice Fridigaire dishwasher (to replace this old Whirlpool dishwasher) for $150 thanks to a find by Fred at One Project Closer. It was a rush sale by a guy who was being foreclosed on and moving out of state in two weeks (yikes), but a great deal. Getting a new dishwasher wasn’t a priority, I had been looking around, but $150 for something worth around $500 was too good to pass up. Quite fortuitous!

One nice benefit of these net worth monthly reviews is that it forces me to think about what we’ve done this past month and what we need to accomplish in the next month. As I was writing, I was forced to think about things I had set off to the side. In looking back, the net worth portion is really a minor part (I mentioned the increase, what was a main contributing factor, and then moved on to more “strategic” level ideas) but I think that’s a good way to approach it. Please let me know what you think!

On your typical renters or homeowners insurance policy, if someone comes into your house and steals your television, you’re covered. The insurance company will either give you money for the value of the television or give you its replacement value (purchase price minus depreciation) and while that is a headache to deal with, your television is covered. That isn’t the case for jewelry and so we’ve decided to get a jewelry rider on our homeowners insurance policy to protect the jewels that I’ve showered my betrothed with.

Erik interjects (from the comments below but they’re very important) and corrects me on the fact that jewelry is covered, the limit is just usually low such that a rider is necessary to fully insure them:

… there IS coverage for jewelry that is stolen. Usually, your policy puts a limit on certain categories of personal property like jewelry, guns, cash, business property, and other special items. Like on my policy, it covers jewelry up to $1000, but only in regards to a theft. God forbid, if you have a huge fire in your home and you had jewelry damaged, then it would be covered up to the full amount of your coverage C limit. Because this limit is so small for jewelry theft, that is why everyone should schedule their expensive jewelry onto their policy, but don’t go thinking that your jewelry isn’t covered at all on the policy.

I thought the appraisal process would be akin to the home appraisal process where the lender wanted their own appraiser doing the assessing. Not so with jewelry. See, with a home appraisal, the lender wants to know the value of the home with respect to the area that its in. They already know the stats (square footage, bedrooms, bathrooms, etc.) and they’re just getting them in context, which is a big part of the value of a home. With jewelry, they don’t know anything and they’re just looking for a certified jeweler to record the information because if a loss occurs, they will look to that appraisal document to assess a current value. What the jeweler appraises the jewelry for is unimportant, except to determine a ceiling really.

Another interesting note for those of you who are recently engaged and thinking about getting insurance, I was able to get the jewelry rider on my homeowners because my fiancée lives at the same address as I do. If she didn’t, it’s technically her property and she would have to get a rider on her policy (if she had one) or she would have to have to get personal property insurance and get it linked to my account.

I found out that you can get insurance without having the jewelry appraised but you can’t file a claim without the appraisal documents. So, this weekend we plan on finding a jeweler to do the appraisal, which will cost something around $50 or so I imagine (I’ve done no research on this except read this little post), and then we’ll get ourselves that rider.

Diamonds better be forever.