Sometimes I wonder if I deserve to blog about personal finance. I’ve made too many embarrassing money mistakes in my life– I would suffocate if I had to re-enact the number of times I have face-palmed myself.
Here I was, declaring myself to be on a mission to educate broke Americans about money when I myself made crucial mistakes that can potentially make any American, or whatever your nationality is, go broke.
But on second thought, that’s probably what made me so qualified to talk about money. After all, your experience is the best teacher. The more embarrassing the experience is, the better the chance that you will actually learn from your mistakes.
I recently claimed $2,500 of previously unclaimed money. You read that right. That’s no less than TWO THOUSAND FIVE HUNDRED DOLLARS!
With that kind of money, you can buy:
- 5 days/ 4 nights vacation package to the Caribbean islands for 2 people
- Apple 15″ MacBook Pro, Retina, Touch Bar, 2.8 GHz Intel Core i7
- 5,000 bottles of San Miguel beer (@ 50 cents each) in Manila.
The burning question is– how on earth did I lose the money in the first place? I’m sure you’re going to ask. That’s a lot of money to be forgotten. Not enough to buy a single Bitcoin in 2017, but still a hefty amount to slip through the cracks.
Here’s what happened.
In the spring of 2009, around the time when Chrysler filed for bankruptcy, and the Dow Jones Industrial Index was close to the bottom at 8,000 points, I hired a subcontractor from a popular big box store to install custom cabinets in my basement, which I was in the process of finishing. I wrote a check to initiate the work, to the sum of $2,500 or half of the face value of the contract.
A couple of days later, I had a change of heart. The frugal side of me came to the rescue– I decided that I will install the cabinets myself. I figured that since I already went to the trouble of doing most of the renovation myself, including the plumbing for the full bathroom, why would I spend $5,000 for custom cabinets? I might as well do the work myself and save more money.
So I immediately called the subcontractor to cancel the deal. The subcontractor obliged and promptly returned the check that I issued for the job. I had the check shredded after promising myself never to spend a big sum of money for something that I can do myself.
Weeks later, I got a refund check for the same amount from the big box store. I scratched my head thinking that this was a big mistake on their part. But due to my honest nature, I didn’t cash the check reasoning that (1) the subcontractor already returned the check that I issued, (2) I never saw that big amount debited from my checking account. I was under the impression that the transaction never took place.
Fast forward eight years, the bear has long gone, unemployment is at its lowest, the Dow is at its highest ever at around 22,300– I received a letter from my home state’s treasury department asking me to submit the necessary documentation to claim what is rightly mine, to the tune of $2,500.
Obviously, someone messed-up. But whose mistake was it really? I wouldn’t have missed that big amount being debited from my account.
To verify, I immediately searched my old statements online, but Wells Fargo lets you view just seven years of historical records. My other checking account does let me access up to ten, but I didn’t find any amount close to what was supposed to have been debited. Regardless of who messed up, I’m glad that I’m able to recover the property.
But do I feel lucky for the unexpected windfall? No. Not in a million years. Why?
It’s because of the opportunity cost of not being able to invest that money.
What is Opportunity Cost?
According to Investopedia, Opportunity Cost refers to a benefit that a person could have received, but gave up, to take another course of action. It’s a key concept in economics that lets you assess the profitability between two choices: (1) the most lucrative option, (2) the chosen option.
Here’s the formula:
Opportunity Cost = Return of Most Lucrative Option – Return of Chosen Option
Return of Chosen Option
In my case, I mistakenly chose not to deposit the check. As a consequence, I made an involuntary 8-year interest free loan to the State of Pennsylvania. I made a quick trip to usinflationcalculator.com to calculate the cumulative rate of return when inflation is taken into consideration.
Based on the above numbers, I essentially lost $361.03 due to inflation alone.
Return of Most Lucrative Option
Just for fun (at my expense), let’s take a look at what a $2,500 investment, in various companies, would have been worth today.
Bank of America (BAC)
I bought 1,000 shares at $7 apiece in 2011. I would have bought 350 more shares if I had that extra cash. Those shares alone would have been worth $9,000. Not bad.
I owned this stock since 2003. My boss told me many times that nobody gets fired for picking Microsoft. No longer true after Windows Phone flopped big time. At 350% cumulative return since 2009, the investment would have been worth $8,750, probably $10,000 with the dividends reinvested. Not too exciting, but very good return nevertheless.
Monster Beverage (MNST)
Never owned this, but this was my favorite drink at the time when I was finishing my basement. It kept me from shooting a nail through my fingers. I loved Monster the way Warren Buffett loves his Coca-Cola. At 1300% return, the investment would have been worth $32,000 today. Now that’s exciting!
Sold this too soon. This semiconductor company continues to make a killing in the CPU and gaming industry. At 2200% return, the investment would have been worth $55,000. That’s awesome! I could have bought a 5 series BMW with that money.
I was a customer since 2001. Blockbuster kept on charging me late fees, so I decided to switch. Blockbuster got busted by Netflix, and the rest is history. Netflix stock returned by an unbelievable 4400% since 2009. $2,500 would have grown to $110,000– that’s enough dough to buy a Tesla Model S!!!
Be pro-active, check if you have unclaimed property
All states require financial institutions to report when personal property has been abandoned or unclaimed after a specified period. The government then claims the account through a process called “escheatment”. Then it’s up to you to put your own claim to the property.
What happened to me can easily happen to anyone, albeit probably with a smaller amount. So it’s a good practice to check your local government’s treasury department website at least once a year to see if you have unclaimed property.
If you’re a U.S. resident, you can enter your name and state at the National Association of Unclaimed Property (NAUPA) website to instantly check if the state owes you money.
If you live in Canada, you can enter your info at the Bank of Canada’s website.
If you live in the Philippines, you have five years from the date the property has been escheated to make a claim.
Please comment below if you know the process in your home country.
Never hesitate to receive a check that is written to you
Outstanding checks can cause accounting problems that often result to an unclaimed property that must be turned over to the state. When a business issues you a check electronically, like in my case, the funds are often deducted when the check is printed.
The case is different if the check came from an individual– the amount is debited from your account at the time when the check is presented to the bank for payment.
Regardless of the source, checks issued to you are meant to be received. You should never hesitate to have it deposited or encashed.
Maybe one exception is when a rich dirty old man who is asking for a favor suddenly offered you a blank check– that you can simply tear up into pieces right in front of his face.
You can worry about the opportunity cost later.
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