Collectibles - A Sound Financial Plan?

"Try to keep the shiny ones, they'll be more valuable in the future." A pre-teen imparts his sports cards wisdom as his younger brother tears open their fourth pack of 1992-93 Fleer Ultra basketball cards. The elder brother carefully sorts through the new bounty of waxed cardboard, uncovering that sparkling-fresh Larry Johnson "Power in the Key" insert card. This was during his "Grandmama" heyday, and before back injuries would limit his promising career. This card was worth $10 at the time... now, you can find it on eBay for $3.

Yes, I vividly recall getting this card, thinking I hit the jackpot. My brother and I spent hours of our young lives buying, selling and trading sports cards. If I had the foresight to sell this, wait 5 years, and bought Amazon stock post-IPO, I would have turned my $10 card into approximately $15,000! Of course, only Jeff Bezos had this vision for Amazon. But even if I was savvy enough to buy an average index fund with this $10, assuming 7% annual return, I could have had a cool $54 today. And then I could buy 18 L.J. Power in the Key cards!

10-year-old me should have thought through time value of money!

All this just to lead into this week's topic - collectibles. Some of us (myself included) are interested in collecting sports cards, antiques, art, classic cars, or almost anything unique. Some may collect as a hobby - without investing substantially - while others do so for the potential returns. Whatever your reasons, it's important to think through the financial ramifications of your collecting.

Case Study - Beanie Babies

They are soft, cuddly, and oh so adorable! The rage of the mid-90's, Beanie Babies were a must-have for every man, woman and child. There was such demand for these small, bean-stuffed bundles of joy that stores would sell out in minutes of them hitting shelves.

During my distinguished McDonald's career, with Beanie Babies at peak popularity, the fast-food chain decided to partner with Ty to produce a line of exclusive "Teenie Beanies". And then the world fell of its dang axis. I remember working the drive-thru, with a line of cars wrapping around the building, spilling into the main street of my small town. People would literally get in line, buy the maximum number of Happy Meals possible (8), then get back in line to buy more. Our store was so slammed that the regional manager came in to help us pimply-faced teens collect cash and shove bags out of the window. I remember asking him why Ty/McDonald's just doesn't produce more to meet demand. He told me they produced enough for every single U.S. citizen to have one of each. And, yes, I did secure my set plus the exclusive employee-only ones, and they're stashed away safely to sell to pay for my children's college. HA.

But, seriously, these dopey fur critters are worth nothing today. Why? Supply and demand. Everyone has them, nobody wants them. Think about it - these can be mass-produced, sold as part of a children's meal, and you're going to hoard these for huge profits? Let's pretend world currencies all collapse, cryptocurrency implodes, and Beanie Babies become the capital of the future. What stops Ty from producing more?

Liquidate your retirement savings - new Beanie Baby available now! Image Credit: Ty

Why So Serious?

Okay, so maybe I'm being a little harsh. Perhaps I'm still recovering from the brutality of the McDonald's drive-thru, issuing out Teenie Beanies like they're life preservers on the Titanic. Without question, collectibles can be both entertaining and profitable. I've known people to buy classic cars, fix them up, and sell them at a profit. I know someone who collects antique pennants, buying them from rummage sales and selling them online for a tidy gain. For a time, I was buying and selling specific genres of vinyl for a little extra money. With all these examples, this was a side hustle. Using my situation, if you factored in all costs and time invested, I'm coming nowhere close to what I make in my regular job or even what I could make in a part-time gig. So why did I do it? I enjoyed the hustle, the search for the diamond in the rough. Many collectors are the same, hoping to stumble upon the needle in the haystack.

Not to needle you, but for the record, I made some decent scratch spinning vinyl.

So What Do I Do With All These He-Man Action Figures?

If you happen to have some items you think have value, and no longer want them, I highly recommend getting an idea of their value. Use a site like eBay to see what people have the item listed at to gauge market price. While not exact, you will at least get a feel for how much it's worth. From here, it's hold or sell. Do you have a spare shelf in the basement to store your goods or will they just take up needed space? Could you sell and put the cash to better use? With 6 tubs of sports memorabilia tucked away in my storage area, I'm not going to criticize anyone for hanging on for the payoff. Just don't engage in shenanigans like renting a storage unit to stash your bounty. Guaranteed you will spend more for the unit than the items will appreciate. Then, you'll drop the ball on paying the rent. All of the sudden, you're watching the Storage Wars marathon and your Pogs collection is getting auctioned off!

How Does Personal Finance Play Into This?

For this entire article, I'm going off on beanbag animals and haven't really given you much personal finance guidance! Well, let me get back to my mission. Should collectibles be a part of your personal financial plan? No, absolutely not. If you are investing time and money into collectibles strictly for a big payday, your efforts are better spent elsewhere. Go find a second job that provides a more stable and lower-risk stream of income.

Now, if you derive enjoyment from this pursuit, go for it! Dig through dingy antique shops to find your targeted items. Just recognize this is for your entertainment. If you're doing a personal budget like I preach, you can figure out how much you can afford to spend and go from there. Pay all the bills, save for retirement, and maintain a strong emergency fund. From there, see what's left for entertainment money, and treat what you're spending on collectibles as you would anything else you do for fun. Maintain this perspective and you will know how much it's really worth to you.

What if I could tell the younger me about how the mass production of sports cards in the 1990's would make them a horrible investment considering what we spent buying packs with our lawn-mowing money? Even if I had just saved it for college or started a retirement fund, wouldn't I have been much better off in life? Perhaps... or was it really my tuition payment for a crash course in Commerce 101? The lessons I learned from buying, selling, and trading cards helped me build my business acumen at a young age. The same is true for anyone that gets into collectibles - you have to pay attention to the market, assess value, and make sound decisions. You're bound to gain some insights that will help you either in your career or personal finance journey. Just don't over-do it. If you find yourself spending hours cycling through a McDonald's drive-thru for "collectibles", I have a bunch of shiny basketball cards to sell you!