Food & Drink


How cool would it be to get free iPhones for life?

Dream with me for a minute. Imagine brand new free iPhones every other year. And hey, if we are dreaming anyway, how about a free cell phone plan to go along with it? Pretty sweet. Since everyone likes free stuff, let’s add in $200 gift certificates from Starbucks, Lululemon, Starbucks and Chipotle. Even better. But is this really possible? And why would these companies give all of this away for free? More important, how can you get in on the deal?

Most personal finance writers would shoot down the idea of new iPhones every other year, fancy coffees, dining out and premium sportswear. I would too, if you actually had to pay for all of it. But what if there were a way to actually get it all paid for…every year…for life?

So what is the scheme and who actually pays for the free iPhones?

Over at Apple there are 147,000 employees. They are all working hard, dusting store fixtures, selling iPads, explaining nuances of iCloud and making all the boxes open slooowwwly. Meanwhile at Chipotle, people are opening stores, scrubbing grills and being incredibly patient while customers fuss over their exact burrito toppings. The Amazon folks are scampering around filling orders and whipping reindeer to get everything to your house on time (kidding on that last one). What are we doing while they are working so hard? Well, frankly not much. And therein lies the elegance of this approach to get free iPhones and other stuff.

As they are busy with all this ceaseless toil, they are growing their companies. Improving sales numbers, opening new stores and making their companies more money. The brands become more valuable and their success continues to snowball. The great products and experience keep the results coming and and their stock prices continue to grow. That stock price growth is what we can use to get their products for free.

Converting stock growth to free stuff

Ok. So far we have companies with products we want. Employees working like the Dickens. Stock prices rising. So how do we cash in and get all the free iPhones and the other cool stuff?

Imagine that we set aside $7,000 five years ago and bought $1,000 worth stock of each of 7 cool companies whose products and services we like. Let’s lay it all out in a table:

free iPhones
An initial investment made 5 years ago

On the left is the company, their stock ticker in blue and an initial investment in yellow. $1,000 per company. Adding up the growth of the stock over the last 5 years, including dividends give us today’s value in green. Finally, the purple column shows the average annual return for each of these stocks. Wow! An average annual return for the group of 34.39%. They are all great companies with big competitive advantages. Will they keep growing like that? I have no idea. And neither does anyone else.  But stay with me!

So our initial investment of $7,000 has grown to over $30,000. Not bad. There are lots of things that we could do with that cash. Usually, my counsel is to keep it invested, especially in an IRA or a 401(k). (TFSA or RSP for you Canadians). But this time, let’s assume that your debts are under control and you have a good start on your retirement savings.

Time for a little fun with our cash

Rather than spend the money in a lump, or invest it for the long term, what if we just pull out each year’s gains after that initial 5 year growth period and spend it on fun stuff. What could we buy and how long could we keep this up? Let’s take a look:

free iPhonesSo we will start with a new iPhone every other year for $1,000, or about $500 per year. Let’s add a cell plan and let it gorge on unlimited 5G data. Tasty. Tuck in a standard Netflix subscription. That adds up to $1,508. Then let’s spend $200 on gift cards from each of Starbucks, Lululemon, Amazon and Chipotle. That all ads up to $2,308 of fun stuff every year. Some nice lifestyle additions. Why those numbers?

They sum to $2,308 or about 7.5% of the value of our stocks. If our stocks grow at about 7.5% a year, we would be able to spend that much and not actually deplete our $30,691. In fact, we could enjoy free iPhones, cell plans, Netflix subscriptions and all those gift cards forever. $2,300 worth of stuff forever, all from a one time investment of $7,000.

But wait, it wasn’t free. We still had to invest $7,000 and wait 5 years.

Actually, you can get that initial investment for free. Or very close to free. Some careful re-shopping of regular bills can easily emancipate the cash for that kind of investment. All with minimal effort. Have a look at easy ways to reduce regular bills like energy costs, home renovations, housing costs, prescription drugs and even vodka expenditures. Want another $13,000 of monthly savings ideas? Check out Cashflow Cookbook.

What about the business of waiting 5 years for that initial investment to grow? Let me answer that with a story. When I was about 27, I started working on an MBA part time. People would often say “Part time? Are you kidding me? That will take you 4 years. You won’t be done until you are 31.” My answer was that I will be 31 eventually. I can either be 31 with an MBA, or without one. Life goes on, tuck away the money, go about your business and check your balance in 5 years. Hopefully you will have a fun account that spits out free iPhones and other goodies for life.

You can, of course set this up with whatever brands you like and nothing says you have to spend the growth and dividend money on the same companies you invest in. The investments are spread across 7 stocks which provides some level of diversification.

We got some free iPhones and some powerful learnings

A few things get reinforced with this example:

  • Compound growth really is the 8th wonder. It can even keep you in iPhones.
  • Great companies have brand power that fuels their growth and investment returns
  • A group of strong stocks can provide an ongoing stream of money to fund a lifetime of expenses
  • This is really a miniature version of the power of long term investing for retirement
  • Invest for the long haul. Markets tend to rise over the long haul, but may rise or fall in the near term

Some caveats

Readers should always do their own research on any investment. This example was for illustrative purposes only and does not constitute investment advice. The author holds positions in Amazon and Apple. Investment results are unpredictable and past results may not be reflective of future performance.

What companies and products would you add to the list? Let me know in the comments below.

Photo credit Douglas Bagg at Unsplash

You wouldn’t think that your VP of HR would be the one to turn you on to premium vodka. Yet there I was. During an after work drink (sadly that fad is gone), I ordered a dry vodka martini with olives. Donna gave me a slight sneer and then ordered a Grey Goose with a twist. Ugh. Was that a career limiter?

And so it was that I came to settle on The Goose as my standard. Decades later, I read an article that suggested that all vodkas are alike and there was no point in spending extra on premium brands.  Hard to believe. Here in Cleveland, we started drinking Tito’s Vodka for no reason in particular and I did notice that it seemed a tad harsh. Penance for betraying the Goose perhaps.  And so it begged the question: Is premium vodka worth it?

Quite separately, my wife, Deb, and I were noodling fun, Covid-safe entertainment ideas and I offered a formal vodka tasting night. Good entertainment value, staying within our household bubble and it would answer that niggling vodka enigma once and for all. Deb smiled and nodded and it was to be.

The preparation

Deb did the shopping trip, asking the liquor store clerk for 5 bottles of 80 proof vodka, from premium to bargain and then had them packed, sight unseen, into a stapled brown paper bag. We pressed Deb’s daughter into service, labelling 5 glasses with the numbers 1 through 5, each with about 2 ounces of mystery hooch. Hidden behind our bar, in a sealed envelope, Ruthie left the intoxicant index. I prepared a tray of appetizers for palate cleansing and some sustenance value to keep us upright through the research. We were each equipped with a note pad, pen and years of drinking experience.

The methodology

We began with a sequential sampling while making confidential tasting notes. I tucked into Vodka 1 – fairly smooth with a clean finish. Not too boozy. A decent start for sure. A bite of an appetizer and then a mindful sampling of Vodka 2. Hmm. Quite noble, almost buttery, perhaps a bit harsh on the way down. I mulled the two in my mind as I savored my reduced salt Triscuit with vegetable cream cheese topped with two half grapes. On to the third. Quite decent, maybe the best of the bunch so far, with a meatier viscosity and a medium boozy finish. I glanced at Deb as she pondered her fifth taste…time to pick up the pace. Number 4 seemed pleasant enough, but was it as buttery as the others? And what of its relative viscosity? On to 5. Less mindful. Was it a little harsh? A bit reedy? Is premium vodka worth it?

What was Deb thinking?

I set down my cup and checked in with Deb. We agreed to compare tasting notes. Five was her overall favorite since it seemed to be the smoothest, but she was also partial to 2. I felt that 3 was maybe the best and mentioned about the superior viscosity. Deb gave me one of those “always an engineer” looks but gave 3 a re-test. While we each had a quasi favorite, neither was willing to fight for their grog. Who would have thought that drinking vodka could be this tough? Still, it beats working for a living. And if it is this hard to decide during a structured tasting, is premium vodka worth it for home purchase or bar consumption? More importantly, how would we pick a winner?

What would my eye doctor do?

I thought back to my last eye exam and recalled the endless inquisition of ” A or click B, and click click,, now C or click D?” Could that work here? I covered the numeric labels and handed Deb 2 and 5 to test, calling them A and B and making a clicking sound between each. Deb liked A better, not realizing that she had just abandoned 5, her overall favorite. I then paired up the rest, taking her to Vodka 4 as her overall winner. She repeated the ophthalmologist routine with me, sans sound effects. I ended up with 2 as my overall favorite, viscosity be damned. Neither of us had conviction in our choices.

The big reveal…

We opened the envelope and had a few surprises. My initial pick was my old friend Grey Goose. But I abandoned that during the eye doctor testing and ended up with Absolute. WTH? Deb had picked our lowest price brand initially but landed on Tito’s as her favorite. But by the end of the second round of testing things didn’t get any clearer. As we polished off the cups as part of our bar clean up, things may have been even less clear.

Is premium vodka worth it?
Is premium vodka worth it?

Our Conclusions

  1. A vodka tasting night was a good switch-up to our Covid repertoire of Netflix, TV and watching movies.
  2. We had no idea which vodka tasted the best.
  3. Our new favorite vodka is New Amsterdam. Unless something else is on sale.
  4. We likely don’t drink enough vodka to get rich by switching brands, although that may not be true of all of our friends. You know who you are.
  5. There is always a smarter way to buy everything. This one was just for fun, but it shows that I have been over paying on something by more than 2.5 times. For no reason. Over 40 years of drinking, might that extra cash have done better investing in alcohol stocks rather than the premium brands? Let’s take a look!
Buy cheap vodka and invest the difference
Buy cheap vodka and invest the difference

In the chart above the golden line shows the growth in the S&P 500, a proxy for the overall growth of the US stock market. The other lines show the growth of the stock prices of three major alcohol companies, Diageo (DEO), Brown Forman (BF.B) and Constellation Brands (STZ) over the last 10 years. Buying cheaper vodka and investing the difference would have been a path to wealth! Remember that past results may not be indicative of future results and that readers should do their own research or consult a registered financial advisor on any investment. This chart and these securities are for illustrative purposes only. Most stocks won’t grow at anything like this rate, but being careful with your spending and investing wisely will make a big difference over time.

A big thanks to Deb for her testing help and some good laughs as we adjudicated the elixirs.

Next week, I’ll be back with Part 3 of How to Stop Worrying about Money. If you missed Part 1 or Part 2, go get caught up now so that you are ready for Friday.

What are your thoughts on vodkas? Can you tell the difference? Let me know in the comments below.