A question for the financial-minded...

[ChanceSchmerr]

Something I've been wondering for a little while.....

The more I get into CCs, the more I wish I could make up for lost time and stock up now on what I won't be able to find later. Part of the lost time stems from being only 25, and thus being too young to really have known what I was missing a few years back. Regardless - I would really like to be able to stock up now before it gets too late.

Question - If I walked into a major bank today (for me it would be a Canadian Bank, but the question applies to all countries and their banks), Sat down with a banker and asked for a $10,000 Loan to purchase a large supply of cigars for aging and consumption purposes, what would they tell me? Further to that, what would they have told me, had I asked 2 years ago, before the recession hit, would it be any different?

Background info, for those with financial backgrounds -

I'm 25. I'm an officer in the Navy, with a Mechanical Engineering degree, a steady job with a current base pay rate of $5800 Monthly, plus additional incentive pay entitlements for Cost of Living, etc, 2 major Credit Cards, 2 Dept. Store credit Cards. I own a car with negligible collateral value, and I rent an appt, with an intention to buy a house in approx. 4-6 months.

What would the bank tell me if I wanted to borrow money to buy cigars? Would they laugh me out the door? I am curious!

[bigfunkyg]

I'm a designated accountant (CMA) in Canada and I deal with banks quite a bit, I also like to dabble in personal financial planning, so here is my take on your situation.

Don't mention the part about cigars. Yes they will think you are crazy and probably not lend you any money.

What you should do is approach you bank about an line of credit (LOC). My bank (Big five Chartered Canandian Bank) gave me a LOC 5 years ago for $10,000 and I had it increased to $20k over a year ago. I believe it is unsecured but they might require security against a major asset (home, investment, but not cigars). If you don't own any major assets ask what they will give you unsecured which might not be too much in this financial climate. This might be somewhat all contingent on your banking history as well.

From a personal financial planning perspective, I would recommend against doing that. The interest costs of carrying a $10k loan don't justify the means. As an example to borrow $10k and repay it at a rate of $200 per month would take just under five years and cost a total of $1500 in interest.

Here is my plan for developing an aged stock. Determine how many cigars you smoke in a year. As an example if you are a twice (occassionally three) a week smoker you would smoke approximately five boxes in a year. Buget to purchase 8 - 10 boxes per year. If you stick to smoking five boxes a year in five years you should havean aged stock of 15 - 25 boxes. If you assume an average cost per box of $250 that means you spend $2500 per year on cigars, which is about the same as if you paid the $200 per month loan payments. At the end of five years you have established a good stock from a variety of years and didn't encurr the interest cost of $1500. Patients pays off. The only unfortunate part of my plan is that the $250 average price per box might be a bit unreasonable once you factor in the excessive duties and taxes on cigars.

Hope that helps some!

G

[Shelby07]

Geez, why rush it? What have you "lost?" 7 years? Every time you smoke a box replace it with 2.

At 25 years old you have plenty of time to build up a very impressive stash. Take your time and buy selectively. By the time you're 50 you'll have one hell of a collection. And there will be opportunities along the way to invest in special vintage cigars.

Besides, how would you feel if you went out and borrowed 10 grand, bought a bunch of vintage cigars and found out you didn't like them? The quality that seems to be coming out now suggests that maybe you are pretty lucky to be starting now rather than 20 years ago.

Just my opinion.

[ucla695]

I'm a designated accountant (CMA) in Canada and I deal with banks quite a bit, I also like to dabble in personal financial planning, so here is my take on your situation.

Don't mention the part about cigars. Yes they will think you are crazy and probably not lend you any money.

What you should do is approach you bank about an line of credit (LOC). My bank (Big five Chartered Canandian Bank) gave me a LOC 5 years ago for $10,000 and I had it increased to $20k over a year ago. I believe it is unsecured but they might require security against a major asset (home, investment, but not cigars). If you don't own any major assets ask what they will give you unsecured which might not be too much in this financial climate. This might be somewhat all contingent on your banking history as well.

From a personal financial planning perspective, I would recommend against doing that. The interest costs of carrying a $10k loan don't justify the means. As an example to borrow $10k and repay it at a rate of $200 per month would take just under five years and cost a total of $1500 in interest.

Here is my plan for developing an aged stock. Determine how many cigars you smoke in a year. As an example if you are a twice (occassionally three) a week smoker you would smoke approximately five boxes in a year. Buget to purchase 8 - 10 boxes per year. If you stick to smoking five boxes a year in five years you should havean aged stock of 15 - 25 boxes. If you assume an average cost per box of $250 that means you spend $2500 per year on cigars, which is about the same as if you paid the $200 per month loan payments. At the end of five years you have established a good stock from a variety of years and didn't encurr the interest cost of $1500. Patients pays off. The only unfortunate part of my plan is that the $250 average price per box might be a bit unreasonable once you factor in the excessive duties and taxes on cigars.

Hope that helps some!

G

Excellent advice!!

To this I would like to add a couple of things:

First of all, whoa, what's the hurry? Simply buy a several more boxes a year than you smoke and you'll have a nicely aged stock in a couple of years. There are a lot of '07 and '08 vintage available. Swipe some up and they'll be smoking well in no time.

Another thing I like to do is spread out my purchases thruout the year. This helps insulates me from the ebbs and flows of quality and production issues. Who knows if it works? I also like to sample my new arrivals after they've rested. This helps me figure out if I should order more.

Anyway, remember it's all about the journey and not the destination. Enjoy!!

[thechenman]

No bank will ever give you an uncollateralized loan to buy cigars for investment or consumption...regardless of the economic environment...at least not in the U.S. and I imagine in Canada it would be the same. Financially speaking...it is not feasible to go into so much debt to acquire cigars, especially not for consumption. Investment may be a different story, but cigars have not proven to appreciate like a French bordeaux or burgundy. Best to save your money and acquire cigars slowly over time as has been recommended. There are plenty of great Habanos still in production today, and I am sure there will be more in the future.

[Ken Gargett]

ask any bank for ten grand for cigars and i suspect they'll think you are smoking something else.

agree with the stuff above. hell, 25! spend the money on a few of the vntage boxes that pop up now and again - no doubt, rob can help - and then aim to buy more than you smoke so you build the stocks and before you know it, you'll have an impressive collection that will only continue to get older if you continue to buy more than you smoke.

[Erm310mce]

All great advice so far.

I agree with all of it, plus one thing I wanted to mention is that you stated you want to buy a home in 4 to 6 months. It is best to keep your debt down right now, when your bank pre approves you for how much home you can afford, you want your debt to income ratio to be as low as possible so you can afford more home. Unsecured loans and open lines of credit can effect how much a bank will loan you.

I wish I was 25 looking to buy my first home right now, in most markets prices are as low as we have seen in many years and purchasing a home right now is an excellent move for someone your age as successful as you are.

I would focus on that first and then follow the advice you have received here with growing a collection. Plus it's much more fun to try and experience along the way and grow a collection you like.

Good luck to you!

Erm

[Rogers72]

all good advice. I am assuming that you have a credit card??? Why not buy one box per month more than you smoke and pay it off at the end of each month. In no time you will have a pretty damn good inventory and no debt. If you smoke 10 cigars a month, buy an avg of 35 cigars a month and pay it off.

Another thing that has really helped me to build inventory is to find a fairly inexpensive cigar that smokes great young and smoke it most of the time and let the higher end stuff you buy accumulate and age. An example, I smoke Bolivar PC's about 80% of the time. The PC is a great size, great value, and phenomenal when young. I blow through them and accumulate and age other things.

[ChanceSchmerr]

Thanks for all the great advice, guys....

Perhaps I'm jumping the gun a bit at age 25, it's true. I should have mentioned that I've found a lot of what I enjoy smoking are discontinued cigars - I continue to try as many different ones as I can get my hands on, but what I like best seems to be mostly cigars which are gone or going shortly....Perhaps I need to try the robustos and Corona Gordas that guys love on here, like RASS or Boli Royal Corona, and give the coronas a rest!

At any rate - I agree that buying a little more than I smoke is a perfect way to build up a great stash over time, so I think I'll go that route, maybe a box every 1-2 months. I just started my Online FOH humidor today, actually! Used my promotion back pay check to start with 3 boxes -

SLR Churchill

LGC Medaille D'Or No. 1

Party Presidentes

I think If I add a box every month or two to that, I'll be in good stead in a few years. No competition to my hero Bartolomeo with his massive collection of RE/LEs....but well on my way, anyway!

And yeah, I won't go to the bank to ask for a loan. I'd rather not be on laughing terms with the guys that have all the money! Haha!

Thanks guys!

[samb]

Well I certainly found this info useful. I am in a somewhat similar situation here, except Im only 21 and already thinking with the end in mind... But thats another story . Anyway, some very wise words and sound advice were given to me to help stifle the "I have to have all the habanos ever made, right now, with some to smoke and some to age, and its not easy to afford it all, please help" bug.