July 12 2010|10.00 AM UTC

Jonathan Rivers

The Cost of Convenience: 10 Things We Overpay For

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Each day consumers pay extra for convenience. Sometimes the associated fees seem minimal, or on lesser-priced items worth the price. However there are many ways that individuals could easily cut hundreds or thousands of dollars from their annual expenses by simply taking the time to analyze what they are actually spending their money on. With that said, when critically examined, the price disparity for a delivery service or paying someone else to complete a basic task often does not turn out to be worth it. Below is a list of 10 notable convenience costs that customers incur on a regular day, often without merit.

Paying Credit Cards over the Phone

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Credit card companies typically write in lengthy terms of service in card member agreements that customers rarely the entirety of. This typically includes verbiage on their ability to charge you numerous fees and penalties, should customers forget to make a payment. Arguably, these fees and penalties are created as scare tactics to discourage their users from having their accounts going late, delinquent or go into bad standing. But, it is also another important way to bring in revenue off of their customers. They know that most people are busy and will often wait until the last minute to make a payment, which many people do on the phone.

In most cases, credit card companies will charge a $35-40 late fee for a payment that is received just minutes late. Additionally they may increase interest rates, and report this payment as late to one of the credit bureaus. Knowing that customers do not want this, many credit card companies charge a ‘convenience fee’ for accepting payments by phone. The most common price to pay by phone is $15. One way to avoid ever getting into the situation of having to pay this absurd fee is to register for online payments, and track accounts online. Banks that allow online payments generally do so for free. For customers that are not technologically savvy, it is suggested that they create an excel spreadsheet listing all credit card due dates. Then the payment date could be marked two weeks before the actual due date. That way, when payment is mailed in there is adequate time for a payment to reach a creditor, and save the customer other unwanted fees, payments and charges.

Express or Expedited Shipping Costs

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Most people believe that the United States Postal Service is somehow owned and operated by the U.S. Government. In reality, it is not. The USPS operates by a government mandate, and in contract with the government, but it is a for-profit business with a corporate hierarchy, profit margins and budgets. As is the case with most businesses, sales representatives will often try to up-sell the customer for services they do not necessarily need. The most popular form of this at the post 0ffice is a postal clerk strongly suggesting an expedited shipping service, when it is not needed.Most customers are not aware of the many ways to ship certain, such as via printing postage off www.usps.com (which is priced at a discount and comes with free tracking service for first class and priority), and/or the use of flat rate envelopes, which can accommodate hold up to 70 lbs for $4.80 (priority) and $16.33 (express).

Another misunderstanding is the pace at which parcels are shipped and received. Shipping regions are categorized into groups of proximate states. Each parcel can reach its destination at about the same pace as others in this region. For example, if you lived in Newport Beach, CA you can expect a parcel shipped to Los Angeles, San Francisco, or to Phoenix, AZ to reach its destination in about a day using USPS Priority, as long as the parcel is received by the shipping office by 5PM. Most customers are unaware that the lesser-priced Priority Flat Rate ($4.80), can make it to their destination as quickly as Express Flat Rate ($16.33). Express shipping rates also increase greatly if the parcel shipped is over 1 Lb, and Flat Rate packaging is not used. There is a wealth of knowledge regarding the shipping system online at www.usps.com. This may not be the source of the biggest savings for everyone, but over the course of one’s lifetime (especially around the holidays and important birthdays) the cumulative money overspent on postage can be significant.

Food at Sporting Events

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Nachos, Beer, Sodas, Candy and Ice Cream. Bottled water too. Sporting events are a wonderland of junk food. And baseball and football stadiums across the country sell their refreshments at highway robbery prices. As a case study, at Angel Stadium in Anaheim, CA food items are typically 200% greater than what one could expect to pay for them at a convenient store, and can be priced at up to 500% greater than the asking price for the same items at groceries stores – if you were to buy in larger quantities (ie., a six-pack of soft drinks, or candy in bulk)

Many will argue that getting a beer and a hot dog at the baseball game is part of the experience, but for those looking for a healthy or cheaper (or both) alternative, outside food can often be legally brought into the parks. For those unwilling to pay super-inflated park prices, they can call the local stadium in advance to see what types of food items may be purchased outside and subsequently bought in. Per the above example, Angels Stadium allows its guests to bring in any food, including from the surrounding fast food restaurants chains. The same goes for unopened non-alcoholic beverages. Calling the stadium to make see if this is an option, is one way of cutting expenses for a professional sporting outing nearly in half, and can be done as easily as dialing free 1800-GOOG-411 (very convenient) on the way to the game.

Bottle of Wine at Fine Dining Restaurants

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Fine dining restaurants often sell wine at prices that are at least double (and as much as 4X) what one could expect to pay at a grocery or specialty store. Like any business, restaurants make money in margins – by buying and reselling products at profit. The average starting price of a bottle of wine at a fine dining restaurant is about $40.00. On average, a comparable bottle may be purchased at about 1/3 the price at a store such as BevMo!. This chain regularly runs their ‘five cent’ wine sale, which prices a bottle of wine at $0.05 when another bottle of equal or greater price is purchased. If diners know in advance that they will be going to a restaurant and they are going to be drinking, why not stock up on a wine beforehand?

Typically the price of bringing wine with you to the restaurant is a $10 corking fee. Given the price disparity above, it is ideal to then buy bottles of wine priced at $13, and incur the $10 corking fee. The customer would then save $17. This also would drive the gratuity down, as the total bill itself would be reduced. Economies of scale are pertinent to this example; if multiple bottles of wine are purchased, the per-unit savings would lead to greater overall savings, especially as many restaurants do not charge a corking fee for each bottle opened. So instead of purchasing two bottles of wine for $80.00, two bottles could be purchased and corked for $36. Or if the customer were to take advantage of the aforementioned savings at BevMo!, the price for two bottles of wine, brought to a restaurant and corked their could be as low as $23.05. As was hinted at, this would also decrease the implicit gratuity on the wine alone from $12.00 to $3.46. This is definitely one way to bring down your restaurant bill by about 40% or more, or cutting your wine bill from $92.00 to $39.46 or $26.51, without cutting out any luxury or decreasing the dining out experience.

Valet Parking

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Valet Parking is one of the biggest unnecessary expenses of all time. Barring red carpet events, or going to a venue without accessible street parking, it is a wildly-overpriced convenience-based amenity. Many malls now offer guests this service at an average of $10-15. In most cases, this involves someone parking the customer’s vehicle a few parking spots closer than a spot that what they could find on their own. In an era where one out of three Americans is obese, the merit of this service vis-à-vis self parking is dubious at best. Typically, valet parking also comes with an implied gratuity of 10-20% to be paid to the person who runs to get the car, and then bring it back. Because, for some reason the inflated price already paid for this service does not sufficiently cover the costs associated with the valet’s efforts.

To give perspective of what paying a valet service can equate to in a years time: if one were to go to a mall or restaurant and incur a valet fee of the average price of $13 (including tip) once per week for a year, this would total $52 per month. Consequently, by years end, they will have spent $624. This is comparable to the amount spent by many people for six months of their auto insurance premium. To further illustrate this frivolous expense, a year’s valet parking expenditures could very well cost more than a round trip ticket from Los Angeles to London, which can be purchased these days for about $486.

Luxury Travel

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Traveling first class may be something that everyone should experience once in their life. It is however, one of the most overpriced luxury items that an individual can splurge on. This is especially the case when the price and amenity disparity between flying economy class and flying first class is examined. According to Expedia.com, a round trip first-class ticket from LAX to JFK in mid-March starts at $1598. For an economy-class ticket on the same airline, the price is a mere $243. This is a difference of $1355. Arguably the difference in service is minimal: the food and service are slightly better (still airline food), more television channels, and a larger, fully-reclining chair. This trip, on average, is about five hours.

This means to travel first class, the passenger is paying $271 per hour for the improved seating placement. Even though New York City is notoriously expensive, this is below the average price one could expect to for a 3-4 star hotel in most of the city’s boroughs per night! Unless an employer is paying for the trip, travelers might want to rethink taking such a short trip first class. Because, a few perks, and getting to board and exit the plane first is not really worth the price tag.

Mobile Car Detailing

Mobile Car Detailing
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Like many things, the cost of maintaining one’s automobile can total more than expected. To most, the costs most commonly associated with maintenance have to do with how the car operates: tires, breaks, tune-ups and oil changes. One aspect of car maintenance that typically goes overlooked is cleaning and maintaining the vehicle’s aesthetic qualities. Regularly washing and cleaning a car is something most people do on a weekly or monthly basis. If the latter is the case, many individuals may choose to have their car detailed. One of the most convenient ways to have your vehicle detailed is by having a mobile detailing company drive to your office to have them take care of it while you are hard at work making the money to pay them, among other expenses.

Car detailing for a high-end vehicle can be realistically priced at around $75, which includes: wash, wax, vacuum and wheel and interior polishing. If someone were to get their vehicle detailed once per month for a year, the cost would be $900 before gratuity. After tipping a mere $5 per session, this figure would be $960. Alternately, if a person were to detail their own car twice a month at a self-service car wash station, they could expect to pay around $7 per visit on soap, water and vacuum. Additionally the cost of wax and wheel and interior console polish for a month could be purchased at a combined cost of $15. This would total $29 per month out of pocket expenses, and the car would be cleaned twice as often. The price could be further lowered if one were to detail their vehicle at home, assuming they already have the necessary equipment. The monthly savings for self-detailing equates to about $51. Over the course of the year, the savings would be $612.

Mini Bars

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Mini-bars are, across the board, excruciatingly overpriced. On average, the cost of an item consumed from the mini-bar is priced at 500% the items market-price, meaning what one could expect to pay for it at a super market. This would mean a $1 soft drink would be priced at $5.00, and a 1 fl oz spirit bottle would be priced at about $10.00. The mini bar was first introduced in an effort to increase additional revenue, and it has since proved one the most profitable sub-categories of the travel industry. The margins are incredible for hoteliers, and they can really make money if people decide to over-drink in the hotel room, or if they simply decide to eat snacks and sodas.

Part of the logic behind the mini-bar is that they serve not only the spirits, but also the soft drinks to be mixed with the spirits. As a result, one mixed drink can easily run the hotel guest $15. While this price is extremely high for a weak cocktail consumed in a hotel room, the bills start piling up if there is more than one person, and guests drink more than one cocktail. If just two guests were to have two drinks each, the bill would quickly total $60, for what could have been purchased at a convenience store for $12.

Pizza Delivery Service

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People lead busy lives, that much is certain. And nothing is more accommodating for this lifestyle than to have goods and services delivered to you. One common example is the ubiquitous pizza delivery service. The average price at a chain pizza restaurant for a medium two-toping pizza is $15. In order to have the pizza home-delivered, the customer can expect to pay approximately $3 in delivery service charges. In addition to this, it is implicit to tip the delivery driver about $3. If the price difference was a mere $6, then maybe it would be worth the price of not having to leave the comfort of one’s own home. But it is not always this simple.

Most pizza restaurants require a minimum purchase of $20 or more for delivery service. The most common move is to then purchase two pizzas, in order to qualify. Keep as constant that there will still be a delivery charge and a gratuity for the driver and one may easily find a confused customer with two pizzas that somehow spent $36. Even if the customer decides to reach the $20 threshold by ordering soft drinks or a salad with their pizza, their price can still jump to $26. In this case, there is still a price increase of 58%, enough to question whether it is really worth it to spend the extra money on delivery services.

Boutique Coffee Shops

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For the past decade, Starbucks has ranked among the top of America’s fastest growing companies. A number of other coffee chains have grown rapidly as well, and the result is that most towns and cities across the nation have at least one boutique coffee shop, where individuals can purchase coffee and coffee-based drinks for extortionately high prices. With the recent downturn in the economy, many financial experts have made it a point to caution consumers of how they are drastically overpaying for an item that can be cheaply and easily made at home, for a fraction of the price. For example, a Venti (Large) Iced Mocha Frappucino in a southern California Starbucks can run a customer $4.90.

While the specialty items are on the higher end of the spectrum, it should be noted that coffee shop customers are paying for a very basic mixture of: coffee, ice, chocolate, milk and whipped cream. For the sake of argument, a Medium Starbucks drip coffee is $1.70. For many Americans, a trip to Starbucks or Coffee Bean is breakfast, lunch or just a part of one’s daily social activity. If this is indeed the case, a monthly budget of $51.00, or $612 per year would be reasonable. Alternately, two packages of Dunkin’ Donuts premium coffee can be purchased at a $14 total, or $7 each. From this, a total of 30 16-oz coffees (same size as Starbucks) could be produced at one’s own home in just a few minutes. The monthly savings for cutting out boutique coffee shops and brewing coffee at home would be $37.00. Yearly savings would equate to $444.00.

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{ 18 comments… read them below or add one }

Davey Boyd February 13, 2009 at 3:11 pm

Okay so I confess… I’m a sucker for expensive coffee and mini bars in the hotels I stay in!

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Paddy February 13, 2009 at 7:17 pm

The blurb about overpaying for wine is not entirely true or accurate. First, in some states in the US, it is illegal to bring wine into a restaurant and have the restaurant charge a corkage fee if they serve spirits. Second, the restaurant pays quite a high tax on wine and needs to offset some of this cost. Third, the restaurant needs to make some money, they are in a very competitive business and often the margins are slim.

If you want to discuss a beverage for which people over pay, you should discuss iced tea or soft drinks. Or even water. The cost for restaurants in cents per glass and they charge $2 for a glass of a beverage that might cost them $.15.

Also, think of how much a steak costs in a retail store. You could buy a nice piece of meat for $10. Why pay $35 to have someone cook it for you when you could cook it for free at home?

Yes, a bottle of wine is not cheap. Then again, good wine costs money to make and ship. If you are cheap and want to lower the cost of your tab just order something inexpensive of the by the glass list.

The writer of this article is definitely writing about something which they know very little about. It makes me question the veracity of the other 9 thinkgs for which we overpay.

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Mike Lieman February 13, 2009 at 8:27 pm

I think if you’re gonna be bringing in your own bottles, you better be able to explain to the Sommelier exactly why you think you made the right choice for your meal.

And I don’t know *any* pizza places with 20$ minimums. I can’t think of any time I’ve ever had a pizza place tell me I needed to order more.

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BillShrink Guy February 13, 2009 at 9:46 pm

Davey: As mentioned in the post, its the price of convenience ;)

Paddy: You do have a point that in certain region of the country, it is illegal to bring your own alcoholic beverages into the restaurants. We have nothing against restaurants trying to make a profit, we’re simply pointing out to people that there are alternatives available for some of us.

You’re absolutely right on other types of beverages such as soft drinks and ice tea. We specifically mentioned bottled wine at fine dining restaurants for the aforementioned reason though :)

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Patty February 13, 2009 at 11:43 pm

$10 corking fee?! Forget that. Yes we know that drinks in general are overpriced in restaurants. We always just have a glass of water when we go out to eat and if we want wine we wait till we get home and have a glass of inexpensive, but good wine (generally always less than $10/bottle).

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Chloe February 14, 2009 at 2:07 am

These are all common sense. If people really want to save money, they should start with their largest expenses first, like rent, transportation, etc. Saving 1% on your mortgage rate will save you FAR more than all the Starbuck’s you could drink.

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BillShrink Guy February 14, 2009 at 4:55 am

Patty: Agreed. Skipping ordering beverages while eating out will always save a nice chunk for the bill.

Chloe: That’s very true, certain key financial decisions in life are the key determination of a person’s financial well being (e.g., academic choices, school loan, auto loan, home loan). Making sound financial decisions in these area will definitely go further in the long run — and we’ll be sure to cover as much of these as we can — but along the way, we’ll try to include the occasional fun read, just to remind everyone of the small details that may be easily overlooked.

Just a note to all that this is simply a post about some of the things we overpay and possible alternatives for certain people. Personal finance can never be absolute, and it should always be about making decisions that fits for you and your family :)

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Tom Chappell February 14, 2009 at 5:21 am

@Davey Boyd: You write as if the authors of the piece were saying that restaurants were evil for charging so much for wine. The way I read it, they’re just saying that a way to save quite a bit of money is to bring your own bottle of wine — at least, in the very many states where that is legal.

Yes, I can order something cheaper, or by the glass, if I want the convenience of not having to bring my own bottle to the restaurant. But don’t try to make me feel guilty about paying a restaurant a corkage fee (the price of which, after all, they set) in exchange for providing wine glasses.

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Anonymous February 14, 2009 at 6:54 am

I have to wonder where the writer lives — what “pizza restaurant” charges a delivery fee? And I’ve never in my life heard of a $20 minimum to get a delivery! I’m writing from Philly, where the minimum to get delivery is usually $5, and I’ve never, ever heard of a pizza place charging a delivery fee!

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BillShrink Guy February 14, 2009 at 10:02 am

Tom: Actually it was Paddy who wrote that comment (we should probably consider fixing up this comment template) — but she did have a point in that certain people won’t have the option to our suggested alternative, something we forgot to mention!

You’re right though that we have nothing against restaurants and we’re simply suggesting possible alternatives to everyone. Personally, I don’t think paying a corkage fee is a cheap move or anything, especially if there’s already a great bottle of wine that we’ve been keeping for the special occasion! Even better, my friends and I tend to bring the very wine gifted to us during previous occasions, so we can all share it together again during the night out :)

Anonymous: Actually, majority of large chain pizza-delivery restaurants (or quick service restaurant, if you prefer that term) do charge a certain percentage for delivery fee. As far as I’m aware, it’s standard industry practice?

Now, there are also plenty of local pizza joints that simply expects you to tip the delivery guy (in lieu of a tacked on delivery charge), which is always a good alternative if its available in your area — especially if the local joint taste better and delivers faster!

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Paul Knudsen February 14, 2009 at 5:05 pm

Sure, sure. But people want to get out of the house. And we need a little luxury sometimes.

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Margie Knudsen Wilson July 28, 2010 at 12:24 am

Yes, we do, brother.

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antonio February 19, 2009 at 3:14 am

It is agreed that, like in my blog, we speak about things that WORK for us; it doesn’t have to be like that for everyone; you just need to get the points you like and see reflected in your life, and dischard the others, like the wines.

IMHO I think wines is a good one since I used to “impress” GF’s with nice and expensive wines while i could have the same hangover for 50% de price! ;)

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A. Barista February 26, 2009 at 8:47 pm

I have been a barista for over 10 years, and work for a locally owned roaster/coffee shop. Coffee has been around for at least a thousand years. You can’t say that about the tradition of any other item on your list. If you think what I do is basically mix coffee, sugar, and milk together, then I will gladly step aside while you grind, tamp, and froth your way to 2 inches of espresso crema churned beneath a dense cloud of velvety milk foam.

Coffee is a science of flavor, a lesson in geography, and what you fail to point out is that many people are saving money by socializing at coffee shops where they can savor a drink and a conversation instead of spending upwards of $20 each for a movie ticket and crappy popcorn.

What one considers good coffee is entirely relative, and I mean relative to the number of Starbucks per square mile in your neighborhood. If you are like me though…if you can tell an Ethiopian Harrar from a Guatamalan Huehuetenango, then yeah, you get it.

If all you want is cheap coffee, consider this: You are paying $7 for a bag of Dunken Donuts which is 12 oz. That is 4 oz. short of a pound, and you can get a full pound of beans, freshly ground from a local roaster often for around $10. If you don’t drink a lot of coffee, or want more variety, every shop I’ve worked at sells by the half, or quarter lb even. If you don’t have a local roaster, shop for an indie roaster online.

The bar has already been lowered enough by Starbucks, and this is one situation left in the economy where you can basically buy the Cadillac for the same price as the Hyundai.

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RolandD March 9, 2009 at 5:09 am

One of the worst rip-offs consumers are subjected to are contracted cell phones. It’s almost criminal how big carriers tie clients into a contract, then pile on hidden charges & overage costs. If you cannot afford to keep your phone they get you again with exorbitant early termination fees.
A prepaid phone can save the average consumer at least $20 a month and sometimes much more.
Here’s an interesting story: http://abcnews.go.com/Business/WireStory?id=6905481&page=2

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Dan March 10, 2009 at 12:35 am

Luxury travel: If you must travel first class, the way to do it may be with frequent flyer miles. I once could not obtain a seat in coach using miles, but was informed that there were first class seats available for double the miles. Now here’s the thing: The dollar fare for first class is always way, WAY more than double the coach fare. So in this case, getting a first class seat using “just” 2x miles was a raging bargain compared to buying it with cash. I didn’t regret it, either.

Beverages when eating out: Whenever I can stand it, I go for the free water. The thing about soft drinks is that they are so bad for you that you are basically paying somebody to raise your health care costs. “I’ll stick with water” turns out to be a double win.

Coffee: If you don’t care about your coffee, you won’t benefit from going to a boutique shop, just get the cheapest you can. But if you care about coffee and don’t have the equipment and skills to do it right, it can be worthwhile. Especially if you really do like COFFEE, and not fancy drinks full of milk and sugar. A tasty, well-pulled Americano is still around $2 where I live, but I see too many people loading up on fatty mega lattes with sugary flavors for $4-5 a pop. Once again, you are hiring your own assassins when you do that. Just drink the coffee, so you can actually taste it.

And there is one more thing. I save money on my broadband at home by subscribing to the cheapest plan. If I need to download something huge that will take too long at home (usually work files), I know which coffee shops have far faster broadband than my home connection. A nice $2 cup of coffee later, and I saved a ton of time on the download while getting out of the house.

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Anonymous August 19, 2010 at 3:24 pm

… ohh and besides bringing your wine to the restaurant, why not bring your date home to the wine?

Some canapes, conversation, and maybe a DVD, you can create an experience with very little talent mainly because she isn’t expecting “all of this.” FAR less predictable than sitting across a resto table, waiting for service 18 times and nibbling on the bread bowl. Tick tock…

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Victor September 28, 2010 at 8:52 am

I am always amazed at how freely people will throw away money on convenience. For me, dramatically reducing fast food/junk food consumption has been one of the best decisions I have made, although the loss of convenience is probably pretty hard for some to overcome.

Not getting the expedited shipping was a little bit of a struggle for me, until I sat down and thought about whether having it in a day or two was really necessary. It is easy to fall into the “Got to have it now” mindset, but more often than not, you don’t really have to have it right away.

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