Author: Mike Holman

According to the mainstream media in both Canada and the US – we are in the midst of a terrible recession.  Stock market crashes, layoffs, increasing unemployment mean that lifestyle inflation is not something that most people have to worry about.  Or is it?

In my case, my investments are doing fairly well, I still have my job, no permanent pay cuts and I have a side business which did reasonably well in 2009.  The fact is that 2009 was the best year I’ve ever had financially.

My wife and I have identified some financial goals that we would like to achieve over the next 5 years or so.  The main ones are:

• Pay off the mortgage.
• Max out my rrsp room.

We’ve been pretty good about watching our spending and keeping our eyes on the goal but it is hard to not just start spending more.  There are unfinished renos/fixes around the house that I would love to hire someone to do.  Our tv is a 27″ CRT (the old tube style) which still works ok but it would be nice to upgrade to a shiny new flat screen.

Since we are not hardcore about reaching our goals before loosening the purse strings a bit, I’ve been thinking about how to analyze potential purchases.  It seems to me that one way to think about purchases/expeditures is to divide them into 2 categories.

1) Where you commit future money in the form of debt payments or regular fees.

Debt:
Examples might be where you buy a bigger house/car  – property taxes, utilities, insurance, maintenance, debt payments.  Large reno. vacation, any other spending which is on credit.

Non-debt future payments could be on something like:

Sign up for some membership such as a gym – monthly payments.
cable tv service, internet service.  Costco – other clubs.

The problem with this type of lifestyle creep is sometimes it can’t be easily undone or changed.  Debt has to be paid off, a house or car that is too expensive can be sold but that is a lot of work.  This adds risk to your finances and sometimes you can get into trouble if your income is reduced and you have trouble making your payments.  Things like houses are not all that liquid and if the value has gone down significantly then selling might not solve your problems.

Some ongoing fees can be reduced or cancelled such as cable tv.

2) One time expenditure – no future obligations.

These are items where you just have the one time cost which you don’t have to borrow.  Entertainment, nice dinners, vacations, any other items that you have the cash for such as furniture, renos.

In my mind this is a different type of lifestyle creep that is less risky is where you spend money (where you have the cash) on things that have no future commitments.

These lifestyle luxuries may not do much for your financial standing (except maybe renovations) since you are basically trading money for “experiences” but if nothing else you can stop that kind of spending on a dime if necessary.  Yes, mentally it might be hard to stop eating out or have to cut back on vacations but the choice is yours.

The dilemma that I see is that items with future commitments are often items of lasting value so they might not be poor financial decisions.  A house is a great example – while they can go down in value and do, it’s not likely that your house will lose the majority of it’s value.  Even if your house value does go down a lot it might not matter much as long as you can still make the payments and don’t want to move.
A car is another example of lasting value – yes, it does depreciate but not overnight.

The problem with spending money on items with no future commitments is that they are often of no value once you purchase them.  Any money spend on nice dinners, entertainment and vacations is completely gone since there are no remaining assets of value.

It seems that borrowing (leveraging) to buy assets that hold their value or appreciate will lead to greater wealth down the road as long as your income can be maintained.  If you have reduced income for any length of time then you could lose a lot.

On the other hand someone who spends a lot of money on items of no monetary value may not have a great finances since they might not have any real assets but they also don’t have much in the way of commitments so they can survive a reduced income fairly easily.

Anyway, for future large purchases I’m going to try to consider the following:

• Do I have to borrow? Borrowing means future obligations which means more financial risk.
• Are there on going fees?  Signing up for a gym/club membership might not cost anything up front but your cash flow will be reduced until said membership is cancelled.
• If I buy a new HD tv then do I have to upgrade my pvr as well as my cable package?  If I get a new car (with cash) will the insurance/gas costs go up?
• How quickly will the item depreciate?  This obviously doesn’t apply to consumables but do things like furniture, new cars, a nice tv retain some portion of their value for a time?
• Will this purchase delay retirement?  I’d love to be financially independent at some point and every penny I spend or commit to spending in the future delays that date.  If the purchase is large enough then it will delay retirement.
• Do you apply any kind of selective thought process before committing to new purchases?  Do they work?

Summary

It’s hard to come up with any kind of financial “rules” out of all these different thoughts but I did manage to come up with the following:

1. If you are regularly spending more than you earn then try not to commit any future money to things with ongoing payments.  Ie just overspend on things like restaurant meals (which can be easily stopped).
2. If you are living well below your means then you can not worry about future commitments as much.  Buy a house, join a gym etc.

Warning – this post is very long and most of it has very little to do with my Sony external flash.  If you want to just read the low down then skip to the Sony external flash review.

Last year we bought our first DLSR camera – the Sony A350 which is a pretty good camera.  It wasn’t cheap but it takes great photos and is super fast which was a key criteria since one of the main motivations for buying it was to take pictures of our very active kids.  A friend of mine has a similar type of camera which he had bought about year before I bought my Sony A350.  One of the things he told me was to buy an external flash since he found it made a huge difference in the quality of photos.  I was ok with the photos we were getting so I didn’t bother with the external flash at first, but last fall I started thinking about it and ended up pulling the trigger on a Sony HVL-F42AM external flash.

How and where I bought the flash

First of all – I’m not a really shop-around kind of guy.  For some reason I like to think that the electronic markets are relatively efficient so it shouldn’t really matter where you buy your electronic product since the prices shouldn’t vary all that much.  In reality that is not the case.

I ended up buying the flash from an American company called Click 4 Digital which is basically an electronics wholesaler.   They had the cheapest price I could find at $229 US.  This seemed pretty good considering the other companies I looked at were all about $299.  Future Shop here in Canada was the only place I found the identical item and it was $385 there ($435 including tax).  Even with the exchange I was saving about $205 compared to Future Shop.

I can’t complain about the price but it turns out that they charge $50 US to deliver to Canada (they phone to tell me this).  Ok, so now the saving is only $150 which is still pretty good.  However, the guy on the phone pointed out that I needed batteries for the flash and said they had some rechargeables – either $49 or $69 for the extra-long-life rechargeable batteries and recharger.  I opted to go with the $69 batteries – this cost didn’t affect the savings from buying in the US however it did add to the price of the flash.  Instead of the $230 price tag I was comfortable with – I was now looking at $229 + $50 (delivery) + $69 (batteries) = $348 US which is about $370 Cdn.  Had I known it would cost this much I would have done a lot more thinking about whether to purchase or not.

I later on looked up the rechargeable batteries and recharger and it turns out that Amazon has the same recharger for $14  (I paid $70).  That should teach me to do an “add on” over the phone.  I assumed since the flash was cheap that everything else was cheap too!  I was sitting at my computer when he phoned so I could have easily looked it up.

The UPS ground delivery

I’ve heard before that UPS ground should be avoided at all cost when receiving a package from the US and I wasn’t disappointed.  UPS left a notice in my mailbox saying they tried to deliver the package and would try again the next day.  There was also a $41 COD (cash on delivery) charge which is why they wouldn’t just leave the package.  Needless to say I wasn’t pleased with the $41 charge which now meant my (not very expensive) external flash was up to $390 which is more than you would have to pay for my Canon 200sx (awesome) camera.  The other problem was getting the delivery – the next day the same thing happened where they tried to deliver but nobody was home so another notice.  I checked the UPS website to see if I could just arrange to pick it up somewhere but it didn’t look like I could do that.  Normally my wife is home during the day but for some reason she wasn’t there for those delivery times.  On the UPS website it indicated that after three attempts the package would be sent back to the company.  Needless to say I didn’t want this to happen since I’d probably be looking at a whole pile of new delivery and custom charges.

I phoned a local UPS store and he told me I could just leave a note on the door with instructions to deliver to the UPS store and then I could pick it up at the UPS store later on.  The only catch was that because money was owed, I had to pay the money to the UPS store first before they would accept the delivery.  So the next morning my wife went to the UPS store – gave them $41 on a credit card to make sure we could get the damn thing delivered.  As luck would have it, my wife was home to accept the delivery so we ended up cancelling the $41 we paid to the UPS store – but it was still a big hassle!  Avoid UPS ground delivery if you can.

The Sony external flash review

Now that I’ve finished the exciting story of how I purchased the flash – maybe it’s time to actually give an actual review.  To put it simply, I was quite underwhelmed.  I had expected great things from this flash – as my friend had put it – his flash made a difference like “night and day”.  My flash didn’t make that difference for the shots I like to take.  Most of our shots are in our house or outside in good light.  Either situation means that the external flash doesn’t usually add much to the picture and in fact often made the indoor shots look worse because it put more light behind the subject.

The Sony flash works very well – it can literally light up a room and is quite impressive in that respect.  The problem is that for the photos I like to take, it just doesn’t add much.  In fact sometimes it makes photos look a lot worse.  It’s the right tool for someone else’s job.   Part of the problem might be my lack of expertise – perhaps a more advance photography nut could make better use of it.  I did a number of tests to see if it was helping my photos and it appeared that the only time it really was making  a difference was in poorly lit rooms.  If I turned the dimmer lights most of the way down in our kitchen for example then the picture with the external flash was far superior to the picture taken with the normal flash.  This proves the flash works but why would I take a picture in my kitchen with the lights down so low?  Maybe if there was a burglar having a snack and I wanted to get photographic evidence? I also  suspect the flash would also work fairly well if you are taking pictures outside at night but this is not something I normally do.

Another thing I figured out was that the flash worked quite well when taking pictures of certain objects but not others.  People pictures (which is all we take inside) did not do very well with the flash, in fact using the flash often made the picture look worse.  For some photographers this flash would probably be a great tool but for us, it just doesn’t do the trick.

Here are some test pictures which show the good and bad sides of the external flash

Why did my friend like his flash so much?

I have a couple of theories as to why my friend liked his flash and why some people would benefit from an external flash.

• The built-in flash on your camera is crap.  If this is the case then adding an external flash might make a huge improvement.  Buying a better camera might also make an improvement.
• You like taking pictures in poor lighting.  I’m sure there are lots of times this would come in handy but I haven’t encountered them myself other than then on the odd power outage.  I imagine there are a lot of professions who could use this flash such as insurance adjusters, accident/forsenic investigations, stripper scouts, ghost busters, anything to do with vampires etc.

What to do with my flash?

The reality is that we don’t use the flash. It’s a bit of a hassle and most pictures don’t look any better with it.  If I could do it again, I would have preferred to not buy it or have bought a local option so that I could return it.  I may try to sell it and see what I can get.  I’m thinking that if I can get at least $200 then selling it is probably the best choice.  I’d rather sell for say $300 (and a $100 loss) and not have the flash over owning the flash and never using it and being out $400.

What do you think?

In the unlikely event anyone is still reading this incredibly long post – what should I do?  Sell for whatever I can get?  Learn how to use it properly?  Start taking pictures of cemeteries at night?