Category: Personal Finance

I’m a big fan of inline skating – or “roller blading” as I like to call it.  I got my first pair of skates which were the original Rollerblades back in the mid-80s.  Rollerblade was the original inline skate company and I had to order them from somewhere in Quebec.  It wasn’t until probably the 90’s when they became more mainstream and other sporting good companies got in on the act.

I tend to run my sporting equipment into the ground before replacing it.  This has nothing to do with being frugal or environmentally conscious but rather it’s just easier to keep using what you have as long as it still works.  Laziness is also a factor as well.

My first pair of roller blades I used until the wheels literally stopped turning.  Then about 10 years ago I bought a new pair which are still in good shape but unfortunately I never rotated the wheels and the front left wheels got worn down to the point of falling apart.  I was still able to use the blades without that front wheel but I figured I should get new wheels or blades.

I ended up going to Sporting Life and buying a new set of wheels for $100 which compared to $260 for the blades I considered buying.  One of the main reasons for this decision was that I liked the bindings on my old blades better than the “new” style of bindings which you see in the photo.  My skates are more like downhill ski boots.  Plus of course, it was a lot cheaper.

I’ve had situations in the past where I just replaced a part and the final results didn’t work out very well.  Hockey skate blade replacement, buying used tires for my car (really dumb) are some things that I would recommend avoiding.

Do you have any examples of where you where able to just replace a part and it was successful or not?  Are there some things you would just automatically buy a new item?

Photo credit: Oh Barcelona

During tough economic times, you might hope that scammers would lay low.  Since people are having hard times, they might have a more suspicious attitude (and scammers would do something worthwhile with their time).  Sadly, the scam artists are hurting just like the rest of us and hustling to take advantage of the desperation of others.

Advance Fee Fraud

One scam that is popular during tough times is the advance fee fraud (which we’ve touched on before).  After trying to get a loan, maybe you have the “good fortune” to run into someone who has the inside track on getting all the cash you might need (and at a very attractive interest rate no less).  The details can be whatever convoluted story the scammer dreams up, but the end result is that the loan is yours if you just pay a small “application fee” or “service charge”.  This small fee is all the scammer is after, and once he’s got it, he’s gone (along with the imaginary  loan).

The famous Nigerian Bank Scam is a variant on this. Instead of a loan, a portion of a fortune is yours for the taking, just say that you’ll accept!  Without fail, a string of “roadblocks” will crop up, each requiring you to send a “relatively minor” sum of money.  They will string you along as far as possible, bleeding you dry (and trying to get you to embezzle money “temporarily” from any other sources of funds you have access to).

It’s definitely not something you want to try at home, but Silicon.com and 419 Eater have hilarious records of exchanges where they respond to Nigerian scammers and mess with them (the ULTIMATE is when they convince the scammer to send embarrassing pictures, or to send the “victim” money first, an advance fee for the advance fee if you will).

I loved a blogger’s reaction piece (unfortunately I’ve lost the link) when a scammer called him up offering him free grant money from the government.  He just had to pay them a $50 processing fee.  He tried the obvious and said, “Ok, take the $50 out of my free money” and the woman said they couldn’t do that.  He said he wasn’t interested then, and she kept pestering him why he “didn’t want free money?”  He had to tell her forcefully that it’s not free money if he has to pay for it.  There are a large number of posts detailing that there is no free money for the taking (not even stimulus money) and the books and CDs promising to tell you how to quickly and easily get it are scams.

Employment Scams

Also related to advance fee fraud, an employment scam preys on someone’s desperation to find work.  The service posts in a variety of places (newspaper classifieds, on-line job boards, etc) that they’ll help you find a job, guaranteed or your money back!!!  You go for a meeting, and the “recruiter” spends his time chatting you up and convincing you to write him a big check for the services he’s about to provide.  You’ll be told that there’s no effort on your part, just pay the money, they’ll do all the work, and you’ll have a high paying new career in the near future.  Nothing happens (of course), and they keep stalling you.  Eventually you get angry and their tune changes (NOW they say all that they offered was resume advice and career coaching, and it’s far too late to take advantage of their money back guarantee).

I actually encountered this years ago.  I was job hunting, came across a job that looked like a fit and had an appointment scheduled.  The day of the interview, I was reading up on the company ahead of time, and almost immediate found a string of complaints that had been posted that they don’t actually offer jobs, just try to talk you into paying them money for worthless services.  I called to cancel the interview, and when the woman asked why, I told her I’d done a Google search on their company and after reading about them I didn’t want to have anything to do with them.  She started saying that I couldn’t believe everything I read on the Internet, at which point I politely got off the phone with her.

A host of similar scams prey on job hunter anxiety, like resume services.  They offer a free “proof reading” of your resume, which will result in their identifying “major problems”, and selling you a brand new resume (that they’ve just plugged your information into their standard template, something that will be obvious to the hiring manager or HR department).

At the end of the day, as rough as it is job hunting, you have to do the legwork yourself.  There’s no “hidden job market” you can buy your way into.  While it’s certainly worth getting help with your resume, talking to friends who are good writers, reading resume advice online, going to an Ontario Employment Center, or going to a university’s career services (often they’re happy to help non-students) would be far more effective (in addition to being free).

Have you encountered any scams recently trying to take advantage of people’s desperation in the current economy?

Everyone loves a nice vacation – whether it involves driving a short distance to visit family for a couple of days or flying to the other side of the globe to go snowboarding.  The big problem with vacations however is the cost – most of us have budgets that are limited in some way and we want to get the best value for our vacation dollar.   Nobody wants to go into debt for a vacation.

Is it better to do a 3 week trip to Europe once every 2 years or go on 1 or 2 more modest vacations per year?

One trick which I have done in the past when trying to determine the costs of a trip is to figure out the “net” cost of the vacation.  Everyone knows that when you go on a trip that there will be quite a few costs such as airfare, gasoline, rentals (cars, accomodation), food, tourist attractions etc.  What some people don’t realize is that when they leave their normal life for a while that they are also saving some money which should be subtracted from the cost of your vacation.

Go on vacation and save money?  I don’t think so!

It’s true – and I’ll give you an example.  If your family normally spends $200 per week on groceries and household items then if you go on vacation for 1 week you will save $200 on groceries and household items.  When you calculate how much a trip is going to cost (or has already cost) you should factor in these “savings” to get the net amount of the trip.

For example if a family goes on a vacation and spends $2000, most people would to say the trip cost $2,000.  But if they factor in money that they didn’t spend when at home (let’s say $400) then the trip only cost a net amount of $1,600 which is significantly less.

Obviously you would need to have a very frugal trip to have an overall net saving by going on vacation but if the trip is reasonably modest then netting out your “normal” expenses could make the trip quite cheap.

Why do this?

One reason is that you like to know exactly how much things cost – I have always calculated the net costs for big trips and it makes me feel better to know that a trip was a bit cheaper than the gross costs.

Another good reason is that if you are trying to make decisions about future vacations, it’s good to have the proper cost information to make an informed decision.

Lastly – it might allow you do longer or more expensive vacations.  If you budget $2,500 for a trip and don’t subtract the $500 you would normally spend during that time then you will actually end up spending $2,000.  This isn’t a bad thing but it’s better to make that choice ahead of time.

How to do it?

Add up your expenses that result from you being at home.  Food, some utilities, gasoline, commuting expenses are good examples.
Don’t include any fixed costs – things like car insurance are going to happen even if you don’t use your car.  You don’t have to be exact with your figures – estimates are fine.

Some factors to think about

The two biggest factors which will influence the effectiveness of this “accounting” are:
1)  Daily cost of trip – The more expensive the trip then the less the “netting” will have an effect.  If you are spending $5,000/week in Hawaii then the fact that you are saving $350éweek by not being at home isn’t going to be all that significant.
2)  Daily costs of “nettable” home expenses – If your regular daily expenses are very low then removing them from the vacation cost won’t be as significant as it will for someone who eats out a lot and burns a lot of cash on a regular basis.

In the example noted in the first paragraph it’s likely that the cost of a 3 week trip to Europe won’t be reduced by a whole lot by netting the home expenses so it will still be an expensive trip.  However, if the alternative trips are cheap enough (the 2 weeks per year trips) then it’s possible that the cheaper trips might be very cheap in comparison to the Europe trip after netting.

This is significant because it the decision between doing shorter more expensive trips or longer cheaper trips (or more cheaper trips) might point more towards doing the cheaper trips since you will get a lot more bang for your buck especially after netting the costs.  Most people who are working don’t have a lot of vacation so for them – netting out the expenses will just let them budget more accurately for their trips.  People who have more time for vacations ie teachers, retirees can use this method to decide between the higher budget short trip or lower budget longer trip.

Summary

When going on vacation, subtract any expenses which you would normally incur while living at home but that won’t occur if  you are away.  This could alter your thinking on the type and length of trips you take.

Some time ago Mike’s post on the Toronto Garbage Strike struke a cord with readers and generated 85 comments.  A large amount of the discussion focused on unions (from a philosophical perspective more than that specific union or strike).  One comment that had a particularly interesting part to it (from semi-frequent commenter Brendan) focused on the idea that being jealous of someone for their job is silly, if you think their job is so much better than yours, switch to it!

My brother used to get this a lot.  People at the job site where he worked would rant about how good he has it.  After listening to them rant, he’d say that they’re hiring for his position, and encourage the person to apply.  At that point the person would either point out a part of the job they wouldn’t want to do, or admit they didn’t have the academic credentials to do it.  The pregnant silence afterwards hopefully led some of his co-workers to an understanding:  There’s a reason why jobs offer the benefits they do, it’s all a trade-off.

One of my uncles, by marriage, is always going on about what a sweet deal teachers have in Canada (it’s actually a very well paid and respected profession in Canada).  He loves to have people listen to him talk, so he makes stuff up.  He’s a high school drop out and wasn’t able to get through the academic requirements needed to teach, so now he gripes about those who have managed to actually become teachers.  As an armchair psychologist, it’s pretty clear to me that he complains about teachers out of bitterness that they are able to earn a living doing what he wishes he could.

I read an interesting article some time ago that made the assertion that students are quite savvy at choosing college majors.  Even if industry and government is saying there are lots of jobs in an industry (or that their will be), the “wisdom of crowds” kicks in and students tend to move to areas where the high paying careers actually are.  If a genuinely sweet deal appears (such as computer workers during the dot-com boom), massive numbers of people get trained for this career, flood the market, and drop the salary down to a more appropriate level.  Similarly, if there’s a job no one wants to do, eventually market pressure forces companies that need those skills to pay top dollar to get them (like Cobol programmers).

The only time this doesn’t happen is when you get a barrier to entry for a specific field.  This was one part of Brendan’s comment that I felt was somewhat misleading, it isn’t like we can all go sign up with CUPE tomorrow.  Typically union jobs are tough to get (sometimes going to the children of senior union members).  A large number of people would be willing to do the work the strikers were refusing to do, even at a lower pay rate.  But they weren’t able to.

At the opposite end of the employment spectrum you have a similar situation with Canadian doctors.  I was in pre-med for my first couple of years at university, and my classes were PACKED with smart, eager kids who wanted to get into medical school (and become doctors).  The extremely limited number of positions at Canadian medical schools meant that the majority wouldn’t get in.  Similarly there are hordes of foreign trained doctors who would love to come and practice in Canada, but quotas restrict the number that can actually enter to a fraction of applicants.  The argument supporting the limited number of positions (to train new doctors or admit foreign M.D.s) is to ensure high standards and protect the health of Canadians.  If this was actually why there were doing it, they’d have a minimum entrance requirement, then admit EVERYONE who was above this.  Clearly the goal is to actually restrict the number of jobs and, like the unions, provide superior benefits to those in the field.

Feel free to make snarky comments that I’m only dogging doctors since I didn’t become one :-).

If us computer workers had gotten protections for our jobs we might have been able to keep the gravy train flowing after the dot-com bust (and perhaps avoided the whole offshoring situation).  I think computer people are far too free-market oriented to unionize (or put other barriers in place to protect their jobs).  I certainly am.

As I mentioned recently, I got my 1% rebate from RBC and want to come crawling back transfer my money back to my favorite broker – Questrade.  There is one huge reason why I’m such a fan of Questrade and that is money – their $5 trades are the cheapest in the business and that is all I care about.  I also like their customer service – I’ve rarely had to wait when I phone.

Can’t I just go to any new brokerage and get my fees covered?

Yes, but you have to negotiate the transfer fees and will probably have to pay $20-$30 every time you make a trade.  As a huge fan of low-cost investing – I go for the cheapest fees.

I’d like to try out Questrade but I’m not a returning client

Good idea – in that case you can sign up here or click on the banner after the text.

Is it hard to transfer to a different brokerage?

It’s not hard but it does take some time and is a pain in the butt.  However, I calculated that I will save about $150/year in trading fees by moving from RBC ($10 trades) to Questrade ($5) fees.  $150 a year indefinitely is well worth a bit of time to make it happen.  Also – I’m not a very active trader so your savings could be larger if you trade more.

Questrade review

Questrade Discount Brokerage review

Manulife Financial cut its dividend by a whopping 50%.  They still made $1.8 billion in Q2 so if anything it’s probably a good buy since the stock dipped 15% today.   The company hasn’t done a good job managing the risk of its variable-annuity products over the last few years so this move was made to improve the balance sheet and lower risk.

This just goes to show that diversification is a key strategy in investing.  It also shows that stock picking is hard – it doesn’t matter how well a company is doing or how long it has been doing it – you just don’t know what is really going on inside.  Some good financial statement analysis can go a long way.

Some links

Million Dollar Journey talks about the purpose behind your financial goals.

Canadian Capitalist had a neat post on the merits of investing in collectibles such as rare stamps and coins.

Where Does All My Money Go found the impossible – free investment management.

Bible Money Matters goes through his experience with signing up for Lending Club peer to peer lending.

Cash Money Life has some unexpected ways a baby can change your budget.  Patrick should know since he just had a baby.

Moolanomy explains how to find the best online high yield bank accounts.  (American)

Military Finance Network goes over Dave Ramsey’s Baby Steps.

Carnivals

Economy and Your Finances Carnival

48th Bankruptcy and Debt Carnival

Carnival of 20 Something Finances

Carnival of Financial Planning

Money Hacks Carnival

Festival of Frugality

Please note that this post is very Toronto-centric, very rant-like and also contains a fair bit of fantasy.  Your challenge will be to determine what is truth and what is  fiction.

I read in the Star today that apparently one of the negotiated items in the City of Toronto outside workers strike (aka “The Garbage Strike”) was for the union members to continue to accrue benefits such as sick leave and vacation days during the time they were on strike.  This is unbelievable – they were on strike – why would the city give them credit for anything?  And why stop there?  Why doesn’t the city just pay the workers for their time on the picket line (minus union pay of course).  And it wouldn’t have to be at their old pay, if the city had any heart at all then the “strike wages” would be paid at the new negotiated higher rate.

Kevin Sack who is the city spokesman (fun job) had this to say about it:

City spokesman Kevin Sack said yesterday that granting vacation and sick pay credits for time spent on strike is “standard practice” in back-to-work agreements.

Wow, thanks Kevin for that inside look at the City of Toronto’s bargaining strategy.  Was this issue even talked about or was it just assumed?

Let me just paraphrase Kevin ever so slightly and try to show what I think really happened:

City spokesman Kevin Sack said yesterday that “We got our asses handed to us and by the end of it all, we didn’t know which way was up. David and I were so busy trying to keep up with the union orders demands, that we didn’t know what we were agreeing to”.  “They made us wear women’s lingerie to the meetings, wash their cars before and after each meeting and they kept giving us ‘time outs’ in the corner if we disagreed with anything they said.  It was horrible”  he sobbed.

Another back to work item was the amnesty for various law-breaking union members in exchange for the union not punishing the small percentage of members who crossed the picket lines.  I could write a whole post in this issue but I’ll try to summarize my thoughts concisely (for the first time ever):

Amnesty for law-breaking strikers – As Mark Ferguson – head of local 416 put it:

“The City wanted to terminate and prosecute those few who got a little excited on the picket lines. We made sure of amnesty for everybody involved. What happens in Vegas, stays in Vegas!” he said.

I’m just glad that Mark made those comments at the end of the strike and not the beginning otherwise we might have seen 6 weeks of murder and mayhem in Hogtown as 30,000 members run wild through the streets knowing that amnesty would be on the the way.

“Union promises not to punish scabs” – Another quote from Ferguson:

In exchange for City-sanctioned amnesty, the union made what Mr. Ferguson called “the difficult decision” not to punish what the union calls “scabs” — unionized workers who crossed picket lines during the strike.

So the union *promises* not to retaliate against the scabs?  I really hope that Miller insisted on the “cross my heart and hope to die” promise otherwise this will be the first part of the agreement that gets tossed out the window.  I mean really…is the city going to monitor this somehow?  Very naive agreement from the city.

What about David Miller as mayor?

I have to admit that I like David Miller, he’s smart guy, well-spoken, obviously competent at a lot of things and he seems to be doing a reasonable job of running the city.  He has a lot of good qualities except for quite possibly the one thing that the city really needs in a mayor – the ability to negotiate.  Miller has always been known as a “friend of the unions” which doesn’t bode well considering he’s on the other side of the table now but I just think that like myself, he’s just a bad negotiator.  Miller would have sold Manhattan Island for a better price than the natives plus he would have added some benefits as well.  For this reason I think that he would be better of in the private sector where he can use his skills and lying spin ability to forge a good career. In an ideal world it would be great if he could hired to lead the 416 union but that is unlikely to happen (to put it mildly).

I’ve written before about how the big 3 car companies got smoked by the unions every single time their contracts came up and I think part of the problem stems from the fact that a car company CEO gets hired for a lot of talents – negotiating ability is only one talent which may or may not be present in a candidate.  Union leadership on the other hand only requires one talent – the ability to negotiate.  I think that companies and governments in unionized environments should add negotiation skills to their CEO talent searches in order to compete with the unions.

Mike and Mr. Cheap will help decide the next mayor of Toronto

Yes, that’s right – I haven’t told Mr. Cheap yet (shhhh) but I’ve decided that after the silliness of the last little while, the political landscape needs to change in Toronto.  With that in mind here are the changes which will take place.

No more voting for the Mayor – it will be appointment

While Miller was a reasonable choice for mayor, the fact that Lastman got elected clearly indicates that the voters of Toronto have no idea what they doing and won’t be allowed to vote anymore.  Voting for Lastman because of those Bad Boy commercials was stupid and I’m sorry I did it.

Mr. Cheap and I will decide the candidates

The 2 candidates to be considered for Mayor will be selected by myself and Mr. Cheap with one selection each.

Toronto city council will decide who the mayor will be from our 2 candidates

The reason that Mr. Cheap and I won’t make the final decision on the mayor is because we really don’t know the city operations and politics very well.  Plus we really don’t care that much.  Having watched some of the scenes from city hall on the news last week it’s clear to me that city council is not the tight-knit political SWAT team that I had imagined it to be but they have a good (I hope) grasp of the inner workings of the city so they can have the final choice.

So without further adieu…here is my choice for the next election

Mark Ferguson for Mayor!

Yes, Ferguson – the “stays in Vegas” guy I quoted earlier.  Clearly this guy can negotiate and that is the #1 skill that I am looking for in a candidate considering the large budget shortfalls Toronto will be facing.  As he said to his union “We didn’t give up shi*”.  While this omitted the fact that the union did the time-honoured negotiating tactic of selling out each and every future member, he was right.  If this was a hockey game the score would have been 10-1 for the union.

Won’t he have a problem negotiating against his old union?  Not this guy – Ferguson is a negotiator first and union member second.  When Gretzky faced the Oilers in the playoffs in 1989 as a King, did he let up in any way because the Oilers were his old team?  I don’t think so.

What do you think?  Who should Mr. Cheap pick as his candidate?  Who would you pick and why?

Well, the garbage (and others) strike is over here in Toronto – I have to say that I thought Miller caved in the end.  My only question is – couldn’t he have gotten this crappy deal a lot sooner?  Most Torontonians weren’t inconvenienced by the strike very much but a lot of businesses were as well as low-income families who lost their daycare.  Oh well – it’s not like it really matters that much.  New York City went bankrupt (or did they?) and they seem to be doing ok.

The big issue for this strike was the sick day banking policy where workers can bank up to 18 sick days (that’s a lot of sick days!) and then take half their future value upon retirement.  For a long-time employee it could result in a maximum of 6 months extra pay upon retirement.  Sweet deal – no wonder they wanted to keep it.

David Miller (Mayor of Toronto) had said that his goal was to eliminate this policy and wanted a deal where existing banked days were paid out and no new days could be accrued.  Fair enough, I can get behind that.  6 weeks later he caves and strikes a deal where the existing sick bank policy is unchanged for existing workers – only new hires won’t be able to bank sick days.  That will save a lot of money…in about 25 years.

To be honest I don’t think the ability to bank sick days is the biggest deal around – I had no idea the City of Toronto employees had it until a couple of months ago, plus lots of other unions have it.  As much as I’d like to see it gone – it’s not going to change my life much either way.

However, the annoying thing about this particular cave-in is that I’m positive this deal could have been done at the beginning of the strike.  Of course I could be wrong since I wasn’t at the table but that seems to be what I’m reading in the papers.  If you are going to try to force the union to make a major concession then you have to ready for a long strike, if not then don’t bother with the strike.  The funny thing is that I think most Torontonians were behind Miller since everyone who doesn’t work for the city thinks the union workers are all a bunch of overpaid slackers.  Miller had a golden chance to get a good concession – if not on the sick bank, then on something else and he blew it.

If I’m lyin’ I’m dyin’

One of the oddest thing I read in the paper today was a description of the David Miller news conference where he kept trying to insist that the sick day banking policy had been “eliminated”.  Here is an excerpt from the Toronto Star from the news conference which was strangely reminiscent of the Monty Python dead parrot skit.

To add insult to injury, Miller now insists on selling spoiled goods. “We’ve eliminated the sick bank,” he said, 12 TV cameras rolling and frustrated reporters rolling their eyes yesterday. Torontonians should be “extremely pleased,” he said. And no doubt, at least the 30,000 strikers are – even if they are miffed at walking the picket line for five weeks to maintain the status quo.

But tried as he may, armed with lawyerly hairsplitting and a politician’s doublespeak, he couldn’t convince that Toronto’s five-week municipal strike was worth the trouble.

The sick-bank “phase-out” saves “millions and millions and tens of millions.” But asked to be specific, Miller said he didn’t know and refused to “speculate.”

Told that he couldn’t say the sick banks are ended when workers still have the choice of sticking with the old sick-days plan, Miller persisted:

“The provision is ended.”

“Why the doublespeak? Why do you continue to do this?” a reporter challenged.

“With great respect,” the mayor said, “I don’t think this is doublespeak; this is the fact.”

Well, you judge.

A 35-year-old civic worker, employed for 10 years, is entitled to continue banking 18 sick days a year, and do so for the next 30 years – and the mayor says the provision is ended.

Pushed and cajoled, Miller adopted a compromise offered by Star reporter Donovan Vincent. “Phase-out.”

Some Links From Around the Web

Baker from Man vs. Debt has another great update from his big voyage to Australia and now New Zealand with his family.

Baker also sent this “motivational” link – I have to admit it was quite inspirational…

Million Dollar Journey gave some advice to a reader about paying down debt or investing – I thought his advice was spot on.

Financial Blogger tells an interesting story about a friend of his who flew his girlfriend to London (the overseas one) for a weekend to propose.  While this sounds neat I thought this was a bit over the top.  Personally I’d rather do the proposal somewhere cheap (like my living room for example) and then spend the money on a honeymoon later on.

The rest of the links

The Dividend Guy talks about alternative investments.

The Oblivious Investor wrote about low-cost, socially responsible mutual funds.

Top Economy Blog says that the economic recovery has started.  But it might take a while

Canadian Capitalist did a review of Scotia iTrade discount brokerage.

The Intelligent Speculator says that Yahoo is toast.

Good Financial Cents has some Cash for Clunkers Tax Rules.

Investing School has a comparison of online brokerages (American).

ABCs of Investing wrote about the risks of fixed income investments (such as bonds).

Money Ning did a Trade Monster review.

Carnivals

Festival of Frugality

Carnival of Money Hacks