Category Archives: Frugality

Good Help Is Hard To Find

I enjoy meeting new people in casual environments. I don’t, however, enjoy meeting new people in a business setting when I am the customer. This is an area that I truly loath.

The rapport I have with the majority of my contacts is worth more than gold to me. I have written about the benefits of knowing my mechanic and jeweller before, and the same goes for knowing my barber, financial planner, and, until three years ago, my travel agent.

Three years ago my travel agent was transferred to a foreign branch. Since then I have struggled to find someone I can trust with my travel plans. The agent that was assigned my file promptly drew my wrath as she failed to book my requested tickets for 6 people. Her company lost out on about $8000 of business, and we were forced to pay a higher price at another company, as the early booking prices were no longer available.  

While my old travel agent understood my preferences and requirements for travelling, and always knocked off a few hundred bucks through “preferred customer” discounts, I can’t help but feel that I am merely dealing with commission based sales people now.

I met one the other day when I was trying to find out prices for July. I sat down prepared to give all information and then set her loose on the computer, but she starting tapping away as soon as I opened my mouth. “Well, at least I’ll hear several options,” I thought. Within one minute she piped up that she can book me on a flight, and the price is just shy of $2000.

That’s a ridiculously high price for such an advance ticket, and sure enough, it was Air Canada. I asked her to give me a quote for Korean Air flying through Inchon, which was apparently a very difficult question, as it took her 20 minute to search through the database, talk with her supervisor, and make a phone call.

Finally she gave me the quote I wanted to hear (about $1200), but said I couldn’t book the flight because it was too early. Hilarious.

With that kind of service, I’ll once again be searching for a new agent.

Saving Money with Limit Orders

If you buy individual stocks for your portfolio, you might be familiar with limit orders. If you aren’t familiar with limit orders, you should be, as they are a great tool to ensure that you don’t pay too much, and can also be used to save money.

That majority of retail investors probably use either market orders or limit orders when they buy individual stocks. Market orders are simply orders to buy* at the best available price (which is usually the currently listed price). Problems can arise, however, if the price of the stock rises between when you hit “buy” and when the order is actually filled.

By using limit orders, you state the highest price that you are willing to pay for the security (ie. you set a limit on what you will spend). This means that if the price of the stock moves up you will not be hit with a higher than anticipated purchase price. You have given instructions that clearly state that you won’t pay more than a certain price.

I have seen recommendations to set the limit order price at the current market price, or slightly above the market price (say one or two cents) to ensure that you get your shares without paying too much. This is solid advice if you are happy with the current market price, and absolutely must have those shares. Personally, I usually use limit orders to wait for a better price.

Ninety-eight percent of the time I set my limit order to below the current market price and wait out the day to see if my order is filled. This system started because I dislike paying commission, and wanted to lower my purchase price in order to cover the cost. If, for example,  I must pay $9.95 in commission and want to buy 100 shares, I would place a limit order to ten cents below the market price. If the order goes through, I would have saved $10 on the stock purchase, which would equal out the commission cost.

Gradually, however, I started lowering my limit order to reflect what I was hoping to pay.

I recently bought 300 shares of a company I like and set my limit price to 25 cents below what the stock was trading. The stock dropped later in the day and my order was placed, saving me about $65 ($75 saving minus $9.95 commission) compared to if I had merely bought at the market price earlier in the day.

Using limit orders in this way means that you sometimes need to be patient. About a year ago it took me five trading days to buy the shares of a great company. The stock never fell to my offer price over the first four days. I got lucky on the fifth day, however, as the stock dropped significantly before I had placed my limit order. Because of that, I was able to buy into that business at an even lower price than I had been prepared to pay. Thank you Mr. Market!

Unfortunately, the down side to this method is that potential upside may be missed. Another wonderful business that I wanted to own was already very cheap in December 2009. I placed my limit order to cover the commission cost, but the stock went up… and up. I placed my limit orders diligently, but finally decided to abandon the idea as it continued to climb in January, and bought close to the market price. I missed out on about a week of upside, but have enjoyed the ride since. This is a situation where I should have bought at the market price in the beginning. Not because of hindsight, but because I already knew it was cheap, and I really liked the business. I let my emotion of “commission avoidance” get in the way.

So there are some pros and cons to making a limit order below market price, but I generally feel that the pros outweigh the cons. Regardless if you set your limit price at, above or below the market price, at least you know what you are paying.

*Limit orders can be used either to buy or to sell, but the examples in this post only consider buying a security.

Barter Groups and Home Repairs

Back in university I had a friend named Steve. Steve’s dad was an electrician, and had a very interesting way of keeping his home costs in check.

I’m not sure how it all started, but he had several friends that were skilled in a variety of trades. One of his friends was a plumber, another a carpenter, one was a mechanic, yet another did landscaping. There were a few others, too, and I think there was some doubling up of professions as well.

They essentially created a barter group for home and car maintenance. Whenever one of them had a problem with one of the above mentioned trades, they would contact that tradesman and the work would be done for free or at cost. If Steve’s dad had a problem with his toilet, he would call up his plumber friend and have it fixed. His mechanic friend would take care of any automotive needs without charging labour. Of course, sometimes a call would come in to install a new lighting fixture at one of his friend’s houses, and the bill would only be the cost of the materials.

It would be very interesting to see how much one could save by being in a circle of friends like this. The closest thing to a barter group I have seen was growing up on a wheat farm. Our neighbour had a pig farm, so every summer we would give him a wagon load of straw, and in return he would slaughter us a couple of pigs. I don’t think my parents ever paid for bacon or pork chops while that system was in place.

Have any readers been involved in a barter group (products or services)?  What kind, and what was/is your experience with such a system?

I imagine being in a group like the one my friend’s dad was in not only keeps expenses low, but keeps your home in tip-top shape as well.

Scholarships, Bursaries, and Used Books

I studied at university for a total of seven years, earning two degrees in three fields, and a few letters to put behind my name.  I have perhaps only two regrets from my university days: I didn’t make full advantage of the scholarships and bursaries that were available to me, and I didn’t buy used books for the first two years.

From e-mails I have received, I know some of my readers have children that are either at or near university age.  I understand that tuition fees have been on a relentless charge upward (even during my time, tuitions fees were up 90% from my first year to my seventh) but there are ways for students to either gain or save a few bucks.

Buy Used Books

My first mistake was buying all my textbooks new from the university bookstore. I think my first year I paid about $400 for general textbooks ranging from theatrical theory to psychology to astronomy. By my second year I had switched to a double major in English literature and psychology, and my university bookstore bill had ballooned to about $800 -  buying $80 to $100 textbooks on abnormal or applied psychology (plus all the supplemental reading), as well as a few shelves worth of American, Canadian, and modern literature.  I think the Norton Anthology of English Literature alone  set me back about $150.

By my third year I had clued in to the fact that buying used was the way to go (which was ironic, actually, because the majority of my personal/leisure library was bought from used book shops). Buying used cut my book bill by at least half, depending on the courses that semester. As long as there wasn’t a new edition of a psychology text, I could buy it for about half price. For my English lit. books, I bought a used copy from the university store, or went to a used bookshop in town. There is no reason to buy a fresh copy of Shakespeare or Swift, as they haven’t made any revisions recently.

(Edit: I have been reminded by a close friend that I bought the above mentioned astronomy text used… from him. So I guess I was slightly on the ball in my first year.  I have also received an email from another close friend who happens to be an English professor. She makes a valid point that there is much to be had from revisions to the introduction or commentary on literature; there is always new research and theory. So quite often it is a good idea to have the same edition as the course requires, especially if it is a translated work… but you still might be able to find it used.)

Apply for Scholarships and Bursaries

My second mistake was not applying for a wealth of scholarships and bursaries that I could have possibly received. Usually when one says “scholarship”, we think of exceptionally high grades as being required. That is not always the case. I received several scholarships through my program for having an average over 80%, but I never had to apply for these awards. That meant the only work on my part was to earn the grades. But there was much more that I should have been on the ball about.

Quite often you can find small bursaries from alumni of, or local residents around, the university. Many of these bursaries may have a certain grade requirement, but others merely stipulate the student must be in need of financial aid. Take a look at this not-so-randomly selected list of Donor Awards from Brock University. Some are related to grades and program, some are related to grades and varsity sport, others are awarded based on parental employers or the student’s high school.

It is these awards that can really help offset the cost of a university education. (One donor scholarship, for example, is worth $17,600 over four years. The requirements? An average of over 75%, financial need, and meet some residential requirements.) The competition for these ‘application required’ awards and bursaries was often quite low, as students either didn’t know about them, or didn’t get applications in on time.

Because of this, it could be a good idea as a parent to take a look at your child’s university website. Take a look at what your child could be eligible for, and get them to fill out the application. It will only take a few minutes, and it will be in both of your financial best interest.

Re-Post: Inquiring Minds Get Paid

I am on vacation for a few days and unable to update the blog. I thought I would take the opportunity to re-post a few old posts that I like. I originally posted this in March of this year.

In January I noticed I had an interest charge on my brokerage account of about $15. It was for one month at 21% per annum. Worse than a credit card.

At first I thought it was due to my transferring some stock to another account, but the more I thought about it, and the closer I looked at my transaction history, the more I realized that that couldn’t be the case.

I called them tonight to inquire. At first, they said the charge was due to an outstanding balance for the time period. I knew there was no possibility of me having and outstanding balance, so I asked the call representative to look into it.

After about 5 minutes he came back to confirm my suspicion that the brokerage had made an error. He apologized and said my account would be credited accordingly. I thanked him and asked a dollar amount. It was the same amount that was taken from my account incorrectly.

I had two choices at this point:

  1. Accept the return of my money.
  2. Accept the return of my money and raise a stink.

I chose path two by pointing out the fact that they saw fit to incorrectly charge me 21% per annum on one month’s balance, yet were only willing to compensate me the original amount, even though I have been out that money for two months. I should be paid interest for those two months.

Let’s take a pause to point out the fact that I was asking for the same terms… which on $15 would work out to about 53 cents.

He came back about a minute later to offer me a “good will gesture” of a rebate on my last stock commission in addition to my returned money. At $19 savings, that was about $18.50 more than I was looking for.

It just goes to show ya… it never hurts to ask. You just might get more than you were hoping for.