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.

The Know Your Mechanic Rule

Warren Buffet has said many times in Berkshire’s annual report “if you don’t know jewellery, know your jeweller.”

I can vouch for this as true; a friend of mine runs a jewellery store and he has given me amazing deals.

Most of us don’t buy jewellery on a regular basis, however. And some of us might even get away with not buying it at all. For most of us, though, I think the Buffet statement could read “if you don’t know cars, know your mechanic.”

I would love to learn more about automobiles. As it stands, I have a decent understanding of what problem I have, but have no idea of how to fix it. I have been fortunate in that I have been going to the same mechanic for the past 7 years. He runs a small garage from the side of his house, and there is no one I trust more with my car.

Yesterday my car started acting up a bit, so I took it in to the shop today. He worked on the car for about an hour, tweaked a part, and gave me an oil change (he also gave me a short lecture for driving too far without a change, to which I sheepishly acknowledged I was at fault for) and only charged me for the new oil he put in.

As far as the part goes, he said it’s a bit of an expensive part, so he tried to McGyver it a bit, and said to come back if I have any problems.

I cannot think of any other mechanic that would do his best to avoid having me pay more. I think a good number would say the part is shot, order a new one, and charge the labour and shipping.

This is not the first time this has happened, either. I knew I was having trouble with either a spark-plug, or the fuel-line some time ago so I brought it in. He not only fixed that problem, but pulled my muffler off to patch a hole that he could hear. I think he charged me about the amount of the welding rod that he used.

It means, of course, that I bring him a little gift every time to thank him for the last time. Usually a brand of senbei crackers he told me he likes.

No matter what, I surely get more value than I pay for.

If you don’t have a great mechanic, you may have to build some rapport for a few years, but once you have a mechanic you can trust, you know that you will never be suckered into buying lemons or blood diamonds.

A Few Negotiation Strategies

Negotiation is a strange word, I think.

In a consumer sense, we often think of negotiation as getting a lower price for something we want. You’ve made up your mind that you want a particular house or car, and now it’s time to sit in the office and come to terms on a price.

On a larger scale, however, negotiations usually means trying to find a situation that is beneficial for both parties. Countries negotiate the terms of a treaty in order that both sides receive benefits. Is it different as a consumer? Are we too hardheaded when we want something?

Mr. Cheap, on the Money Smarts blog, was talking about negotiation tactics a few days ago and it got me thinking. He asked what are “ethical, effective negotiation techniques?”

Good question.

After some time thinking about this I still don’t have an answer.  I did, however, come up with some thoughts based on experiences, reading, or TV shows I have seen, and here they are:

Deal with someone who can deal

It’s almost pointless to go through all the motions of negotiation when the person is just sales-staff who is receiving an hourly wage. When it comes time to ask for a discount they will inevitably say they can’t (most likely true) and then they call over a manager who has no connection to you.

Building rapport is important as buyer or seller.  So I now seek out the manager straight away. This has helped me when buying suits, cars or electronics.

Be willing to trade down

This was something gleaned from a TV show I saw that was based entirely on buying electronics. No matter what the product is, there is a good chance it is available in a few colours, or with slightly different options.

Ask what the most popular colour is. Then ask yourself if you need that colour. You may be able to get a discount just by selecting the navy blue model rather than the black or silver.

If you don’t mind that colour, it’s a win-win situation. You get a discount, and the store moves a product that may otherwise have to go back to the warehouse.

See if there are any manufacturer incentives

As far as I am concerned, perks can be just as important as a lower price. While the store may have moved their price as much as they can/are willing to, sometimes the manufacturer will have some sort of extra incentive.

It could be free extras, multi-product purchase discounts, or rebates on purchases. I remember getting a booklet of free oil changes and tune-ups this way. When we furnished our apartment, we also got a massive discount by going with two products by the same manufacturer.

Compare prices and know what you want

Information is a powerful tool, and knowing what other stores are charging for the same product is almost a sure way to get the price knocked down. If you know what you want, drop by a few stores to see what the price is, or check the internet. Just mentioning a competitor’s price is usually enough for the manager to mark the product down plus a little extra.

At the same time, be willing to walk away if it is something you don’t truly want/need. I know this seems to contradict my point about being willing to trade down, but let me explain: be willing to concede on things you care less about, and fight for want you do care about. For example, aside from pink, I  don’t care what colour my cell phone is. But if it isn’t bi-lingual, I won’t consider buying it.

Do you want fries with that?

I’ve never worked in fast food, but the cliché fries question is the base of sales: it never hurts to ask.

This is not only as a seller, but works equally well when you have some rapport, and are the buyer. The worst thing that will happen is that they will say no.  Ask for some add-ons. Ask for a better price.

When I worked in sales, I was asked “what can you throw in for me” far more often than I asked “would you be interested in a ____ as well?”

I know some of these aren’t negotiation tactics so much as ways to save money, but hopefully they give you some ideas. If anyone has any other ideas, feel free to write them in below.