Deals Go To Those Who Are Flexible and Prepared

I am heading to Europe in a few weeks time, because I was given the opportunity to go on a trip for 10% of the retail price. I went to Vegas in April because I was able to take over someone else's flight, and wound up getting the hotel and car rental for virtually nothing. This pattern holds true for many other things that I am able to secure, be it goods or services, or events. My friends are always envious, but I am in no better financial position as many others. My only difference is that I am extremely prepared and very flexible, and I have found that this is the most critical factor in getting deals or not.

Firstly, I have an amount in my mind that I will spend on a travel opportunity, whether it is cash sitting in my bank account or at my disposal through a line of credit. It is not outrageous, usually about $2,000, which I will tap into without hesitatation if the deal is right. Secondly, everything else is prepared in advance - my passport is always updated, I keep a small amount in foreign currency, I have a list of people I can call who may want to join me so that I don't have to pay a single supplement, etc.

Secondly, I subscribe to certain newsletters that alert me to great deals, so that I am aware of what is available as soon as it is offered.

Thirdly, you need to know what something is worth, whether it is a flight or an item. The most important thing someone told me was that most people "know the price of everything and the value of nothing". I know what the typical price of a flight from Toronto to Vancouver is, or a weekend package to Las Vegas should be. I know that repositioning cruises provide one of the best values for a cruise. Or that many charter flights in winter to the Caribbean switch to local routes in the summer and must compete with local carriers on price. Many people are too lazy to identify opportunities - they would rather flip open a cataloguie at their travel agent and pick something when thye could save thousands of dollars.

So, there is not much difference between me and anyone else besides flexibility and preparation.

A House as a Home, Not as a Retirement Vehicle

A friend of mine recently moved away from the city and after visiting her in her new home, it got me to thinking about how things are changing (positively,m in my mind) as far as attitudes about home ownership. I have always been critical of the suburbs, the increasing size of homes and the infrastructure that relied on a dependency on cars.

I live in probably the most modest and lowest price home of all my homeowner friends and family. However, I do live on the waterfront -prime real estate in the largest city in Canada. However, because of the ownership structure, a co-ownership versus the more commonplace condominium structure, the price hasn't appreciated as much as the rest of the real estate market. On the other hand, the price hasn't fallen at all.

My purchase was based on two factors - firstly, it was priced well below other similar sized units in the city and secondly it was the cheapest place I could find in the best location (waterfront). I never bought it as a future retirement nest egg (which many of my friends have), but as a home. Conversely, I know people who have built the most expensive home in a not-that-great area. The argument that your home is your best investment currently rings hollow to many millions of Americans, and even Canadian memories are short after their last real estate bust in the late 1980's.

What real estate buyers also conveniently ignore are the carrying costs of holding this investment. Novice buyers become quickly horrified to find that after 10 years, the bulk of their mortgage payments have only gone to pay the interest portion of their loan, or that after the 25 years it will take to pay off their debt obligation that the amount of interest can sometimes be twice the amount of the purchase price of their property. Throw in annual maintenance costs, soaring property taxes and condominium maintenance/strata/HOA fees, and the equation doesn't always look good. Price appreciation? That is a pipe dream for millions of homeowners right now.

I'm not advocating that one doesn't buy real estate, but only that one does so, firstly as a place to live, and secondly, as part of a ddiversified investment portfolio. A number of my friends have sinced followed my lead, selling their large suburban homes to move into smaller, lower-priced homes. All are very happy with their decision, as they have now discovered that their mortgage carrying costs and debt obligations (not to mention their financial stress levels) have decreased, their utility bills for things like heat and electricity have declined, as have their property taxes and insurance costs. They have also discovered that they can live comfortably in smaller homes and that it's not the size of the space that counts, but how it is used. Not to mention the fewer hours it takes to clean a smaller house or less time on the garden in winter or shovelling snow in winter.

I hope that my small circle of friends is but a small slice of what is happening in society today, and if so, then I am happy in the direction it is going.

This Month's Quote

"It is through creating, not possessing, that life is revealed" - Vida Duncan Scudder

Tiny Houses .... Yes Please!

I've written in older posts about the explosion in the sizes of houses in North America during the past 30 years, and how the blight of McMansions has led to the consumer's over-consumption of land, energy, consumer products and debt. This has definitely been a contributing factor to the current economic crisis, where the over-extension of leveraged debt has caused a massive meltdown in liquidity, equity and net worth.

This has led to a return to (hopefully permanently) more sensible proportions of homes, a renewed emphasis on the environment, and a diminishment of rampant materialism. As I have mentioned before, my first home was my largest, and I have been downsizing ever since. I have always been intrigued by small space living - when reading design magazines and books, the issues that always excite me are not of sprawling mansions, but compact living spaces.

I have once again contemplated living in a small cottage or a boat. If I lived in a warmer country than Canada, I may just have made the jump already. However, with the Canadian winters, a lot more thought needs to be given. I have just finished browsing through a fabulous little (appropriately) book called Tiny Houses by Mimi Zieger. It profiles 36 unique abodes that are 1,000 square feet or less. What I love is that it proves that space can be used far more efficiently, a unique home need not be only for the rich and that these spaces are far more interesting than your cookie-cutter, suburban monster-home.

Does a Peasant Lifestyle Increase Longevity?

I've recently finished reading Dan Buettner's book, "The Blue Zones". You may have heard about it or seen it profiled on TV programs such as Oprah. The Blue Zones are areas in the world where there is a much higher than average proportion of the population that live beyond the age of 100. There numbers are quite astonishing, and the author spent time researching these elderly residents and tried to find out what contributes to their longevity and good health.

These identified "Blue Zones" are mainly located in smaller communities in Japan, Italy, Costa Rica and even the US (Loma Linda, California to be specific). While certain aspects differed, what was common among all of these communities was leading a simple lifestyle, eating healthy (with little or no meat in their diets), maintaining strong connections with family and friends and regular exercise.

For some (especially in the poorer communities) regular exercise was a function of their livelihood, i.e. if they were farmers or herdsmen, they spent time in the fields or walking up and down the hills. Even the women who may not toil in the fields, did spend part of the day making meals from scratch, including grinding grains by hand in order to make bread. In wealthier areas such as Loma Linda, there was regular exercise like walking or going to the gym.

The absence of stress was also a common denominator. While there was some stress regarding money and maintaining a livelihood, it was not the same stress that most of us might associate with having a high pressure job, sitting in traffic, trying to make money to maintain a consumer-oriented lifestyle, etc. In fact, when interviewed, there was little to no mention of materialism.

Diets were simple, and while they did indulge during special occasions, generally their diets were simple, yet very healthy. The Italians would drink a glass of wine every day, the Californians were mainly vegetarians who ate a lot of nuts, while the Japanese ate many root vegetables.

Instead of the western disdian for the aged, in these communities elderly people are revered for their wisdom, and treated with respect, rather than shipped to an old age home. They sit at the head of the table, as the matriarch or patriarch of an extended family across many generations, and showered with love and respect. In all these communities, the social network means human contact, not Facebook or Twitter. Meals are important gatherings that bring the family together.

Aside from the residents on Loma Linda, the residents of the other "Blue Zone" communities live an extremely simple life, almost a peasant-like existance. Yet, they all apear to be healthy and content. Perhaps living a peasant lifestyle is the key to longevity?

Start Saving Money ...... Right Away

In these tough economic times, unless the upcoming global recession is short and shallow, people all over the world will be forced to adopt a new way of living. This is especially so for Americans whose access to free-flowing credit will dry up as lenders continue to turn off the taps.

As I had commented in a previous post, there may be a silver lining to this dark cloud, as people wean themselves off consumerism and credit, and start to live more authentic lives and within their means. It will be a long road, as mindless, wanton spending has become a bit of an addiction for millions of consumers.

I have just started to re-read a book that I had last read over 10 years ago, but one that is especially relevant these days. Called "Your Money or Your Life" by Joe Dominguez and Vicki Robin, it provides an interesting view on our relationship with money. Its concepts are not for everyone, but is worth a read.

The book does give tips to save money which may be useful to some readers. These include:
1) Stop shopping - or at least, only shop for things that are essential

2) Live within your means - Cut out all unnecessary expenses and luxuries such as eating out and travel holidays

3) Take care of what you have - This will reduce or eliminate the need to keep replacing things, often unnecessarily. This will also reduce the amount of items that are thrown away or wind up in a landfill.

4) Wear it out - Most of us replace things well before the end of their useful life because we see something cheap or on sale, or spend because we are bored or think we should keep up with technology.

5) Do-it yourself - Learn how to fix things yourself rather than spending money having someone do it for you.

6) Anticipate your needs - Impulse spending occurs when you do not know exactly what you are looking for. This is especially prevalent (and exploited by grocery retailers) during your weekly grocery shopping trips. Have a shopping list before you head out the door and stick to it.
7) Research before you buy - Do your homework before buying. Reading reviews will help you make an informed decision to get the best deal, whether based on price, quality, value or durability.

8) Get it for less - I never pay retail for anything, as I know that there is always somewhere to get an item cheaper, be it on eBay, Craigslist, online discounters, liquidators, using coupons, waiting for sales.

9) Buy it used - There's very few things that I wouldn't buy used, but a careful shopper can get great deals on gently or hardly-used items that people are trying to get rid of because of a multitude of possible reasons, including gifts that are unwanted, a need for quick cash, dissolution of a marriage, a move, remodelling of a home, upgrade in technology etc.

While these are obvious tips to me, I know some people who never think of these options.

This Month's Quote

"After a man has made a lot of money, he usually becomes a bad listener" - Paul Theroux

This is so true! When everyone was (seemingly) becoming more prosperous from easy credit and rising house prices, they failed to listen to warnings. Only after the house of cards has collapsed, are people starting to take heed of advice.

When Living on the Wrong Side of the Tracks Can Put You on the Right Track Financially

It has always amazed me how much stock people place in living in the 'right neighbourhood'. My first home was in the trendy 'Beaches' neighbourhood in Toronto. I no longer live there, but do visit occasionally. It is a lovely area that, as the name suggests, comprises a stretch of sandy beach adjacent to Lake Ontario. As such, it is wonderfully lively area and a favourite among yuppies and tourists. There is nowhere in Toronto that has a higher per-capita rate of baby strollers, dogs or convertibles. The main thoroughfare through this neighbourhood is Queen Street, and any house that is south of Queen Street commands a much higher price than any house north of Queen Street. Such is the popularity of the area, and by extension the desire to live there, that there is even an area called the Upper Beaches. The northern (and invisible) boundary of the Beaches 'proper' is Kingston Road, and any property south of Kingston Road will command a much higher price than anything north of Kingston Road, lest any self-respecting snob be caught living in the 'Upper Beaches'.

The point I'm trying to make is that people can, by merely crossing a street or two, save tens, if not hundreds of thousands of dollars - by locating to the edge of a trendy or desirable neighbourhood, rather than spending the premium for the right address within the actual neighbourhood itself. One might ask if this strategy would not affect resale values. My response is that, if a neighbourhood is that desirable, it will encroach upon its outlying areas and bring up the property values with it (the 'all ships rise with the tide' theory). Also, the money you would save on the mortgage payments will provide you with a lower debt burden, and if those savings we funneled to a savings or retirement account, would lead to a better qulaity of life and retirement. Many people have mistakenly thought of their homes as their retirement nest egg, but the recent market turmoil has shown that this is not a sure-fire retirement strategy.

In Ottawa, Ontario, there are many people who work in Ottawa (where salaries are higher and opportunities more plentiful) but who live across the provincial border in Hull, Quebec where housing prices are significantly lower than in neighbouring Ottawa. With a short drive across a bridge, people have been able to increase their revenues but minimize their largest expenses.

I have also previously lived in an area that was considered to be 'sketchy', but bordered another neighbourhood that was becoming gentrified and subsequently became known as the 'Gallery District'. The previously 'sketchy' hood is now home to stylish boutiques and cozy coffee shops. With it, rising property prices have followed. I actually prefer a neighbourhood that has some grit and realism to it, rather than the vacuous falseness of many of the high-priced, lily-white neighnbourhoods.

Start thinking outside the box and you may want to live on te other side of the tracks.

Are More People Abandoning the Rat Race?

I have, for now at least, abandoned the rat race. It is not an easy thing to do, nor easy to explain to people, especially when most others of my age are hitting their peak earning years. I had often wondered whether I was a pioneer or just a social misfit. While I was definitely not ahead of my time, I am probably just the tip of the iceberg of millions of people who are willing, but maybe just not ready yet, to drop out of the rat race.

With the recent financial crisis, many ordinary workers are probably wondering what good all of their hard work over the past few years has gotten them. Hundreds of thousands of pink slips from the financial industry, the auto sector, the construction industry and airlines? And while they may be (involuntarily) re-evaluating their career options, this is just a repeat of another time not that long ago when similar decisions were made. Remember the dot-com era of the late nineties and into the new millennium? Many technology workers regularly spent mind numbing 15-18 hour workdays, while others either slept under their desks or pulled all-nighters in order for their companies to be the next Yahoo! or eBay. Sure, the lure of stock options and huge capital gains from impending IPOs were the driving force for many, while others were just youngsters excited about building a company that could or would change the world. However, the luster soon wiped away, and while some were fortunate enough to cash in and retire at a young age. Interestingly, many such as Jeff Skoll, Pierre Omidyar of eBay and John Wood of Microsoft started charitable foundations. Others were not so fortunate but decided that what these digital dropouts valued more than money was a balanced lifestyle, a personal life and a need to do something meaningful.

We're starting to see more of this thinking again as the economy sours. More people are opting to work in less stressful occupations or work for themselves. My cousin who worked in the finance industry just lost her job, and her employment search now revolves around opportunities within the charitable sector. A recent article highlighted how many Wall Street casualties are looking to buy small retail businesses or franchises. Others are opting for work that that is more flexible when it comes to work hours, ability to work from home or take longer vacations.

Some are being even more radical, moving to smaller communities where their dollar goes further or where they can get away from the craziness associated with large cities like New York. Some like Geoff Goodfellow, who started and sold his tech company called Radiomail, wound up moving to Prague in the Czech Republic. Even in my hometown of Toronto, there was an article about a rising trend in residents originally from Atlantic Canada, returning to their hometowns after becoming tired of long working hours, high housing prices and exhausting commutes in Canada's largest city. As one rat race escapee said about society's view that your worth is measured by how much you make, "I have a fresh appreciation that there are a lot of Americans making $22,000 a year and they are worth something".

Gen-X and Gen-Y employees are also more likely to rebel against the workloads thrust upon the backs of their Baby Boomer parents. In other words, they are finding greater value in working to live, rather than living to work.

How Some Things From the Past Never Change

At the World's Fair held in Chicago in 1893, a presenter named Mary E. Lease made a bold prediction about the future. Her statement was, "3 hours will constitute a long day's work by the end of the next century. And this work will liberally furnish more infinitely more of the benefits of civilization and the comforts of life than 16 hours' slavish toil will today".

To some degree she was true, in that many of the items we now take for granted as being staples, would have been considered as luxuries not that long ago, and certainly unfathomable during her times. Now ubiquitous electronic items such as GPS, home theatre systems and cell phones were out of the reach of mainstream consumers when they were first introduced to market. In fact, cellphones were never designed with the average consumer in mind, but businesspeople and the military. Most of the above-mentioned consumer items are now manufactured in low-cost developing countries and then sold widely and inexpensively through retailers such as Wal-Mart. This has led to increased buying power, but also contributed to rampant consumerism.

On the other hand, Mary E. Lease and others after her, were way off the mark when they predicted that technology would allow workers to toil fewer hours at their jobs and have more free time. In fact, the opposite has been true, with the majority of North Americans not taking the full allotment of their paltry (on average) two-week vacation time. Mobile technology (think e-mail, laptops, cellphones, Blackberry) that was once the purview of the executive ranks, has now enslaved even the levels of middle manager. The pressure to respond immediately to e-mail on a mobile device has helped to cloud the boundaries of what constitutes the number of hours of a typical workday.
A friend and previous colleague of mine was a reporter, and she observed an interesting distinction between the North American and European attitudes to work and their boundaries. When she was doing a story and was seeking a quote or an interview from a specific American spokesperson or source, the organization would inform her that the person was on vacation, but would be willing to take the call to give an interview or quote, if a specific time was set up. When she requested something similar from a European organization, she was politely told that the person was on vacation and therefore unavailable, and to please call back upon their return from holidays. Even more surprising is that attitude exists even when European companies give far more (if not double the amount of) vacation time to their employees than their North American counterparts receive from their companies. You would think that the response would have been the exact opposite for both parties.

So, I guess you could say that Mary E. Lease was right about the 16 hours of slavish toil - she just didn't think it would still exist 105 years after her prediction.

Perhaps No Better Time to Buy a Car

Despite the woes of GM and Chrysler, they are obviously not alone, as all car manufacturers are suffering from steep sales drops. Probably the best performer in North America is Hyundai, as they have taken a calculated risk in the US by offering to buy back your new Hyundai if you lose your job. But there are now acres of unsold new cars sitting in dealer car lots and also offshore tankers.

The deals on cars were very good a few months ago, but have now become almost irresistable. The automakers have sweetened the deals so much so, that anyone who is in the market for a new car, may not find a better deal again. As an example, in Canada, Hyundai was selling the base model Accent for $9,995 which was a reduction of $3,500 off the MSRP (Manufacturer's Suggested Retail Price). At the time, this price was only available if you paid cash or arranged your own financing. Now, Hyundai is offering a price of $9,995 AND zero percent financing for 36 months. In theory, someone with cash could invest the money for 3 years, and then buy the car and hopefully, any return from interest, dividends or capital gains would offset som eof the cost of the car.

Likewise, GM was recently offering a Chevy Uplander minivan for $15,995. Now, the price has gone down to $14,995 and has the added incentive of 3 years of free maintenance, 2 years of On-Star and 2 years of XM satellite radio. Despite an entry-level price, the car itself has upmarket features such as Stability Control, Air Conditioning, 7 passenger seating, Traction Control, power windows and door locks, four wheel disc brakes and ABS. Some dealerships are selling it for as low as $13,999!

My brother-in-law recently (in late April/early May) bought a brand new Mazda 5 minivan, paying a price of $19,995 for the basic model (before adding on any options). He was ecstatic, as his friend paid almost $25,000 for the same car. Last week, I noticed that Mazda was advertising the same car - this time for $17,995!

Considering that in 1992, I paid $12,500 for a base model Honda Civic 2-door with manual transmission, crank windows, no radio and no air conditioning, I am tempted to buy a new car. Short of the government providing a rebate or a tax-break on the purchase of a new car, it's hard to see the prices going much lower, but then, I've said that before.

The Odds of Getting a Decent Meal in a Tourist Area

I'm heading out for dinner tomorrow night to celebrate a friend's birthday, and one of the advantages of living in such a multi-cultural and cosmopolitan city such as Toronto, is the availability of almost any type of food imaginable. I love food, and more than that, I love eating different types of foods, especially when I travel. Admittedly, I am an adventurous eater, and will, with little or no hesitation, eat from food carts in any city in the world. But I also dine in restaurants when I travel, looking for good, authentic local dishes. So, being peak tourist season in Canada right now, it was with amusement that I read an interesting hypothesis raised in a book I recently read - that the odds of getting a great meal in a major tourist centre (e.g. Times Square in New York) in a city is stacked against the tourist.

Why? According to Tim Harford, author of "The Undercover Economist", there is little incentive for these restauranteurs to provide fabulous food, stellar service or reasonable prices, because the majority of tourists will likely only make a single visit and any ambivalent or dissatisfied diner will be quickly replaced by another tourist who has no idea where other better restaurants may be or may not be willing to make a detour off-the-beaten tourist track.
I also think that while the Internet sites like Trip Advisor may be a more recent method of spreading the word about lousy restaurants, many tourists don't bother to read restaurant reviews as much as they do hotel reviews. This may be because you often don't plan far ahead of time what type of food you want to eat until you get hungry and evaluate the options around you.

Also, many tourists almost expect that they will not find a good deal in the main tourist spots, and therefore are almost resigned to paying high prices. Notice that many of the great restaurants in your city are probably not located right next to your city's most prominent tourist attraction, but likely a bit out of the way - exactly where locals want them to be. I know that I never eat at restaurants located in our tourist areas. For dinner on Saturday, I will be heading to a highly rated, small bistro in a gritty east-end neighbourhood where few tourists would venture.
Looking back at my past travels, I believe this has been true. A recent trip to Peru in May definitely cemented this hypothesis. In the UNESCO-heritage city of Cuzco, the tourist-oriented restaurants I frequented had mediocre food at best (and some were quite expensive), while the best food I experienced was from food carts (cheap and tasty) and in restaurants that were away from the city centre tourist areas and recommended by the locals such as our hotel receptionist. I don't trust recommendations by tour guides as they often get kickbacks or commissions from restaurateurs to bring tourists to their establishments.

I had read recently that while guide books claim to be completely objective, that their authors do favour some establishments and put them in their guide books regardless of whether they are the best around. Another reason to not follow guide book recommendations is that usually all you see in those restaurants are the tourists who read the guidebook, and then the restaurant becomes complacent as they now have a steady stream of tourists.

My opinion is to ignore the guidebook recommendations, travel off the beaten track, and ask the locals where their fellow locals would dine. These are locals such as taxi drivers, doormen, store clerks, hotel staff etc. You will save money, get a better meal and have a more authentic travel experience. BTW, here's a tip - if you are ever in Toronto, have a street hot dog (much better than those in New York City) or a burrito from Burrito Boyz. Both are delicious ..... and cheap!

Cottage/Rural Life - is it still an option for me?

I haven't written much in the past month, as I have been trying to sort out a real estate transaction. I had purchased a small lakefront cottage that was supposed to close next week, but I had to kill the deal upon my lawyer's recommendation because of a legal issue regarding road access to the cottage. During this time, I was driving up and down to the cottage which is about 150km east of Toronto, to do the requisite home inspections, water tests etc. The resulting cancellation of the deal cost me a few thousand, but I would rather pay that than avoid potentially paying tens of thousands of dollars later in a protracted legal battle.

One other thing that I learned was just how much work goes into maintaining a vacation property that is either not going to be used year round, nor connected to all municipal services (in the big city, we take things like connections to sewage for granted!). Prior to the cancellation of the deal, the owner was showing me all the things that needed to be done when opening and closing a cottage. These included, draining all water from all sources like water tanks, pumps, toilets etc. so that it doesn't freeze and subsequently flood during the winter. Also, lifting out docks, disconnecting and storing water pumps etc.; shutting off power, notifying certain utilities, pumping out holding tanks and septic tanks. While not undaunted, I came to realize that many people fall in love with the concept of owning a vacation property (myself included), but severely underestimate the time and expense needed to maintain the property, even if not in use. Also, I had a lot of difficulty trying to arrange high-speed Internet access (I was hoping to spend a fair amount of time there, and do some work there as well). While some utility companies will provide some type of seasonal pricing deals, it is still much more expensive than what can be found in a competitive urban environment.

I also discovered that the more time I spent away from Toronto, the more I appreciated the city, and what was available in terms of choice when it comes to things like entertainment, libraries and food (restaurants and grocery store food selection). On the other hand, I did notice how friendly the local people were and how much slower the pace of life was, as well as the quaintness of some of the lkittle villages that dot the area.
While not entirely rid of my desire for a cottage, I do have a greater appreciation of the time and expense it will require, and a better sens of myself in terms of what I want versus what I need.

This Month's Quote

“There is only one success … to be able to spend your life in your own way” – Christopher Morley, Author

The High Price of Being an Early Adopter

I learned a valuable money lesson early in life. I was about 14 years old, and the latest thing in watches had just arrived. Not an LED digital watch, not even a conventional LCD digital watch, but a multi-function LCD watch with stopwatch, alarm, hourly chime and other features I can't even remember. When this watch came on the market, I absolutely had to have one, regardless of cost. I used money from my savings to buy one at a then ridiculous price. When I brought it to high school, everyone wanted to see it, and for a few weeks, I proudly showed off this marvel of technology to a rapt audience. Soon afterward, the adulation of being at the cutting edge of technology faded, as the price of LCD watches tumbled, and within six months or so, these 'cutting edge' watches began appearing on more and more wrists. My financial lesson was that the cost of being an early adopter was extremely high and the cost-benefit equation was skewed excessively toward cost and less toward benefit.

Apparently this lesson has not been learned by a huge percentage of the world's population. Expensive lessons like paying a premium over list price for the New Beetle (although easily affordable by Jerry Seinfeld who was rumoured to have paid a premium to get one) or the Chrysler PT Cruiser when first launched, only to see these cars being virtually given away by their manufacturers these days as the demand has dried up.

Or like the owners of the first 50-inch rear projection TVs, behemoths that required not only about $5,000 in cash but also about four men to lift it and move it into place in your home. These are virtually obsolete and worthless now. I'm sure the owners of the first ($1,000) DVD players must be chagrined to see them selling for less than $100 a year or so thereafter, and now routinely sold for less than $30. Likewise the owners of the first flat screen LCD or plasma TVs.
Having experienced that painful financial lesson many years ago, I no longer buy anything when it is first introduced, but rather assess how much I really need (or want) it, and if so, when will be the entry point, price-wise ......... and wait to buy it when a newer model (often with very little technical modifications, and a lot of cosmetic changes), refurbished or a gently used one appears on the market.

In doing so, I now own/have owned high-end electronics, sports cars and sporting goods equipment for a fraction of their original price by being patient. For example, if you want to buy an imported sports car like a Saab or Volvo convertible - wait a couple of years, and buy a two or three year old model for usually almost 50% off the original list price. Or try asking a sporting goods salesperson what the main improvements between this year's running shoe, golf club or tennis racket versus last year's model are.

So, if you want to save your hard-earned dollars, don't be so quick to rush out and buy the latest, new fangled thing on the market. Your patience will pay off handsomely.

This Month's Quote

"He who knows he has enough, is rich" - Lao Tzu, Chinese philosopher, and father of Taoism and author of Tao Te Ching

Who's Happier - Residents of Big City or Small Town?

Awhile back, I wrote a post about regarding the cost of living in a big city versus a small town (or city). I also wondered if I could be happy living in a smaller community when I was used to living in large cities all my life. Even moving from a city of 5 million residents to one of less than half a million creates some angst for me, despite numerous Hollywood movies such as Doc Hollywood, Baby Boom and the recently released New in Town promoting stories of high-powered city executives and professionals finding refuge and love in smaller towns and cities. A Canadian survey conducted a few years ago stated that the happiest people in Canada could be found in the small New Brunswick city of Saint John. Having spent some time traveling in smaller cities and towns in Eastern Canada, there is a noticeable decrease in the level of pace of life, as well as stress and anxiety.

What exactly contributes to my happiness if I change locales? Will I miss having so much variety and diversity at my doorstep? I know I will miss the excellent library facilities, competitive prices in supermarkets, gas stations and retailers. I will miss easy access to good sushi. Will I get bored in a smaller community? Friends of mine believe so, especially since I am single and love to socialize. What of job opportunities - will I be content with the smaller pool of career opportunities?

What I won't miss, I think, is the noise and traffic of a big city, accompanied by drivers, commuters and transit users with short fuses. When I was visiting Newfoundland earlier this year, I noticed that many roads (even main thoroughfares) have a maximum speed of 50km or 60km, and it was not unusual to see someone contentedly driving 30km per hour! I am content to never see huge armies of obnoxious, pretentious and self-centered individuals. I won't miss the price gouging on things such as parking, garbage collection as well as constantly rising property taxes and user fees. Not to mention sky-high property prices.

If I do make the move, I need to be confident that it is a lasting happiness. I just finished reading an interesting book called The How to Happiness which claims that 50% of your happiness can be attributed to your genetic make-up, 10% by your current circumstances, and the remaining 40% within your control. The book backs this up with scientific data and research. It also says that a major change in your situation (new relationship, moving somewhere, new job etc.) only provides a temporary boost to your happiness, with a subsequent shift back to your mean/set point of happiness levels. So, I continue to ponder and research such a move.

How Tech Companies Make Cheap Technology Expensive

You have to hand it to technology companies - they hire smart people, in almost all facets of their business. Why do I say that? Well, if you think how much cool technology has been introduced in the past three decades, it's been quite breathtaking. MP3 players, iPhones, Blackberrys, organic LED TVs and thousands of other amazing technologies. But it's not only their scientists and designers that are smart. Their marketing staff are shrewd as well. Consider the strategy by printer manufacturers. They sell you an all-in-one multi-function printer for less than $50, so that you can scan, copy, fax and print with one compact machine - brilliant. Buy a computer, and usually they'll throw the printer in for free or a ridiculous price that you can 't refuse. I've seen brand-new ink jet printers selling for less than $20!

What they don't tell you, and as astute consumer we should be wary of before we purchase, is the rate of toner/ink use and the replacement cost. I have one of these Epson all-in-one machines that cost less than $60, but whose four-colour replacement cartridges cost over $60. True, you don't have to replace all four at the same time, but they do diminish at a fairly equal rate (unless you print primarily in black only and in draft mode format). Your option is to take your empty cartridges to a toner refill kiosk where you can refill the empty cartridges at about a third to half the regular cost of buying the brand name replacement cartridge. So, the consumer's dilemma is whether one should buy a brand new printer which is about the same price of the replacement cartridge, but then you have to reconfigure your computer, install the printer drivers and then get rid of the printer. Throwing it in the garbage makes you feel guilty (from an environmental perspective) , so you just grudgingly buy the cartridge. Smart .... and sneaky. What would I do? I have purchased refill kits from eBay and successfully topped up my cartridges. However, it can be a messy affair.

Even sneakier was when IBM introduced their cheap Laser Writer 'E' low-end laser printer. In Tim Harford's book, "The Undercover Economist", he relates how the 'E' was almost identical to the more expensive Laser Writer, except they installed an additional chip in the 'E' to slow it down. Those who wanted a laser printer but were extremely price-sensitive would buy the 'E' anyway, but others would pay the extra to get the faster model, even though they were almost identical. It was cheaper for IBM to adopt this strategy than to design two completely different printers. Ironically, it was actually more expensive to produce the cheaper machine, as they had to spend time disabling functions on the chip to slow it down. It is not unlikely that technology equipment reviewers, salespersons and even friends and colleagues would recommend that one buys the faster printer for a few dollars more. Those few extra dollars go straight to IBM's bottom line profit. According to Hardford's book, Intel has also done this with some of their processing chips, as has many software companies. Consumers seem to have an aversion to buying the cheapest or 'base' model of anything, so when confronted with a lower 'Celeron' chip versus a 'Pentium' chip, one might tend to move up a little as insurance in case you need the extra processing power when most people probably don't. Now it's the battle between Dual Core and Core2Duo processors - confused? Same goes with Microsoft's Vista Home Basic versus Vista Home Premium. The majority of users only make use of the basic operating functions, but most will buy the upgraded software. This is little different to upselling you find at restaurants and movie theatres - "would you like fries with that?" or "Can we supersize your fries/popcorn order - it's only an extra 50 cents?" - all of which goes to the company's bottom line.

As with much advertising and retailing, the consumer is confronted with their insecurities and fears. That is that one thinks they need more power/capacity than they really do. Hmm.... what will I do if I am faced with a situation where I would need to print documents at 6 ppm (pages per minute) but my printer can only spew out paper at 4 ppm? My advice is that every consumer should understand what they want the product to do for them the majority of the time, to do some reading or research before they buy, ignore the marketing noise around them and stick to their budget.

Bringing Maslow`s Hierachy Back to Normal Levels

One of the reasons why the world has gotten themselves into such a financial pickle, is the elevation of the most basic levels within Maslow`s hierarchy of needs. As a refresher, in 1943 Abraham Maslow drew up a theory that proposed that human motivation was driven by five needs, that was shaped in a pyramid. At the bottom, was basic Physiological Needs such as food, shelter, water etc. Once those need were fulfilled, then humans would aspire to move up to the next level which as Safety Needs - of our health, bodies, family etc. Once that need was fulfilled, then we would move on to the next level which as the need for Love and Belonging, followed by Self-Esteem and finally, the pinnacle of human needs which was Self-Actualization.

Here is the Wikipedia explanation of Maslow's Hierachy of Needs:

http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs

However, what happened was that society, in its insatiable greed, has had difficulty getting past the lower levels of needs. For example, instead of basic shelter, some people have strived for a MacMansion and has sacrificed their other needs, putting their health at risk (Safety), straining or excluding relationships (Love and Belonging), doing jobs they hate just for the money (Self-Esteem) and acting contrary to their authentic self (Self-Actualization).

Sure, I may sound preachy, but I've seen enough and read enough to know that I am not far from the truth. The silver lining on this current dark and ominous financial cloud, is that many people are reflecting on what went wrong, what is important to them, and re-evaluating their value system. Instead of making the bottom of the pyramid large and unattainable, many people are trying to satisfy the most basic needs and move up the pyramid. I hope that this is a portent of things to come and a welcome change to a materialistic and consumer-driven society.

How a List Can Save You Big Dollars

One of the reasons why many people wind up spending more than they make is that they do not keep track of their expenditures, especially the small purchases. But these seemingly insignificant purchases add up to big dollars. Many of them are impulse purchases which, if one is not disciplined, will leave you susceptible to retailers efforts to put these impulse items in front of you at the check-out counter.

Research shows that more than half of all grocery purchases are unplanned, impulse purchases. That's why people who compile a grocery list and stick to it will spend far less than those who go to a grocery store without a list. 'Spur of the moment' purchases tend to be more expensive and is based on what someone wants at that time, rather than what someone really needs (that is on their grocery list).

Last year, a Toronto Star columnist decided to find out why she couldn't save any money. She tracked every single transaction and expenditure for a month and then reviewed where the seepage from her purse occurred. She was shocked to find that every time she went to the drug store, she would walk out with a basket full of small purchases, e.g. a bottle of nail polish,some bath salts, a magazine etc. These added up to well over $200 per month, or almost $2,500 per year. Women also tend to go on fashion shopping trips, often with nothing specific in mind.

Men are not immune to this, as they are extremely susceptible to electronics, hardware and sports stores. Even worse is that men have been known to purchase cars on an impulse! Research shows that almost half of hardware store purchases are spur of the moment purchases.

Despite the tough economic times, there are so many sales and promotions that present temptations to potentially overspend. So as you go and do your shopping, prepare a list and stick to it. It'll save you dollars when you need it most.

Save Dollars by Not Making the Unnecessary Necessary

I was reading a motoring magazine article recently which was reviewing a new 'luxury' vehicle when it struck me how companies have long made extra sales and profits by making the unnecessary seem like a necessity. There are cars that can now parallel park themselves, ones with rear-end cameras, computer controller displays in the dash etc. It appears that the public has bought into gadgets that were once considered luxuries such as automatic transmission, power windows and door locks, to be considered as essentials. The American auto industry is in trouble partly because it spent so much of its time (and money) putting in fancy gadgets in their cars at the expense of build quality and reliability. Even in the 80's, American car manufacturers would put in digital dash boards, and power everything from doors, windows, seats and seat belts. Unfortunately, the public bought it and paid dearly for it.

So instead of buying an item because you NEEDED to replace it, people were buying things because they wanted to replace it. Advertising, peer pressure or design were all instigators to wrestle money from consumers' pockets. Heck, even my elderly parents wanted a new flat-screen LCD Television when their old CRT set was still in perfect working order. I guarantee that with their eyesight being the way it is, they could probably not tell the difference between the new and old TV set.

Not only is this type of expense a drain on one's bank account, the frivolous waste brought on by rampant consumerism has been extremely bad for the environment. Tens of millions of old CRT televisions and computer monitors are being thrown away annually, and finding themselves in landfills in poor countries used as dumping grounds and whose populations`health is now being adversely affected.

Many new technologies such as MP3 players are designed with a limited lifespan, so that if it breaks down, it is usually cheaper for one to buy a new one that to repair their old one. Read Internet forums on iPods and you will find consensus that their batteries don`t last longer than a couple of years, whereupon they will more likely be discarded and a newer version purchased. Longevity is no longer important to many companies because longevity no longer produces continual sales. Cellphones come upon with new `must-have`or `necessary`features that render perfectly good phones obsolete in their owners`eyes.

If you want to save money, assess what your real needs are, ignore the advertising, peer pressure anfd hype and buy what most closely fits your needs, not your wants.

A Good Time to Re-evaluate Your Actual Needs

If there is a silver lining to this economic downturn, it is that financial hardship has forced people to re-evaluate exactly what their actual needs are. In better times, we often buy things with grand expectations that never materialize and these items wind up being seldom used. A prime example is the trend of families having a 'great room' or family room that turned the traditionally well-used living room into a more formal (and seldom used) living room.

Many people will spend unnecessary dollars buying big ticket items that will either gather dust or stay in their packaging - from electronics to kitchen gadgets, to clothing and shoes. Now, when people are forced to liquidate any asset possible to raise cash, or when their bank has foreclosed on their home and they need to move, then they understand how much money was spent on things that they thought they needed, but realize they merely wanted.

In my first home, I had managed to secure an old nine-foot boardroom table that could seat 18 people for dinner comfortably. I think that I had used it for that specific purpose twice, otherwise it was an unnecessary piece of furniture taking up valuable real estate. An uncle spent thousands on an authentic English pub which wound up gathering dust as his friends and relatives wound up being too busy or tired to hang out in his 'bar'. As I ponder a move onto a boat, I suddenly become aware that I seldom use much of the space in my spacious condo. I hardly use my formal dining room table, preferring to eat in my kitchen; I sit in the same place on the sofa all the time (meaning I don't need a huge sofa but a smaller love seat or a single armchair instead). I am currently purging my condo of all things that I think are now unnecessary (to sell at a yard sale), and as someone who considers himself as living 'lean', I am still surprised at how much stuff I have that I either have not used in a long time, or used at all since I purchased it.

Still, there are limitations to living small. My six-foot tall brother-in-law believes that he could live aboard his 20-foot sailboat, while I don't think my five foot four inch frame would be happy in anything smaller than a 26 foot power boat. I still fear claustrophobia in to small a space, but believe that I can definitely live in smaller living quarters than I currently inhabit. Technology has rendered many things superfluous, and allows one to make better use of space and resources. All my CDs are now on my iPod, all my financial statements are online, all my photos on memory cards or on online storage sites. The good thing is that I become more and more comfortable with the direction that I am headed which is living simpler than I already do.

Unshackling the Chains That Make You a Slave to Fashion

I've been away from the work world for about nine months now, and during summer in Toronto, the weather is warm on most days, and some days, downright hot and muggy. So, I've been living quite comfortably in my current wardrobe of choice - a pair of shorts and a loose T-shirt. On cooler days, I may wear the occasional pair of jeans and a sweater.

This is a very different wardrobe from my work attire which normally consists of a suit and tie, or at minimum, a long-sleeved dress shirt and pair of slacks. On very important meetings and events, shirts with double cuffs and cuff links were necessities. Since being off work, I noticed that my expenses related to dressing for work have almost disappeared. My dry cleaning bills are few and far between, I don't need to do as many loads of laundry, and my shopping for work clothes has, understandably, stopped. This got me to thinking that how costly it can be to dress for success, but how it can be minimized. Admittedly, women have it harder than men - their fashions change far more frequently, they are under greater scrutiny from their colleagues (and mostly, other women), they are exposed to more advertising on TV, magazines and billboards. Add to that, shopping - for many women - serves as a leisurely past time, if not a sport. Men, on the other hand, can get away with having a few suits, a few crisp dress shirts, a selection of ties and a nice looking pair of shoes.

Nevertheless, women tend to also make their own situation worse by following fashion a bit too much. Being a slave to fashion is both costly, impractical and ultimately futile. Firstly, many of the hip and trendy fashions (especially women's) may only last a season, therefore the items they purchase has a very limited shelf life, and becomes destined to the Goodwill bag relatively quickly. Secondly, many people purchase clothes but never wear them (hands up to any woman who has never bought an item that wound up unused in her closet with the tag still on it?). Thirdly, very few people are trendsetters, and by the time the fashion trend hits the streets and is marketed to the masses, it has already started to lose its cachet, soon to be replaced by a new style.

So, you might ask, what's the solution? If you want to maximize your fashion dollars, start listening to fashion experts who will tell you that the best way to assemble a wardrobe is to start with the classic pieces that will never go out of fashion. For both sexes, it may be a plain dark blazer or suit (you can never go wrong with black or navy blue), a classic white shirt or blouse (forget the frills, pleats or puffs), pair of black pants or slacks, plain coat, dark pair of jeans, and a nice pair of leather shoes. For women, add a classic cocktail dress (the little black dress never goes out of fashion) and a plain skirt.

I have a weakness for nice suits, but instead of buying 20 suits in a variety of different colours and patterns, I own 5 great quality, all wool suits in navy, black, grey, charcoal and light beige (mainly for summer) that will hold me in good stead at any occasion. I buy only single breasted suits, as it makes my appearance slimmer and is not as formal or as old-fashioned as the double-breasted variety. If you're tight for cash, my advice is to buy one or two more expensive suits rather than three or four cheaper suits. Why? Because they are more likely to be better constructed, provide a better fit and last longer than a cheap suit. So, if you buy a classic, single breasted, three-button navy blue or black suit, it will never go out of fashion, and becomes the foundation of your wardrobe. Want to be a bit more casual? Pair the jacket with a casual shirt and pants. Want to remain fashionable - buy a skinny tie that is currently in vogue. The key is to invest in a few good pieces, and supplementing them where necessary rather than wasting money by slavishly trying to follow trends.

For women, it may be a bit more difficult, and my advice is to invest in the staple items mentioned above, and complement it with fashionable scarves and other accessories. If you were really feeling the peer pressure, buy a cheaper brand of that fashion style, so that you don't throw money away on something that you'll have to wait 20 years for it to come back into fashion. Example, there are hundreds of thousands of women that spent hundreds of dollars buying 'Uggs' branded boots, that are now gathering dust in a closet somewhere in their homes. Every year, men and women have a ritual of cleaning out their closets, looking embarrassingly at clothes that are no longer in style, and placing them in a garbage bag that will be dropped off at their local Goodwill or Salvation Army thrift store.

So, save money by unshackling the chains that make you a slave to fashion. And by the way, I do clean up nicely when I go out.

This Month's Quote

"Lives based on having are less free than lives based on doing or being" - William James

Some People Still Don't Get It - It's the Economy, Stupid

I have just finished reading the latest editions of Men's Health and Esquire (borrowed from my city's excellent library system), and am flabbergasted that in these harsh economic times, that they are suggesting its readers buy wristwatches costing $6,000 to $10,000. I like watches (I own 6 of them), and while I would not buy a cheap $10 model that you can feel right away is made from cheap and inferior materials, I certainly would not even fork out $1,000 for a wristwatch.

When you read the excellent book, the Millionaire Mind, you'll find that the millionaires profiled would also not spend much money on a watch (but rather invest the money). So, while these magazines write articles on keeping its readers heads above water among the rough economic waters, on the other hand, its pushing $10,000 watches. In my humble opinion, anyone shallow enough to judge you by your wristwatch, is not someone I would want to keep as a friend. No wonder that both the economy is in the amount of trouble, and the population as self-absorbed and materialistic, that it is.

This Month's Quote

"If you are not working on your ideal day, you are working on someone else's" - Marjorie Blanchard

The Great AIG Bonus Fiasco

Having worked in the financial services industry, I understand the rationale behind giving employees retention bonuses, as an incentive for knowledgeable staff to stay with the firm. When my then employer, CIBC World Markets, purchased Merrill Lynch Canada, they paid the top brokers a retention bonus to prevent the Merill brokers from leaving for other competitors, taking their valuable client books with them. Many were paid six-figure (and a few seven-figure) bonuses.

However, that was normal business practise in normal economic times. The current AIG (and allegedly applicable to Fannie Mae and Merrill Lynch) bonus payouts are reprehensible, because of a number of reasons. The obvious and number one reason, is that it is an inappropriate use of taxpayer money to pay obsence amounts when millions of hard-working Americans are losing their job. Secondly, if these people are responsible for the near collapse of AIG, then to reward them for putting the company and their fellow 100,000 AIG colleagues in peril, is beyond comprehension. This amounts to the epitome of rewarding failure.

For the recipients of these bonuses to not feel shame in accepting the payouts underscores the greed and me-first attitude of Wall Street. Any ethical and moral person would have rejected the bonuses in the first place, or at the very least, donated the proceeds to a charity. The swift passage of a bill in Congress to massively tax these bonuses is merely a visceral reaction to the issue.

Let's hope that it will deter future obsence payouts (until the economic situation has dramatically approved) and shame those financial wizards to put the nation's interest ahead of their own. And while the US remains the land of opprtunity, hopefully, there will be a greater sense of country first, individual pursuits second.

Looking Beyond Loose Change Under Your Sofa Cushions

Over the weekend, I steam cleaned my sofa - a long overdue chore that I kept putting off. Upon removing the cushions, I discovered about $6 in loose change which was a pleasant surprise. That made me think of how much money we may have, but may not know or remember where we put it. I had a girlfriend who used to leave money all over the place and then forgot where she put it, only to find it months or even years later. She would find it in books, drawers, pockets, cupboards, boxes and files. To her, it was 'found' money, so she was a happy camper when she made the discovery. I, on the other hand, thought it to be poor money management on her part. But who was I to be so judgmental?
It made me think of the numerous bank accounts I had opened (and closed) in the past 30 years and whether I had left any money behind in forgotten, dormant accounts. I do recall one account that had a few dollars and I could not muster enough energy or enthusiasm to close the account and retrieve my hard-earned cash - I'm certain that there was less than ten bucks in it.

Lo and behold, I am not alone. Apparently, the Bank of Canada has almost $300 million in forgotten cash in dormant accounts - the largest amount is over $400,000. So, how does one forget almost a half million dollars, or fails to take the initiative to claim their money? If typical ratios hold true, then in the US, it must be over a few billion dollars in unclaimed money. In my brief time working in the investment industry, I've seen more than a few dormant mutual fund accounts with over $50,000 in them, so I know that these are not isolated instances. I, like most average Joes, would certainly know if my portfolio were missing fifty grand.

I now endeavour to check my pockets, drawers and files for missplaced cash, or I'll try these websites below:

Canada

www.bank-banque-canada.ca

United States

www.missingmoney.com

Either that, or steam clean my sofas more often.

Pondering a Life on the Water

Lately, I have been thinking about something that has long been on my list of things to do - live on a boat. This past winter in Toronto has not been particularly pleasant, and like millions of my fellow Canadians, can;t wait for it to end. However, the annual ritual of having to endure through a winter does not appeal to my sensibilities. Why do something that you don't like? Sure, there are 'snowbirds' - those retirees that live in Canada for 6-9 months of the year, and as the name suggests, fly south to warmer climates when the first blast of arctic air arrive. Compared to most people in this category, I am, at 45 years old, about 10-20 years too young.

What has been exciting is my search for a boat large enough for me to live comfortably without getting claustrophobic, yet small enough that marina fees and other associated costs do not make this experiment prohibitively expensive. This is an extremely good time to look for a used boat, with many owners being unable to afford their 'toys' and liquidating at below normal market value prices.

I am hoping that it is also an opportune time to rent out a condo, as more people either cannot afford to buy a home or decide to delay a potential purchase with expectations that the prices will continue to fall for another 6 to 12 months. With many workers fearful of losing their jobs, they are renting rather than committing themselves to the largest purchase of their lives at a particularly volatile economic environment.

Also, the prospect of me renting out my condo, either for the full year or half a year, has me already evaluating everything that I own. To that end, I have already started purging my things, and it is very interesting how I have started to look at all my possessions with a critical eye, and begun to sell them. Many things that I have carted with me for close to twenty years, now do not look as valuable to me anymore.

I have been very successful in getting rid of things on free classifieds on the internet such as Craigslist and Kijiji. Having been a successful eBay seller, I have a fairly good knowledge of how to ascertain fair pricing, and my sales to date have proven that the public find my items to be attractively priced. Through eBay, the auction waiting times, commissions saved and hassles of shipping have now been eliminated. As a fair number of things that I have been selling has been large and heavy, it would've been impractical to list it on eBay anyway. The prices that I am getting are better than I would be able to get selling them at a yard sale, where many things are sold for only a few dollars. In this economic environment, I'm finding more and more people buying used items on Craigslist and Kijiji. I am quite amazed at what people are willing to buy and the distances they will travel to get a good deal.

The one thing that I am really looking forward to, is simplifying my possessions, as well as the excitement of planning my first long-term winter getaway. I foresee that, in a few years, I will be able to live 6 months in Canada, and the other 6 months in a tropical country with a low cost of living such as Mexico, Belize, Costa Rica, India, Thailand or Indonesia. Right now, I know that I will miss my family and friends, as well as I would like to continue to do some work while I am still young. Hopefully, this weaning process will not take too long.

Should I find the tropical paradise that I seek, I can consider a purchase of a property when real estate markets are hurting, and when the US dollar is quite high against most currencies.

The way I look at it, I am still invested in the real state market, and will earn a positive (and maximize) net return on my investment, I will minimize my expenses and get the chance to travel in search of my winter home. Will keep you posted.

Two Phone Calls = $500 in Savings

I recently made two phone calls in one day that literally put $500 in my pocket. Having been with the same insurance company for almost 10 years now, I saw that my car insurance would rise a little every year. The first time the rates were raised, I checked around and found that my insurance company still offered the best rates possible. The second time yielded the same result, so I stayed with my insurer. I guess that made me a bit complacent, as for the past few years, I haven't been doing any comparative pricing. But this year, with the help of online comparative pricing websites, I was able to finally get a cheaper rate, finally saving me $200 per year. In fact, I am now paying a lower car insurance rate than I did four years ago. It took me mere minutes on the computer and about 15 minutes on the phone with an underwriter.

Likewise with my Internet provider. Because I was self-employed at the time and needed fast and reliable Internet service, I have had high speed DSL service when many people were still using dial-up. At the time, in 2001, there were only a few big players in the market and I tried high speed Internet through cable as well as through phone lines, and found the latter to be more reliable, and so I had been with my current provider for the past seven years. I have done comparative shopping lately, and while some new entrants have entered the market with attractive pricing, some of the reviews of their service levels and reliability have given me the impression that their service delivery has been inconsistent at best. By the way, the most misleading part of any Internet ad, and the one you have to be the most careful of, is the one where there preface the speed by using the words "up to ..... Mbps", there providing them an iron-clad excuse when the Internet response is as slow as molasses. You seldom get the maximum speed advertised by your provider. So, in comparing the well-established providers with one another, there wasn't much of a price incentive to switch. But, knowing that it is far more expensive to attract a new customer than keep an existing one, and that the marketplace was becoming increasingly competitive, I called my Internet provider and informed them that I was planning on canceling my service. Their first question to me was obviously "Why?". I told them that it was far more expensive than I was willing to pay, whereupon the Customer Service Representative (with seemingly no need for any additional authorization) offered me a 40% reduction in my monthly rate if I could commit to staying with them for a year. No big deal, as I was quite happy with everything except their price. So that was another $300 in my pocket.

I know that in these busy times we live in, that it's often easier just to do nothing, but we should all take a bit of time once a year to review whether we are getting the best possible deal from our service providers as possible. Given the tough global economic times we currently face, the profileration of technology allowing for easy price comparions and the increasingly competitive nature in virtually all industries, the odds are with us that we can exert our individual economic muscle. Or to simply put it another way, if I offered you $500 to make two phone calls, would you do it? Thought so.

Big City or Small Town - What's Cheaper?

Last autumn, I spent a week in beautiful Nova Scotia, a maritime province in eastern Canada. As with anywhere I travel in the world, I always read the local newspapers, look at real estate prices, frequent local eateries and shop at the local supermarkets. Why? Well, living in a very large city, I have always wondered whether I could live in as smaller community, either within Canada, or overseas. Would the cost of living be lower? Would the air be fresher? Will there be less stress? Can I escape the frigid Canadian winters? Could I retire earlier if I moved to a smaller community?

What I've discovered in my travels, sometimes surprises me. In Halifax, Nova Scotia, a city of roughly 400,000 residents (and about one-eighth the size of my hometown of Toronto), the price of real estate is much cheaper on average (although there are pricier homes, usually on the waterfront). While commuting distances are shorter, some Halifax residents have as long a commute as those in Toronto, primarily due to the absence of multi-lane highways into the city (and gasoline prices are higher, due to government price setting). But, public transit is slightly cheaper, as is downtown parking. Buying bottles of liquor from a beer or wine store is also pricier than I am used to, as is casual dining in restaurants and fast food outlets. But drinking in a bar tends to be cheaper (as the city has 4 universities within the city limits). I even noticed that the price of a Starbucks coffee in downtown Halifax was slightly more expensive than in both Toronto and Vancouver. More importantly, groceries tend to be more expensive, even staples such as milk, eggs and bread. The main reason for price differentials on everyday items seems to be competition (or the lack thereof). There are only two large supermarket chains in Nova Scotia, whereas in Toronto, you can probably count 10 large chains (some of them chains catering specifically to large ethnic communities, but drawing mainstream customers too). However, salaries are markedly lower in the Atlantic provinces. So what's the verdict?

Real estate is the big factor. In large cities where the good jobs are and people flock to, land becomes scarce. When living closer to the city means less commuting time, prices rise to levels where compromises are then made, i.e. more space versus convenience of not having to spend an hour commuting to work.

So should one sell their place in a big, crowded city and move to a smaller city or to the country and enjoy a less stressful life? Sounds idyllic, but my friends in Halifax do not believe that I could live in their city - they think I will get bored too easily. Plus I would be far away from my friends and family which are important to me. Less, but still important is the availability of activities that only a large city can bring, i.e. museums, theatres, major-league sports, art galleries, opera and symphonies, lots of festivals, and many amenities that while you may not frequent as much as you would like, but that you are comfortable in the knowledge that they are there is you feel the urge to partake in such activities whenever you feel like it.

So far, I can handle the congestion and have no mortgage, so it may be better for me to remain in a larger city. Nevertheless, selling my home and buying a much cheaper place of comparable size in a smaller community, thereby accelerating my retirement plans, is very, very tempting too.

This Month's Quote

"What's money? A man is a success if he gets up in the morning and goes to bed at night, and in between does what he wants to do" - Bob Dylan

Hallelujah - North Americans Start Saving Again!

In previous posts, I have written about the non-existent savings rates of Americans in almost two decades. How Americans have spent more than they have earned, often at the urging of their leaders, most famously after 9/11 where George W. Bush said the patriotic thing to do was go out and shop. Recent economic turmoil has resulted in a seismic shift in the mindset of the average American to the point where November statistics show that the savings rate has gone from zero to 2.8%.

My hope is that this is a watershed turning point in the American psyche and that they don't go back to their reckless spending patterns. Diminished asset values, rampant layoffs and a realization that there is no umbrella for the rainy days will do that. My hope is also that we do not see unbridled materialism return and hopefully a return to a simpler lifestyle with greater emphasis on how we can help our fellow human beings in our own communities and all over the world, and that people start giving a damn about the environment and the legacy that we are leaving to future generations.

When Size Does Matter

A few years ago, I became aware of an ingenious, but somewhat sneaky, strategy adopted by food manufacturers and retailers. It was to keep prices low, but offer a smaller quantity of the item. While this, in itself, is not sneaky, the way they packaged the size-reduced product, was. I first noticed it with potato chips. The price was the same, the size of the packaging was the same, but a bag of chips didn't seem to go very far at parties or when watching a movie. That's when I noticed that the average weight had gone from 190g to 170g, a reduction of over 10%. Now aware of this, I began to notice that packages of spaghetti and other pastas had been reduced from 900g (or 2 pounds) to 750g (a reduction of 17%). Again, it was difficult to discern by merely looking at the packaging, many of the changes being very subtle and at times, hardly noticeable to the harried shopper. And these changes started happening way before the recent spikes in the price of gasoline. Before long, I began to notice smaller yogurt containers, 18-unit soda packages instead of the usual 24-unit ones. Now, everything from chewing gum to laundry detergent is being re-packaged or as the industry would like to refer as 'right sizing'.

Given all the economic turmoil, tight budgets, rising commodity and fuel prices, I can understand how food and consumer products manufacturers do not want to raise prices and the consequent ire of their customers, and I do believe this is a smart and legitimate practice. Where I think they are disingenuous, is that they benefit financially off of the ambivalence of their customers. Most people grocery shopping reach for staple products that they are familiar with, and if the packaging is visually identical, they merely grab it and throw it in the cart. They are quite aware of how much their favourite item will cost, but very few will know how much it weighs. In my days n the financial world, there was a saying that "People know the price of everything, and the value of nothing". That is, they'll tell you that the price of a bag of potato chips is $2.00, but can't tell you whether it's a good deal or not, based on quality, weight etc.

These days, if any reading of food packaging is done, the majority of shoppers will be looking at the nutritional information rather than the weight. What about grocery stores that offer the comparative tags on their shelves alerting consumers as to the price per weight or unit? These are only helpful in comparing one brand against another, but if all of the pasta packages are the same size, it doesn't really alert you to the fact that you're getting 17% less pasta than you thought (or were used to getting).

In this case, I put the responsibility squarely on the shoulders of the consumer. An astute shopper knows what he/she should be paying for an item and the cost per unit. Unfortunately, most people shop blindly (and without a list which research has shown, results in a larger grocery bill than originally budgeted). If I told a shopper they were getting 10%-15% less food than they were accustomed to, I'm sure they would be shocked and angered. Being cognizant of this change in food and consumer products retailing practice is important to be aware of, as it can either save you or cost you. The choice is yours.

This Month's Quote

"Until you make peace with who you are, you will never be content with what you have" - Doris Mortman

Quite appropriate given the looming financial problems that we are facing. Hopefully, people will start to spend more time focusing on themselves and what's important in life, and less on buying things to impress others or fill voids in their lives.

The Choice of Priceless Memories Versus Disposable Stuff

I just hit the jackpot (kinda). I received notification last week that I had been successful in securing tickets to two events in the ticket lottery for the 2010 Winter Olympics in Vancouver, in my home country of Canada. Not only that, but I managed to secure tickets for the marquee event in hockey-mad Canada - the Gold Medal Men's Hockey Match. Interestingly, as soon as the winners were notified that they had secured these tickets, ads and auctions began appearing on eBay and Craigslist, with people trying to sell their tickets at a substantial profit. Friends of mine have urged me to do the same, and are somewhat bemused when I tell them that I would rather gather a bunch of friends and see the actual event, than to sell it for a quick buck.

One of the cornerstones of how I live my life, is to experience life to its fullest and in person. While I could sell the tickets and buy a brand-new, big flat-screen TV to watch the Olympics, I choose to use my hard-earned dollars to experience it live, and take in the actual sights and sounds of the big event. Having been to the 2000 Summer Olympics in Sydney Australia, I cannot do justice in describing the feeling of goodwill and comeraderie when people from every country in the world gather together to celebrate what we have in common, rather than what drives up apart. It's something that I have seldom experienced but long to do so again.
I live modestly, and spend my money on things that I am passionate about - travel, personal relationships, once-in-a-lifetime events, priceless moments and adventures. As has been often remarked, "Life is not a dress rehearsal". I have known too many people whose lives were cut short far too early, and if everyone of us knew how much time we had on earth, I think that we would be spending more of our money and expending all of our energies on memories rather than material goods.

Besides, I can always earn the few thousand dollars again that I would gain by selling these tickets, but I may never get the chance again to witness the Gold Medal Match (with hopefully Team Canada winning) in my home country again in my lifetime. So, why give up that priceless opportunity for a quick buck?

It's Not How Much You Make, It's How Much You Keep - Ask Warren Buffet

I recently wrote a posting about how being an employee is the most expensive way to make money in Canada. Obviously, the vast majority of people are not independently wealthy, nor self-employed and so, many people have asked me what are they to do? Well, even as an employee, there are options. It always makes me laugh when people ask "How much money do you make?". In my opinion, that is often a meaningless question. It's the amount that one keeps that is more important than how much one makes. Effectively and legitimately shielding money from the taxman is seldom done by the average person because they may think it cannot be done, they could not be bothered or they think it involves complex financial strategies.

But it could be as simple as working a four-day week versus a five-day work week. Excluding overtime, the fifth day of work is the most expensive. If people did the calculations, they would realize that if they only worked 80% of the time, they might see their gross income fall by 20%, but that their take home pay would fall by far less. Conversley, when one works overtime or gets a bonus, the tax rate always seems higher, as it often pushes one up to another tax bracket. That's why workers will often quip that it's not worth working overtime when the taxman takes 50% of the paycheque.

If you decide to chuck your job, don't do it in December because you will derive no benefit from the taxman. Rather do it a few months before that, and your tax refund will likely offset much of the lost income from not working those last few months. Given a choice of working for a full year, or takling a few months off with only a marginal loss in net income, I will always choose the latter.

Understanding that someone who makes $60,000 but only works 8-9 months of the year can net as much as someone who makes $100,000 over a full year can help change one's mindset. The next question is how do you get a job where you only work 8 or 9 months per year? Well, there are tens of thousands of people who (by choice) work as project or contract workers, interim executives or in seasonal jobs. The main reason why a lot of people don't go down this road is their need for stable work and job security. The irony of it is, given recent and future economic times, the average worker has little or no job security.

Ask Warren Buffet, the world's richest man who slams a taxation system that is so screwed up that he pays less taxes than his secretary. Last year, Buffet made $46 million and paid a tax rate of 17.7% while his secretary who makes $60,000, paid a tax rate of 30%. This is one reason that Barack Obama is trying to give tax cuts to the middle class while making sure the rich pay their fair share.

This is the time to think outside the box. Give it a try.

Is It Time to Downsize?

Everyone knows that the North American economy is in for some lean times, and there are three ways in which the general population, especially in the US, have reacted to these more austere times. There are those who have started to tighten their belts and re-examined all aspects of their spending (and saving) and adjusted accordingly. There is the second camp who have put on the blinders and pray that this mess all goes away..... soon. They are unlikely to curb spending, partly because they are addicted to consumerism and partly because they think it beneath them to lower their standards. Not unlike residents who ignore hurricane evacuation warnings, they hope that they will be able to ride out the storm. The third camp sits somewhere in between, making small changes to their spending patterns. Regardless of which camp one falls into, it is hard to imagine anyone having escaped unscathed in some way or another. Whether it's one's home, job, retirement savings, investment portfolio, small business or daily expenses, we have and will continue to feel its effects. The silver lining on this dark cloud is that it may, finally, be the impetus for North American society to review its values and priorities, and in the process, become less materialistic and more values-oriented and community-minded. And by so doing, also maximizing their dollars by spending less.

Let's start with what has caused all this - real estate and the accompanying purchases/expenses related to home ownership, thereby straining mortgage loans, credit cards and lines of credit. Home ownership is the cornerstone of the American Dream, and usually the largest purchase and (hopefully still) asset in one's personal balance sheet. There's nothing wrong with aspiring to have a piece of land that you can call your own. Unlike our European counterparts, the aspiration towards home ownership is more ingrained into the North American psyche. Home ownership rates are markedly higher on this continent versus across the pond. Where we have gotten ourselves into trouble is the excesses that have accompanied home ownership. In many other parts of the world, houses tend to be small whereas the trend in North America over the past few decades has been to build super-sized single-family dwellings, hence the term McMansions. These seem to be prevalent in the southern states, most notably in the big-is-everything state of Texas.

Whether the purchase of a trophy home is a signal to everyone that you have made it, or merely to keep up with the Jones, the future reality is that a home of this size (along with all the accessories) will be increasingly looked upon as being largely unnecessary and will start to become obsolete as homeowners and buyers re-evaluate their priorities, given the current financial and environmental climate. Gourmet kitchens for families that don't cook or entertain much, formal living rooms that rarely get used, three-car garages for people with only two cars. The cost of accessorizing, heating, landscaping, maintaining and paying and property taxes alone should be a red flag to home owners that these monsters will suck the life out of your savings account.

This lesson has come too late for all of those homeowners whose houses are now under foreclosure. While one's first thoughts may be that those who over-extended themselves were from the lower-income sector of the population, that is far from the case. Look at cities like Phoenix, Miami, Las Vegas and many communities in California where many of those families losing their homes are middle-class, well-paid, educated white collar workers.

In the 1970s, the average home in the U.S. housed 3.14 occupants, and was 1,520 square feet in size. By the end of the century, that had increased to an average of 2,225 feet, even though the numbers of occupants declined to 2.59 per household. But the tide has been shifting in the past few years, as baby boomers started to realize that they did not need to live in a cavernous, half-empty mansion, nor wanted to expend the energy and expense for the upkeep of them. Progressive communities such as San Francisco are limiting the size of homes, making building permits for monster homes increasingly difficult to obtain. Increasing numbers of home builders are emphasizing quality (finishing and detail) over quantity (size of the home).

The average millionaire in America has lived in a modest home usually in the same unpretentious neighbourhood for 20 years, with little or no mortgage debt. Read about it in the book "The Millionaire Next Door". Those are the ones who may be least affected by this crisis, unlike the people who may live in flashy homes and have luxury cars in their driveway but are a few months away from having the bank foreclose on their home and repo their car.

My wish is that North Americans follow the lead of the Europeans. Instead of cocooning themselves in their huge houses, do what the Europeans do. Live in smaller homes and spend more of their time and income in their communities - enjoying life by leaving their homes to meet friends and families for coffee, a drink or dinner in town. Stroll the park instead of your backyard. Hopefully, my wish comes true.

High Quality Computer Software .... for Free?

I am frugal, and carefully watch where my money is spent. I spend money on things I am passionate about, such as travel, and scrimp on other things that, to me, are mundane. I do not need to be an early adopter nor necessarily conform to the masses although I do admit that I did finally give up using both a Mac and PC, and reverted to the latter.

When it comes to computer software, I look at a combination of features and price. Free is my price preference, and what many people may not realize is that one can run virtually every type of application imaginable without ever having to pay a cent. Now, I am not one who understands how companies can give away their products without charging any money (doesn't sound like a profitable operating model to me), but I think that open source software has given the public the ability to use software such as the Linux operating system for free while creating an opportunity for companies to provide consulting services to large organizations that have installed Linux to their servers.

Many people also buy software whose full capabilities they never use. Sometimes, they upgrade because everyone else has, and thus they want to be able to open up documents that others have sent that may be created on the latest version of Microsoft Office, for example. Yet they can still do this, while constantly having their software upgraded free, if they use productivity software such as Open Office (which is free). I was hesitant to use Open Office, but also unwilling to pay $600 for a full-blown version of Microsoft Office, so I gave it a bash, and have been pleasantly surprised. Aside from a few glitches with their version of PowerPoint, I am a convert, and will never pay a license fee to Microsoft again (even though I am a shareholder). Areas where Open Office has not been completely compatible has been in some instances where macros are used in Excel etc. But how many people use complicated macros in Excel everyday? Accountants maybe, the average Joe, not likely.

With a browser, I use Mozilla Firefox which I think is far superior to Internet Explorer, and Google has recently introduced its own new free browser called Chrome which, I am sure, in time will be a superior product to both Firefox and Explorer.

These are just two examples. Don't just take my word for it. Read PC Magazine for their picks of the best free software and the reviews on each of them. The annual edition comes out early in the new year, but for the moment, take a look at the picks for 2008.

http://www.pcmag.com/article2/0,2817,2260070,00.asp

In these tough times, it pays to start to keep your money in your pockets anyway you can.

Why Being Employed is the Most Expensive Way to Make Money in Canada

A start of a new year and I`m sure many people are making resolutions, not least of which is probably to save money , make more money, or for almost all investors, to recover some money. I spent New Year`s with a group of thirty-somethings and the conversation turned to the topic of money. Being an ambitious group, they were also discussing career opportunities and advancement possibilities in the new year. Being at least a decade older than them, they asked me for my opinion. What I said to them about employment and money startled them, but changed the way they perceived the two topics.

My opinion which would be considered to be radical by many, is based on an unemotional analysis of the numbers, and does not take into consideration things such as employment benefits or the social aspects of working within an organization. Nevertheless, my opinion is that being an employee is the most expensive way to make money in Canada. Below is my list of the most cost efficient way of making money.

1) Tax-free Savings Account. Totally tax free and extremely flexible, the only downside being the limits to how much can be put into this account. Otherwise everyone should open one and put money into it.Note, I am not including things such as proceeds from a life insurance policy which is tax-free, but is not something that is accessible to everyone and as well, involves the hardship of losing a loved one.
2) Capital Gains. Whether you sell your principal residence with no taxes levied on it, or whether you sell investments (at a profit, obviously) that attract taxes on only half the gains, this is the second most effective way to make money.
3) Dividend Income. The dividend tax credit makes it more efficient earning than interest income. And depending on what type of investment vehicle you are using, not always riskier than a bond (ask anyone who purchased corporate bonds, mortgage-backed securities or even some money-market nutual funds)

4) Self-Employment Income. Because of the deductions allowed, self-employment income usually places the entrepreneur in a lower tax bracket, thus attracting less tax than someone doing the same job as an employee. I was a consultant with an organization and after awhile, I was required to become an employee to comply with Canada Revenue Agency guidelines. Even though the company had to increase my remuneration by 20%, I still wound up taking home less money than when I earned less money as a consultant.

5) Interest Income. Fully taxable, yes, but usually involves little cost in earning this interest.
6) Employment Income. Fully taxable, but many people underestimate how much it costs to earn this money, i.e. just getting to work costs money in the form of transportation (whether it is using public transport or maintaining a car), lunches, coffees, daycare, drycleaning and laundry costs etc. All this adds up, and the underestimation results from the fact that most of it is paid for using after-tax resources. So, in order to pay for a $150 monthly transportation cost, about $2,500 to 3,000 of your annual income will be spent just to get to your desk.

Obviously, the trade-off is that a job provides security (not as much as many people might think), comeraderie in a social setting, and employment benefits (some that self-employed or unemployed people may have to pay themselves). However, Canada`s social safety net is such that the gap is not as large as might be perceived.

So, think about how much it costs you to make money, and you might think twice about landing that job.