take a break

How to lose a customer

First some background. I do triathlons. Obviously part of doing triathlons is running. For about 9 months a year I run an average of 12-15k a week (which isn't much by runner's standards). Running that much means that you burn though shoes on a regular basis. For me that is about once a year. So every year around this time of year I drop about $150 on a pair of shoes. For the last five or six years I have been buying the same model of shoes and I have been buying it from the same store.

A couple of weeks ago I went back to the store I always go to every spring to buy my yearly pair of shoes. Spring is the time of year that the shoe companies roll out their new models. Sometimes the shoes don't change much from year to year, sometimes there are only minor changes and sometimes there are more drastic changes. When I went to my usual store and asked for the shoe they only had an 11.5 size, I usually wear a 12 but some years I wear an 11.5. I tried the 11.5 and it was just slightly tight. So I asked if they could find a 12 for me. I have had to do this many times in the past and since the store is part of a chain they have always been able to get the shoe for me within a few days. Well this time it seems that size 12 shoes were very hard to find. There was only one in the province and when they called the store that had them the store didn't actually have them even though their system said that they did. The store clerk said that she would have to look for the shoes for me and would contact me when they found them. I got a call a few days later saying that they had found the shoes but they were in a store on the west coast and would require an extra $9.95 delivery fee if I wanted to get the shoes.

Well, paying an extra $10 wasn't something I wanted to do. So after making some phone calls I found a pair of size 12 shoes at a competitor's store close to my work. I asked them to hold the shoes for me and I would be in early in the week to pick them up. This store was a store that I have heard of before but I never had been to although it is less than 10 minutes from work for me. I went to the store yesterday to pick up my shoes. The first thing that I noticed was that the shoes were different colour and styling from the 11.5 shoes I looked at in my usual store. The size 11.5 shoes were the same as the ones that I bought last spring, meaning they were the 2005 model. The size 12 shoes in the new store were the 2006 model. Not only were the shoes at this new store actually this year's model they were $20 cheaper than the shoes at my usual store. The staff at the new store, Running Free was very helpful and pleasant to deal with.

One store has lost a customer and Running Free has gained a customer. Don't try to pass off last year's model as this year's, still charging full price for it and then ask a loyal customer an extra $10 because you don't have the current year's model (and a full stock of sizes in a geographical area).
category: General posted on Thursday March 30, 2006 at 21:16:48 by: 0xCC

Sam Spendalot - Payday

Today was payday for Sam. When we last left Sam his accounts looked like this:
Main account: $1151.51
Cash in pocket: $50
Credit Card balance: $0
High Interest Savings Account: $0

Sam's paycheque is the usual $1600.04. Last time we discussed Sam he committed to putting $100/payday into the high interest savings account.

It has been 2 weeks since we updated Sam's accounts. In that time Sam had to buy some groceries and put gas in his car. He also had to visit the bank machine again.

There has been 10 working days since our last update. Sam hasn't changed his morning routine (yet) and has continued to spend $3 per day on his coffee and muffin. So that adds up to $30 since we last updated. Also Sam has made some adjustments to what he spends on lunches at work, he now only buys half of his lunches at work at an average of $7. So in the last 10 working days that is 5 times at $7 each for a total of $35. So Sam's cash burn over the last 10 working days was $65. He had $50 in his pocket when we last updated his account so he had to withdraw some cash. Once again, Sam withdrew $60 from the bank machine closest to his work. This cost him $1.50 from his bank and $1.50 from the other bank. The charges from his bank come at the end of the month so the effect on his bank account today is $61.50. He now has $45 left in his pocket.

Next thing is groceries. Sam has gone to the grocery store twice since we last updated his account. He spent $120 total in those two trips. He is probably going to have to go shopping again this weekend.

Finally, gas for the car. Gas was a little more expensive this past week so Sam had to pay 95.3 cents. Again, Sam put 45 litres in for a total cost of $42.88.

So Sam's accounts look like this now:
Main account: $2427.17 ($1151.51 + $1600.04 - $61.50 - $120 - $42.88)
Cash in pocket: $45
Credit Card balance: $0
High Interest Savings account: $100

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category: Personal Finance posted on Thursday March 23, 2006 at 21:26:09 by: 0xCC

Sam's Milestone

Ok, Sam has reached a nice little milestone. He has managed to pay off his credit card debt. I was actually surprised at how easy it was for Sam to do that. I think part of what made it easy was that I didn't have Sam doing a lot of unnecessary spending (buying CD's, buying a Video on Demand movie every day, buying a Mac mini, buying a TV capture card for his MythTV setup, going to the movies on the weekend, etc...). I should probably add some of that spending in order to make Sam a little more realistic. I will have to add some of that spending for Sam in the future.

Since Sam has reached a pretty big milestone by paying off his credit card he has been thinking a little bit about putting some money aside for investing. Sam talked to a few friends at work and decided that what he would do right now is try to figure out how much per pay check he would be able to put into a high-interest savings account. While Sam builds up a little bit of cash in that account he will take a look at the different brokerage accounts out there and choose the one that is right for him. As a side note I plan to put my own money into the investments that Sam buys. The reason for doing this is that then I will know exactly what happens with the stock and when dividends get paid out if the stock gets paid dividends. For example, one of the stocks that I own right now recently declared a dividend in the form of a stock split. I had no idea what to expect in the behaviour of that stock and have been happily surprised as the stock has jumped about 30% in value. Anyway, back to Sam.

So now Sam needs to take a good, hard look at his current income vs. his expenses. Let's see what we have so far:

Monthly Income
1600.04 X 2 = 3200.08
This is slightly on the low side because Sam gets paid 26 times a year, not 24 but this will give Sam a little bit of wiggle room.

Housing Expenses
Mortgage: $871.55
Condo Fees: $240
Heating: $120 (average)
Hydro: $100

Car Expenses
Car Loan: $280.33
Insurance: $122.58
Gas: $120

Other Expenses
Groceries: $260
Cash Withdrawals: $200 (I'm guessing on this one, I'll look into it more later)
Eating out: $75
(excluding what is paid for through cash withdrawals):
Gifts: $80
Clothing: $100
Phone: $100
Cell Phone: $50
Cable: $70
Entertainment: $100
Vacation: $100

Total: $2989.46/month

So this leaves less than $300/month left over for Sam. Sam thinks he can commit $200/month of that for investing. Sam will use a 'pay yourself first' mentality with this, taking the $100 per pay check and moving into a separate account right away. Sam thinks that taking the full $200 will be challenging but he also thinks he has done a pretty good job of estimating his current expenses. Maybe $1200/year for vacations isn't all that high but that would allow him to get a nice cottage for a week with a couple of friends and have some left over to do some skiing for a few says in the winter or maybe a couple of weekends away over the year. He won't be doing any Asian vacations on that though.

Starting with Sam's paycheque next week he will put $100 into a PC Financial Interest First savings account that is currently paying 2.9%, calculated daily, paid monthly.

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category: Personal Finance posted on Thursday March 16, 2006 at 08:55:45 by: 0xCC

Sam Spendalot - Payday

Previously Sam's accounts looked like this:
Main account: $411.02
Cash in pocket: $32
Credit card balance: $800

That was on Saturday last week. So there have been 4 work days since then and Sam probably needed some more groceries since then, so we'll say he spent $55 on groceries (I've been estimating Sam's grocery bill based on what we have been spending and taking off a little bit because Sam is only feeding one mouth and we are feeding two, and we brown bag lunches the majority of the time). Sam continues to spend $3 every work day on his coffee and muffin and he also bought lunch everyday for a total of $30 just on lunch and $12 on the coffee and muffin combo.

So obviously Sam had to make another trip to the bank machine. Once again, Sam decided to use the cash machine closest to his office but that isn't his bank's bank machine so he pays and immediate $1.50 charge on that and his bank also charges him $1.50 for the privilege of accessing his own money (but that charge won't come out until the end of the month. Which reminds me, I forgot to add that in to the last update. So in February Sam went to the bank machine 2 times, costing him $3 in bank fees). So that cost Sam $61.50 today and an additional $1.50 at the end of the month.

Ok, back to the main point of this post, Sam got paid today. To recap: Sam makes $58,000 a year and gets 26 bi-weekly pay cheques. His before-deduction pay is $2230. He pays about 485.25 in taxes, 103.76 in federal pension (CPP) and 41.72 in employment insurance (EI) leaving his net pay at $1600.04. This would leave Sam's main account at $411.02 - $55 - $3 - $61.50 + $1600.04 = $1891.56.

I have left out a few expenses from Sam's regular expenses. I'm not totally sure how condos work with respect to heating bills and hydro bills but I think that some places pay for part of those expenses out of the condo fees and some don't. I will assume that Sam's condo doesn't. So that means that Sam will have to pay hydro bills and also heating bills. In order to make things easy for me I will assume that Sam uses natural gas for heating since I can then use my natural gas bill as a basis for what Sam's should be. The other two expenses I have neglected are Sam's cable bill and Sam's phone bill. I will also say that Sam gets his internet connection through DSL so that will add about $50/month to that bill. I think I will also give Sam a cell phone that will cost him about $50/month.

Ok, so now we have 5 more regular bills. To keep things easier for me I will say these new bills (hydro/water, cable, natural gas, phone/internet and cell phone) are all due on the 15th of the month. So Sam has the amounts for all of these bills for this month already and will pay them next week. Hydro/water is $95, cable is $70 (Sam has the UltimateTV pack from Rogers and is renting a cable box), phone/internet is $100 and cell phone is $50. So Sam's total bill on the 15th will be $315 for those expenses.

And finally, Sam had to get more gas for his car over the weekend. The price for gas is about 89 cents now and again Sam put 45 litres into his tank for a total cost of $40.05, bringing his main account down to $1851.51.

Sam has a real opportunity here. He now has more in his main account than he needs for expenses he needs to pay before his next pay day and he has enough in his main account to pay off his credit card balance completely while still having money left over to cover his other expenses. So Sam will make a $800 payment to his credit card and do a little happy dance because just by moving to paying cash for everything he was able to eliminate $2000 of credit card debt in less than two months. That will leave Sam's main account at $1151.51. Of course, there will be some interest outstanding for the 9 days that Sam had an $800 balance but we will deal with that at the end of the month.

Sam's final numbers look like this then:
Main account: $1151.51
Cash in pocket: $50 ($32 - $30 - $12 + 60)
Credit Card balance: $0 (Woohoo!).

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category: Personal Finance posted on Thursday March 09, 2006 at 11:32:35 by: 0xCC

Sweet Setup

I have been sitting here this evening in my family room, on the couch, watching the hockey game (Leafs look like they are going to win which they had to do to keep basically any hope of a playoff spot alive) working on my laptop. I have my main development machine running in the basement and I am using Remote Desktop Connection through my wireless network to do some work on an app I have been working on for a few months now. My productivity might not be the best but I've been having trouble lately finding the motivation to actually do some coding during the week.

Over the weekend I had some time to make some pretty good progress on my app. That little bit of progress opened up some interesting challenges for me and now I find myself wanting to solve these challenges. I am getting to the point where I can personally start using the app and I think after a minor amount of tweaking I should be able to open it up to a few users as a very limited alpha release. It feels good to be in this mode again. I haven't been this charged up about coding/development for awhile mostly because the culture at my day job doesn't allow for a whole lot of ownership.

Oh, and the Leafs managed to pull off a win, 5-3 almost 6-3 but the last open net goal was about a second after the buzzer.
category: Development posted on Tuesday March 07, 2006 at 22:34:52 by: 0xCC

Sam Spendalot - Update

Previously in Sam Spendalot's financial life:
Main account: $2215.42
Cash in pocket: $62
Credit Card debt: $1000

On the first of the month Sam had a bunch of expenses to pay. His mortgage at $871.55, his condo fees at $240, his car loan at $280.33, car insurance at $122.58. He also has his credit card payment which since he hasn't been using for regular purchases has a fairly low minimum monthly payment but the interest charges are brutal.

His credit card interest rate is 18.5% annually, compounded daily. This means that over a 30 day period a $1000 balance would have grown to $1015.32, if that $15.32 wasn't paid off every month the balance on the credit card would grow to $1203.16. The formula for figuring this out is fairly simple. The amount owing is the principle multiplied by the annual interest rate divided by the number of compounding periods in a year (in this case that is 365 since the interest is compounding daily) plus one all to the power of the number of compounding periods in the time frame you are calculating. In a formula it looks like this A = P(1+(r/number of periods))^n. However, since Sam's credit card balance was actually $2000 until the 19th his interest charges on the credit card are actually $24.94.

So Sam's total first of the month cash outflows are $871.55+$240+$280.33+$122.58+$24.94 = $1539.40. This leaves his main account balance at $2215.42 - $1539.40 = $676.02. Since the last update Sam has had 6 working days. He has spent his $3 every morning on a coffee and muffin for a total of $18. Sam actually had a few company-supplied lunches this past week so he only bought lunch once this past week for $8, the other couple of days he brown bagged it. Sam also washed his car this past week. He went to one of those self-wash pressure wash places and paid $4 to get his car washed. So total drain on the cash in Sam's pocket this week was $18 + $8 + $4 = $30, leaving $32 in his pocket.

Since Sam hasn't bought groceries since February 19th he also went grocery shopping in the past week. This time he spent a little bit more than last time he went shopping, spending a total of $65 on roughly the same sort of thing he spent money on last time he went grocery shopping. This brings the cash left in his main account down to $611.02.

Sam also gets paid on Thursday coming up so he doesn't really need all the cash he currently has in his account, he has paid the majority of his monthly expenses and really just needs enough to cover an emergency of some sort. So let's say that he needs to have $400 in his account for that. This leaves just over $200 'available'. That extra money will go to pay a little bit more off the credit card.

This leaves Sam's accounts looking like this:
Main account: $411.02
Cash in pocket: $32
Credit card balance: $800

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category: Personal Finance posted on Saturday March 04, 2006 at 11:45:24 by: 0xCC

Taking a closer look

In my last post I mentioned that the Bank of Montreal (one of the stocks that I own) increased its dividend. I personally feel that one of the criteria that should be used when evaluating a stock is if they pay a dividend what their payout history has been. Investing in companies that have a habit of increasing their dividends is a powerful way to generate solid returns on your investing dollars.

So let's take a closer look at BMO. I originally bought BMO near the end of February of 2004 for $54/share. At that time is was paying a dividend of 40 cents a share per quarter. So the dividend yield was 1.60/54 = 2.96%. On Wednesday BMO announced an increase to their dividend to 53 cents a quarter or 2.12 per year. BMO is currently trading around $66 so that gives a yield today of 2.12/66 = 3.21%, slightly better than the yield when I originally bought my shares.

Now here is the interesting part. Letís assume that I haven't bought any more shares of BMO since February 2004, so my original investment is still $54/share. Now that $54 is giving me $2.12 per year in dividends. So the yield on my *original investment* has moved from 2.96% to 2.12/54 = 3.92%. The increase in the amount of cash that my investment in BMO is giving me per year has increased from $1.60 to $2.12 or 52 cents which works out to an increase of 32.5% over a little more than 2 years. I don't know about you but my salary hasn't even come close to that sort of increase over the same period of time.

Disclaimer: I am not an investment or financial advisor. I discuss financial topics on this site that I consider interesting. These discussions are not advice in any way shape or form. You should consult your financial advisor before making any investment or financial decisions.
category: Personal Finance posted on Friday March 03, 2006 at 10:28:14 by: 0xCC

Wow, crazy couple of weeks

In the last 10 work days I have actually been in the office 2 days. Tomorrow I finally get back to a normal schedule. I have been on a couple of different courses in the last 2 weeks.

I need to do a Sam Spendalot update because Sam should have bought some groceries in the last week as well as having a whole whack of monthly bills that require paying. Hopefully in the next couple of days I can update that.

I have also been busy playing around with my taxes in the last couple of days. I needed to sort through my capital gains stuff for 2005 to figure out if I needed to top up my RSP a little bit in order to ensure I don't have to pay any additional taxes. I didn't get it all figured out in time (I did some really weird things in 2003 that I was still 'cleaning up' in 2004 that allowed me to buy a car with my tax refund, maybe I'll write a post about that sometime).

Finally just let me say that I am very happy with the Bank of Montreal. This week they announced an increase in their dividend of a little more than 8%. I own BMO and am quite happy with that little move. I expect to hear similar things from the two other Canadian banks I own, TD Canada Trust and Royal Bank in the next couple of weeks. Owning companies that have a habit of increasing their dividends at a higher rate than inflation I feel should work out very well in the long-term.
category: General posted on Thursday March 02, 2006 at 20:51:46 by: 0xCC