Tempted to Buy Shiny Toys with Your New Income? Think Pragmatically

by Chris W. Rea on November 26, 2011

This is the third post in the getting started with your finances series.

Having income to spare after you land your first full-time job opens new possibilities. It’s tempting to go out and treat yourself to some shiny new toys. You deserve to reward yourself, don’t you? Absolutely. You got the education, you landed the job, and you earned the money. It’s yours.

But don’t you also deserve a financial future not fraught with excessive consumption leading you into debt and threatening your financial well-being? To witness some bad debt situations, watch a few episodes of Gail Vaz-Oxlade’s Til Debt Do Us Part. Gail’s television show highlights what happens to young people when they are sunk deep into debt, usually due to over-consumption. You don’t want to end up like the cases on Gail’s show.

There’s a lot that can be said about debt, but today I want to consider the aspect of consumption, specifically the buying of things you don’t necessarily need.

First, an admission: If I were to claim in public I don’t buy things that I don’t need, I would certainly be exposed as a fraud! Friends would jump at the opportunity to out me as a technology fanatic. In order to save myself from embarrassment and you from hypocrisy, you won’t find me preaching that you should practice strict self-denial until you become the millionaire next door.

I named my blog Pragmatic Money because pragmatism describes how I approach money: dealing with money sensibly and reasonably, based on practical considerations, and for practical effect. Theory has a place when it can be put into practice and yield results.

When it comes to satisfying your wants vs. setting money aside for the future, I suggest aiming to strike a reasonable balance. Make a habit of setting aside a decent portion of your income each month, as opposed to spending most of what you earn. Stop yourself from becoming a victim of the “impulse buy” and begin to question yourself when you want to buy something.

Here are some questions to ask yourself when you’re thinking about buying something:

  • Will this purchase only provide short-term enjoyment, or will it have an enduring contribution to my life? Asking this question can often stop you from making an unnecessary purchase, especially when you think of other things you bought that ended up collecting dust, getting thrown out, or being given away.
  • Will I need to go into debt to purchase this item? If you were thinking of buying on credit but would be unable to pay off your balance in full at month’s end, ask yourself instead: Can I make do a while longer while saving the money up? Odds are you can. If you can avoid consumer debt, it’s best avoided. Don’t get into a habit of carrying debt unnecessarily. There are special cases where debt may make sense, and this likely isn’t one of them.
  • Is what I’m considering purchasing a high quality item, or is it likely to break, wear out, or become unsupported? I’ve been disappointed by purchases that fell short in the long run, so now I make a point of considering this aspect carefully. What I buy should have demonstrated quality and reliability and come from a company with a track record of supporting its products. Search for trustworthy reviews and recommendations, and do more research when it’s an expensive item. Reduce your odds of making a big mistake that could cost you dearly later.
  • Do I need to buy this item brand new? Could I find an older model or a used or refurbished item? When I wanted to switch my main computer to a Mac mini, I avoided the latest model just released. Instead, I searched Apple’s online store over a few weeks. Eventually, a refurbished previous model became available, which only two months before was the current model. I saved a bundle.
  • If I am buying this new, can I buy it at a better price? If you’ve decided your finances can handle the purchase and you decide on buying new, consider waiting until the item is on sale. Many things go on sale at least once per year. In addition to reducing your cost, there’s another benefit to waiting for a sale: Sometimes you discover a cheaper alternative, or learn something that changes your purchase decision.

You might have a few questions of your own to add, to help you be mindful when you’re thinking of buying.


Waiting for a Refund of Your Fido Account Credit Balance? Follow Up to Get Your Money Back

by Chris W. Rea on November 10, 2011

I’d like to relate a recent experience with Fido, in case it can help those experiencing a similar problem.

I had a mobile phone contract with Fido that I didn’t need any longer. I was fortunate to have somebody willing to take over my contract. I had established with Fido that it was possible and easy: I would call in and provide authorization for a named person to take over my phone, phone number, and contract. Then that person would call in, provide my account number, their own information, and accept the transfer. Finally, upon Fido’s approval, the service would get moved over to a new account under that person’s name.

We did exactly as described and the service was transferred quickly. I was impressed: No forms, no authorization letter, no in-person visit to a store, no rejection. Credit where it is due: Fido scores a point for making the phone service transfer process as hassle-free as possible.

I subtract a point for what came next.

I hadn’t thought about the timing of the transfer, and it ended up being early in a billing cycle. I was on Fido’s online billing service, and received emails listing my balance and inviting me to view full invoices online. After the transfer was completed, the next email revealed my August credit balance of $58. I had overpaid my last bill. I wanted a copy of the final bill for business expense purposes and to have something that confirmed the service transfer.

As usual, the email requested I log in to fido.ca and view my invoice. I realized this would be impossible: To log in I would need a phone number on my account, but now there wasn’t one! Fido had not allowed for the possibility of using an account number to log in.

I had to call Fido. I spoke to a representative and explained their system’s deficiency and that I still needed the detail from my final invoice. I also asked to have the credit balance refunded. The representative said I would be charged a bill reprint fee. I objected and pointed out the “reprint” was only necessary due to the deficiency in their system! They reluctantly agreed and switched my account to paper-based billing and re-issued the invoice, without fee. Regarding the refund, the rep said it would take four weeks to process. I expected I would receive a cheque in the mail.

I patiently waited, but no refund arrived. I did get mail from Fido: a printed copy of September’s new invoice, repeating that I had a credit balance of $58 on account.

I called in again. The new representative involved a manager at my request. The manager created a “case” to request the Fido back office to promptly issue a refund. I was assured it would be mailed within 48 hours. I had faith in the manager’s action to open a case and to – presumably – follow-up on the case if needed to see it through to completion. That’s what managers should do with escalated issues.

My faith was misplaced. Another month passed and I received October’s new invoice, again repeating the credit balance.

So I called again. To the new rep, I mentioned I had already tried getting the simple matter settled twice over as many months. They looked up the case and relayed the message that the back office had rejected issuing a refund cheque because my account had been on credit card billing and the refund should be made to my credit card instead. The representative then remarked: “So, you were on credit card billing? That’s easy. I can refund to your card while I have you on the phone. You’ll see the credit in the next two days.”

I was again relieved, yet also frustrated. The first rep in August and the manager from September both should have been aware of this. I also felt it was the manager’s responsibility to follow up on a rejected case. Wouldn’t she have received notification of the case rejection? Either she did not, or else she did not act on it.

My wish-list of suggestions for Fido customer service: First, address the issues in your online billing system. Next, train all front-line representatives to better understand the credit balance refunding process. Finally, ensure your people take ownership of the issues opened on behalf of customers and please follow-up when a case doesn’t complete normally.

This experience reinforced for me the idea that nobody cares about your money or your problem as much as you do. Follow up, be persistent, and don’t assume that a company’s personnel or case resolution processes function as you expect they ought to function.


New & Notable #1

by Chris W. Rea on November 1, 2011

Here are a handful of posts from elsewhere that I read recently, with my comments:

FrugalTrader at Million Dollar Journey posted How to Save Money at Costco. My family has had a Costco membership for a long time. We don’t do our regular grocery shopping there, but we do visit on average once per month to resupply some dry or non-perishable food items (coffee!), household supplies such as paper towels, bathroom tissue, vitamins, shampoo & conditioner, etc. and office supplies like paper, toner, and envelopes. We also had occasion recently to exercise Costco’s excellent return policy on a suitcase that had left us less-than-satisfied. Costco accepted the slightly-used suitcase back without a hassle.

Jonathan Chevreau at Wealthy Boomer posted Radical concept: Financial planners should give clients financial plans and wrote a related FP news article, Planners should make plans. I don’t use a financial planner myself (a story for another day), yet I find it astonishing that many individuals with the title “financial planner” fail to actually deliver a financial plan. A financial plan should be more than just how much of your advisor’s investment products you should purchase. Someone I know showed me a plan they had made by a real professional (in my opinion) and it covered much more: where the money for regular savings would come from, how it should be invested, tax strategies that could be considered, what would happen if one or the other spouse were disabled before retirement, what insurance was available for the family and would it be sufficient in the event of early death, etc. Financial planners should consider much more than just your investment portfolio.

Dan Hallet at The Wealth Steward posted BMO Monthly Income sets the distribution bar unreachably high. I don’t invest in this mutual fund, but I did have an experience long ago where a closed-end fund I had invested in had too-good-to-be-true distributions. I didn’t pay attention to where the money was coming from. The result was a share price that simply eroded over time. Overall returns were less than the impressive yield. The lesson is to look more closely at what you’re investing in and don’t just chase yield.

Writer Alexandra Levit guest-wrote the post How to Ask for a Raise in a Bad Job Market at Get Rich Slowly. I liked this post because it highlights the need to be assertive while suggesting tactful ways to deal with the raise conversation. Great people end up short-changing themselves when they avoid asking for raises. In my experience, if you only receive the typical salary increases offered by companies — e.g. low single-digit percentage increases — then you are leaving money on the table, especially when your skills and responsibilities have increased substantially. If you’re excellent at what you do — and you better be if you want more money! — then consider asserting yourself (in the right way) when it comes to compensation.

That’s it for now.


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