The Latte Factor is a phrase coined and trademarked by ersonal finance author David Bach to explain how the expenditure of many small things add up to a lot of money over time. The phrase itself derives from the fact that Bach showed that a latte a day at $3.50 equals $1,260.00 over a year. In essence, The Latte Factor shows us how much money we can waste and why we never get ahead financially.

However, whenever I think of the Latte Factor (assume the registered trademark sign is behind this phrase since this luddite can’t find it on WordPress), I think of the episode of the tv show Friends. Specifically, I think of the episode where Rachel’s boss kept going out for a smoke and all her co-workers except her joined her boss, giving Rachel the impression that her smoking workers were getting ahead of her with all the extra (albeit smoky and poisonous) face time.

The point being there are two large limitations to the Latte Factor. The first was recently commented on by Kathryn from Million Dollar Journey that overly focusing on cutting out all expenses would deprive a lot of little pleasures of life. The second is, as Rachel found out, that spending a little for a purpose can go a long way.

To use the sports analogy, our personal finance basically compromises of offense (generating income or human capital) and defense (saving money). Some can succeed on all offense. Some can succeed on all defense.  But it is hard to maintain the discipline to do both (and kudos to those of you who do). One tends to get ahead using a bit of both.

Businesses succeed by their ability to market and sell effectively. Why should you be any different? A $3.50 latte with a colleague who may give you a job lead or vital market intelligence, with your boss to get to know each other better, with a mentor to teach you about investing is worth infinitely more than the immediate loss of $3.50.  Some of the best advice I got was over a coffee and building a book of business is sometimes done one coffee and affordable lunch at a time.

If you are gainfully employed and do not think you have to market yourself, think again. What is sometimes referred to pejoratively as a co-worker playing office politics is actually a person marketing themselves. Whether this is perceived as right or wrong is in the eye of the beholder but all relationships are based on shared experiences and your boss and co-workers may think well of you sharing those $3.50 latte experiences. It is a tough job market out there so hanging onto your job through networking may be worth those small expenses.

As a magazine wrote recently, employees who worked from home were more likely to be let go not because they were more or less productive but because the boss did not see them as much and out of sight is out of mind. A $3.50 latte to save your job or to find a new one has a real revenue recognition quality about it.

The point is not to spend money but to spend it for a purpose. Bach is right in the sense that small things do add up but I would modify this general statement with spending on small things without a purpose is wasteful. However, spending on things that will advance your career, your business and your life, as long as it is reasonable and for a clear purpose, can be worthwhile expenses.

To paraphrase the words of the SteadyHand blog, is this a financial crisis well wasted? Last week, ING in Canada and the UK warned of the possibility of a real estate bubble in the residential and commercial real estate market spurred by the low interest rate environment. Beside the obvious bubble and double recession concern (a theory I subscribe to), the issue with rising real estate values is that it tends to act as a negative influence on a household’s ability to save more money.

The reasons are both obvious and not so obvious.  Household savings rates were quite robust (9.6% in the 1970′s) until our paper net worth began to multiple manifold in the 1990′s with the real estate and stock market boom. From the 1990′s onward, we ceased really to save and more often than not consumed instead.

However, studies show a negative correlation between the increase in our net worth and our savings rates. This effect is most pronounced for real estate than the stock market. A 2004 study found that for each $1 increase in real estate worth, we saved 8 cents less.  While for each $1 increase in our stock portfolio, we saved 2 cents less (the link to the paper is quite buggy so I did not link it but google “Real Estate Versus Financial Wealth in Consumption” by Benjamin, Chinloy and Jud to read at your own risk).

Some of the reasoning is obvious. Purchasing a home costs a lot of money and we tend to save less money since we have to make a down payment, pay for movers and new stuff for the house. The more subtle reason is that, for most middle class households, we are restricted in tapping our stock portfolio since the majority of assets are locked into non-accessible vehicles like pensions, RSP’s, 401(k). Finally, on a more marco level, it is easier to save more money when interest rates are higher (like the 1970′s) since there can be a healthy return investing in high interest savings accounts; conversely, low interest rate environments encourage leveraging and its associated effects of increased costs of borrowing on a household budget.

From a practical perspective, one tip to save more money would be to simply to turn a blind eye to the value of your home or, more accurately, remember its only paper wealth and not cash in the bank. If you live in a region with depressed real estate valuations, do not bother looking at the price of your home. Instead, enjoy it.

For those trying to be better savers and living in healthy real estate markets, ask yourself if you really need to buy a larger home rather than wanting a larger home. A lot of people I know are rushing to buy real estate because of favorable interest rates, an external stimulus justifying a want, not because they need a larger home, an internal condition necessitating the fulfilment of a need.

From a larger contextual perspective, if the stimulus has worked too well, and a spike in house hold savings rate is only temporary because the government says its time to consume again, then we truly have short memories and we have no one but ourselves to blame if we suffer another financial stress we cannot recover from. Money in the bank smoothes over a lot of personal finance mistakes.

I  welcome our guest blogger, Steven from Grocery Alerts Canada, who shares his tips on saving money while shopping.

When my wife and I started dating she thought I had a shopping addiction. I just enjoy shopping.

If you enjoy shopping as much as I do, I have five tips to share that will help everyone save some money.

Tip #1 Know your prices.

It is so important to know the difference between the regular price, a good deal, and a great deal. Stores know how to attract shoppers, spend millions on marketing and know what price points they can sell items at. For example, I enjoy all natural peanut butter that has no sugar or salt. At a local grocery store, I often see the 1 kg jar for $5.99. However, it usually goes on sale about once a month and I can then purchase it for $3.99. A savings of $12 a year just on peanut butter based on one jar of peanut butter every 2nd month.

I dislike purchasing items at the regular price and I enjoy the challenge to seeing how far my food budget gets me every month. If I see a tremendous deal on cans of tuna (i.e. $0.79 a can), then my wife and I would stock up and purchase a dozen.

What I have started to do is develop a price book. The price book allows you, as a shopper, to document the prices of frequent items you purchase (i.e. cereal, walnuts, contact lenses solution, laundry detergent) and determine what prices constitutes a great deal.

When purchasing clothing the first place we head to is to the back of the shop to check out the sales and discounted items. Since most clothing eventually goes on sale, I tend not to look at new releases. With the amount of competition in the fashion industry, shops are marking their discounted items only after 6 weeks. Based on how early shops put out their latest items, you will be in time when the weather actually really hits.

Tip #2: Make a list and stick to it.

The longer you stay in the store, the greater the chance that you’ll purchase more than what you came for. My wife likes to plan ahead for the week, making her list of meals and lunches. To my surprise we often end up not spending a single dime all week.Tip #3: Look for extra savings on coupons or join any membership clubs.

Retailers of all shapes and sizes are offering discounts and coupons to shop at their brick and mortar stores and online. For example, recently my wife was looking to purchase a top at LaSenza, she happened to find a coupon that saved her 15% off her purchase at our website (here is the LaSenza coupon which expires at end of the year).

My wife and I travel often to the United States and enjoying shopping to get different choices. At the visitor’s center for most malls and outlet malls, discount books are available for out of town visitors. These places already expect you to spend money and hope to offer some additional savings.

I always keep my eyes peeled and ears open if the store has any free clubs to join that are of no cost to you but provide a small coupon savings (15% off coupon for your birthday, free burger for two weeks during your birthday etc).

Tip #4. Prepare a budget and plan before going shopping.

Planning is so important before shopping. If you are heading to the store to purchase a new set of golf club drivers and your budget is $150 maximum it is not worth it to see the latest Nike Sasquatch driver which would blow your budget.

If you bring your list of shopping goods, you will be more determined to look for the best price for one particular item. i.e belt, gloves, scarf. This avoids a impulse shopping for yet another blue sweater to add to the pile.

Tip #5. Analyze your monthly spending.

What I find aids my wife and I in managing our finances is the analysis of our monthly spending. We see where we spent too much. We see where we could make improvements for the future and see what we did with our money. The most common excess we always found was where we spent extra money for a quick bite to eat or a cup of coffee, simply being unprepared.

Final Thoughts

Personally, I use a combination of these methods to help maximize the savings. Keep things simple and plan ahead results in a health bank account and good habits of saving money.

Author’s Bio: The author is Steven Zussino, Founder of Grocery Alerts Canada – Home of grocery deals and money saving coupons. He enjoys personal finance and saving money in beautiful Victoria, BC.

The NFL regular season starts tonight with the Washington Redskins playing the defending Super Bowl Champs the New York Giants which is an apropos time to blog about the costs of attending a sporting event live. As a life-long sports fan, it is tough to accept the fact that large companies who own sports franchises see us as walking wallets rather than fans. For example, the Washington Redskins were one of the first teams I know about that charged fans a seat license to buy season’s tickets- in other words, you had to pay for the privilege of being able to pay for your tickets (yes, you pay for the right to pay so they get you twice for the same seat!).

I watch a lot of basketball games every year. Hockey I tend to avoid (the product on the ice- both the Maple Leafs and hockey in general- is too unwatchable; I pine for the 80′s era Oilers) and I will watch the odd baseball game every year. So I do spend my dollars on sports. But, as a sports fans, its a constant struggle to make sure “they” don’t get you- for ticket prices most middle-class families can’t afford, the $8 beer, the $5 hot dog, constant advertising in the arena, using our tax dollars to build sports arenas for private businesses (a topic for another time).

I fight back in my own way but doing a couple of things to make sure the teams only make a moderate amount of money off of me:

1. Eat before the game outside the stadium: This sounds stupidly straight forward but a $2.50 hot dog outside the baseball stadium is $4.50 or $5.00 inside the stadium. Stadiums are like airports- buy as little as possible in them because they are captive markets and once they got you, they will take you for all you are worth. This is the beauty of the tail-gate party. You eat, drink and be merry on your own dime.
2. Sit in the higher seats- its cheaper and the view is better. The corporate fat-cats love to sit as close to the action as possible. No one can deny that the experience of sitting in front-row seats is worth it (not that anyone has taken me!); but once you get a few rows back, you may be better off sitting much higher up in the upper bowl. Its a personal preference to me but I have sat in the 12th row in the Air Canada Centre (aka the ACC, where the Maple Leafs and Toronto Raptors play) and the view is not that good. You are not elevated enough to get a good view of the action. Instead, I like sitting in the upper bowl to watch the Raptors: its cheaper and its a better experience (you can see the shot coming off the hand of the player better and you sit with real fans and not suits trying to impress clients). The difference in price? The 12th row seats cost $197 (thankfully, someone took me) and the upper bowl seats cost $60.
3. Go to a game no one wants to see: you can get cheap tickets or someone will give it away. Who wants to see the Buffalo Bills play the Houston Texans, the Raptors play the Utah Jazz or the Maple Leafs play Nashville? There’s always a couple of dud home games where you can get tickets at the ticket window, buy them cheap off of someone (scalpers- cough, cough) or someone may give them away. If you are not necessarily the biggest sports fan but you want to see the game for something to do on a Friday night, this may be a good way to see a game cheaper.
4. Forget about parking. I use to live across the street from a parking lot close to the ACC and watched the attendant change the price of parking every Saturday at 5:00 p.m. from $7.00 to $20.00 for everyone attending the Leaf game.  Take public transit to save money (and you save the environment).
5. Get lil’ Johnny swagged up before you go to the stadium. Maybe I am being a little too practical but I watch parents buy their kids a t-shirt at the stadium store for $20.00 when it retails for $15.00 in the mall. Perhaps the experience of buying something at the game is priceless but it strikes me as another cash-grab.

Anyone else want to share ideas to save money at sports events?

BTW, Super Bowl predication? I am going with the obvious- Pats over Dallas.

I am often astonished to read tales of personal finance where the person in question is saving 40%, 50% or upwards of 60% of their take-home pay to reduce debt, plan to retire early retirement, move to an island or fulfilling some other dream. I often think that this is an insanely high savings rate. It is an incredible exercise in self-discipline as well. But I often think if there is such a thing as too high of a savings rate?

I look at the question in two ways- what is your savings rate and where is your savings going? My answers tend to be a little different for each depending on the context used. Before you think I am advocating no savings, fear not. Not including the payment of my mortgage (which I count as savings- see below), my contributions to my retirement, my dividend fund and emergency cash hovers between 20-30% of my take-home a month so its all a question of relativity to me and I am a big believer that the only thing in excess should be moderation.

As a definitional point, I define savings very broadly from cold hard cash to paying down the mortgage. I agree with the Business Dictionary which defines savings as: “portion of disposable income not spent on consumption of consumer goods but accumulated or invested- directly in capital equipment or in paying off a home mortgage, or indirectly through purchase of securities.”

My other guiding principle is that money should allow you the freedom to do things. Money is not the ends in and of itself. It is a means to something else (whatever you want that to be). What good is a pile of money if you are not enjoying life?

WHAT IS TOO HIGH OF A SAVINGS RATE?

Having gotten that out of the way, what would I consider too high of a savings rate? The conventional and ideal savings rate floor is 10% of take-home of your take-home pay should be used to invest in bonds and stocks (the rule made popular by the book The Wealthy Barber). The book The Millionaire Next Dollar (my little personal finance Bible) suggests that a savings rate, excluding mortgage payments, approaching 20% of take-home pay will, over time, lead to financial independence. I would consider anything over 30% to be extraordinary and anything over 40% to be too much.

Let me add a wrinkle to this now. Most people do not consider paying down the mortgage as savings but it is to me since you are adding equity to your home (assuming that your house is worth more than your mortgage). Most of these astonishing tales of personal finance I read involve a couple saving 60%-70% of take-home, mostly in very aggressive payment of their mortgage. Although most of these profiles are not in-depth, it also appears that other than paying down the mortgage, not that much of the savings is going towards investing in stocks or bond (I will freely admit I am reading between the lines and perhaps projecting my thought process into this; guilty as charged).

I would consider 60-70% too high of a savings rate. What kind of life are you living if 60-70% of your pay cheque is not going towards consumption? I work pretty hard for a living so I am of the view that if the mortgage is being paid down with at least one extra payment a year and 10%-15% of a pay cheque is going towards investing in stocks and bonds, which is a pretty healthy savings rate, purcashing an iPhone or a Xbox isn’t going to kill you and may actually let you enjoy your life a little.

Again, I am not suggesting that you blow all your money on consumption. But at some point, if you are a good saver and manage debt well, a few materialist indulgences here and there is not going to destroy your net worth assuming, as always, it is in moderation.

I am always reminded of a story a colleague once told me. He is a wills and estates lawyer. I called his practice “old law” since all his clients were old, and many well to do financially, and his clients always said the same thing to him. If they had to do it all over again, they would have enjoyed their money more while they were younger since they were not healthy enough to enjoy their money or money made people look at them differently.

I always struck by this story of how we sometimes don’t see the forest from the trees and the hyper-savers could be missing the point of why they are saving- to have the flexibility to do what you want and have fun before things are sagging and wrinkled.

I do respect those who want to retire early and are saving massive amounts of money to do it but I am already a cranky ex-lawyer in my 30′s. I am not sure how much I would enjoy life money-ed up but crankier in my 40′s and 50′s. But to each their own. But if you are gritting your teeth at a job you hate in order to save your 60-70% in order to retire early, how fulfilling of a life is that? You spend your working day hating your environment because it allows you to save money and then you go home to pinch pennies. Now if you love your job and want to retire early by saving lots of money that is a different story altogether…. again, its context.

WHERE ARE YOUR SAVINGS GOING?

The other consideration I look at is what are you doing with your savings? If you are putting all, or substantially all, of it to paying down the mortgage, is this not, in essence, bad asset allocation? Your net worth relies heavily on real estate which has turned into an asset which is just as turbulent as stocks. The same can be said if you took the bulk of your savings and put it into stock or bonds or private enterprises. I would rely on this principal regardless of what your savings rate is since this is simply bad asset allocation. We often think of asset allocation as simply an aggregate of our retirement portfolio but we need to add back in the equity in our home to get a trurer sense of asset allocation.

A good example would be someone with a large amount of equity in their principal residence and then buying REIT’s or investing in mortgages in their portfolio; they are simply over-weight in an asset class and need an asset which is negatively correlated to real estate to balance their portfolio.

You may have a moderate savings rate but if all of it is going to stocks, real estate, bonds or cash then your opportunity costs are quite large and I am not sure who is worse off- the saver who is over-allocated in an asset and loses their savings by being over-exposed or the non-saver who has little hope in the event of a financial emergency: it becomes the old sports debate- would you rather lose by 1 point in the last minute of the game or get blown out completely?

THERE’S ALWAYS AN EXCEPTION TO THE RULE…

Where my thoughts about one’s savings rate being too high goes out the window is a situation where someone is majorly in debt (which I would define as anyone using 50% or more of their take-home pay to service the carrying of the debt PROVIDED HOWEVER you didn’t ratchet up your mortgage payments to increase their debt servicing load). In cases where carrying debt consumes more than half of every pay-cheque, there is no such thing as too high of a savings rate. In such a case, the analysis moves from “what is a good savings rate in which I can still considering living a good life?” to “how quickly can I obtain financial flexibility by paying down debt?”

As Albert Einstein once noted, compound interest is the greatest mathematical discovery of all time but you sure don’t want to be on the losing end of compound interest for too long. In such a case, the longer you are in debt and not chipping away at the principal, the longer you will continue to be in debt (for a good example of how compound interest works against you, see Million Dollar Journey’s example of interest paid during the life of a 25 year mortgage compared to a 40 year mortgage).

In such a situation then I would agree it is time to go on a Kraft Dinner diet and use all available resources to pay off debt whether it be student loans, credit card debt, a mortgage you couldn’t afford etc.

I am also not particularly worried about asset allocation at this point. The major imperative is to reduce how much money is being consumed servicing debt so you can start building cash and equity savings which affords you the luxury of debating asset allocation.

In the end…

It is your typical lawyers answer. It depends (and that will be $500 please…). You have to look at your particular life situation, where the savings is going and your debt load. There isn’t one definitive, one-size-fits-all answer. Just a lot of soul-searching. But I believe the healthy balance is saving 15-20% directly to non-mortgage savings, paying down the mortgage with at least one extra payment annually and trying to enjoy what is a very stressed filled life in this day and age.

Anyone have any thoughts they care to share?

Yesterday, I wrote about ways of saving money which is, in some respects, a prelude to today’s post. I have previously interviewed Alan Corey who became a millionaire before he was 30. One of his biggest strategy on reaching his goal was to save money- over 60% of his income through a wide variety of techniques including eating a lot of instant noodles, going on cheap dates and watching every penny. Alan recently got called out on some of his money saving techniques being unethical. Alan’s response is here (readers: let me hear your thoughts).

I don’t agree 100% with all of Alan’s budgetary measures- the popcorn trick seems dodgy to me. But, not addressing the calling out per se, there seems to be an underlining tone in western society that being frugal is somehow unbecoming of us. Haggling, a staple of cultures in other parts of the world, is seen as “low class” in the west. In some stores in China, haggling is being replaced by set prices as a symbolism of its growing middle class sensibility.  We tend to mock those who save pennies and lauded those who spend beyond their means. Our economy is fueled by consumption and we are labeled unpatriotic if we don’t buy a SUV (Ben Bernanke: please stop lowering interest rates and throwing fuel into the inflationary fires; you can lead a spent consumer to water but you can’t make it drink from the credit pool).

I noticed when reporters review Alan’s book (note to media- remember he’s a comedian; literalism is not really the journalist bent you should be taking in this context) there’ s an underlying sub-text of “well, if it requires me being cheap to be a millionaire then I am not doing it since its so unbecoming darling.” Obviously, there’s a fine line to be drawn between being cheap and miser but, as a society, we really have our values backwards. We mock those who conserve and save (and, how ironic, that “green” is being used as a selling tool now) and, at the same time, complain about how broke we always are not putting two and two together.

Anyone ever get grief for being frugal? Is your partner frugal and its a source of tension? What’s the fine line between being frugal and just a financial kill-joy?

The stock market seems to have entered a definitive slide (good, stock may actually be cheap in the spring) which means, if you want to increase net worth in the short term, the emphasis has to be on finding ways to save money rather than focusing primarily on capital appreciation. Most of us know about the save 10% of your take-home pay rule but I came up with the following 10 ways to save money now based on my day-to-day life.

1. Carpool or, if you are in the market for a car, buy a car that takes regular gas or diesel and buy a used car. Last year, I bought a used car but it doesn’t take regular gas. I am getting killed at the pump. What I saved on buying a used car is being balanced off by the additional gas bills (one step forward, one step back one supposes). Ideally, buying a used car that takes regular gas and then leave it home to carpool.
2. Leave your credit card at home during the week-days. I use to work in an office tower with a series of underground malls underneath and I use to watch people die by a death by a thousand cuts buying something on sale here and something on sale there; all these unexpected expenses add up. Leave the credit card at home so you only spend what cash you have in your wallet.
3. Pack a lunch. I don’t think I need to expand too much on how much it costs to eat out every day. The additional benefit is that if you take a short lunch at your desk, you may be able to leave work earlier (this is my pattern now).
4. Watch those transaction fees. I give away money every month being on the wrong account plan at the bank and the wrong cellular plan. I am always over the maximum transaction/time allowed and paying through the teeth in additional charges. As counter-intuitive as this seems, I am adjusted my bank plan fees and cellular plan fee to pay more monthly to avoid those extra charges since the increased plan fees save me more money than the extra charges I use to incur.
5. Save more than 10% at the beginning of the month to make yourself “poor”. I set up automatic debit plans that take out large portions of my pay cheque at the beginning of the month to my retirement account, mortgage payment (I am prepaying my mortgage down every month), savings etc. By the 10th of every month, my bank account looks like I have no money other than for fixed expenses (I get paid once a month). I fool myself into thinking I have no discretionary income to spend.
6. Buy used or borrow….book, CD’s, DVD’s and all those other entertainment expenses. If you have kids, why do they really need brand new books or clothes- they tend to destroy both in months…
7. Find free entertainment. I am finding I am spending good chunks of my weekends at the library (books, free internet access, sometimes they have shows- well, they are for the kids but I am young at heart…), window-shopping (credit card at home), at the gym (not really free but it is included in my condo fee so might as well use it). There are a lot of free things to do especially in a large city.
8. Buy in bulk with other families to really save on items. My family use to do this when I was a kid. You buy in extreme bulk (I am talking about an entire flank of a cow or 60 boxes of tissue) and you divide it up among several families. The savings really add up buying in that type of bulk.
9. Wait before you buy anything. My friend and I walked past the Hide House two weeks ago (aka the Old Hide House) which is now in receivership (they sell everything you could think of in leather). I saw something I like there for 40% off but it was on my want list so I went home to think about it. It was gone the next week… which is good. The instant gratification would not have been worth the amount of money I was going to pay.
10. Find the most cost conscious person you know… and ask them before you buy something. They’ll point out to you where you can find the best deal; it seems to be built into their DNA to sniff out good deals. My brother is one of those guys who will research, research and research before he buys anything. I am in the market for a washer and dryer and so is he. I know more than I really want to at this point about front-loaders vs. top loaders and the pricing of each but if it saves me money, I am all for this knowledge.

Anyone care to add to the list?

I have spent most of this year emphasizing controlling costs than relying on the appreciation of investments. With the stock market the way that it is, I best to pay more attention to something which I can control than that which I cannot.  I do a budget on fixed costs but I have been worried lately about cost containment. I believe inflation is a growing issue caused by the increasing amount of currency the central banks are printing in order to avoid a mild recession (solve a small problem but creating a bigger one- yep, sounds like politics at its best). I have been focusing recently on these budget items:

TRAVEL

I have to drive to work- public transit is not an option. On Friday, I went to the gas station to fill up my car and the person before me had a $75 bill! Of course, I proceed to put $55 of gas into my car.  The only saving grace is that I do a lot of highway driving which has better fuel economy. This may be one budget item which is, unfortunately, unsolvable on the week days. On the weekends, I am trying to take more public transit. At least, I know what the costs are for a subway token.

FOOD

I throw away too much food every week. North American shopping habits encourage us to buy in massive bulk (“oh look honey, a 2L tub of mustard for $7.99! It will last us for 3 years!”) when we may save more money in the long run shopping like the Europeans- buy on the day of for the meal which is to be prepared. At the very least, the wastage factor would be reduced considerably.

I started shopping the European way; I have nothing in my fridge for dinner. I walk over the grocery store and buy only what I need.

CELL PHONE

I hate the Blackberry- it makes me accessible all the time, reinforces our increasing indifference to detail and it sucks up so much money in some many different ways (data plans, roaming charges, long-distance, text-messages).  If not for work, I would chuck the thing into the lake (other than doctors and other life or death service providers, why do we need this machine? Is the world going to fall apart if someone doesn’t have the opportunity to email me on a Saturday night about a business deal?). Some of it is covered by work but it can be a black hole expense sucking away dollars.

My choice is either to change my plan to cover charges not covered in my current plan or simply go low tech and get a plain old cell phone that does nothing but, shock and horror, act like a phone. I am afraid technology is being produced not to help our lives but to increase shareholder value.

What are you doing to budget better?

I spent a part of my holiday moving my office. Suffice to say, this activity isn’t exactly on the top of my list of things to do on a sunny August day.  However, it needed to be done at a time in which I needed to watch the pennies in order to amass a large acquisition fund to purchase stock.  Rather than hire movers, I decided to do this myself (along with my summer student) as an exercise in budgeting. Not including storage, the total costs of the move was approximately $300.00 (includes tax) to move 45 bankers’ boxes, computers and assorted furniture to two different locations. This is equivalent to four years of my professional life. If you remove how much I paid the student (which I have to do anyways regardless of the activity), the moving cost is cut in half- not a bad budget. Here are some budget saving moves that you may want to consider for your next move:

1. Rent a mini-van rather than a truck:  The Chrysler Mini-Van has a “stow and go” seating system which allows all the rear seats to be store into the floor of the van.  When you put all the seats down, you end up with a two seat van with lots of storage. In other words, you get storage almost equivalent to a cube van without all the blind-spots. The cost savings is not that great but I would prefer to move safely and a Mini-Van is more readily available for rent than a cube van. One more tip- always rent a vehicle on a down day (I rented it on a Tuesday). The costs is cheaper and you have greater selection. The van rental cost me $68.00 (the rest of my expenses, not including labor, was for boxes, packing tape etc).
2. Visit the rear of retail stores for boxes: My office is upstairs from several retailers on the ground floor. Every week, they throw away and/or recycle dozens of boxes of all sizes. Given how much the boxes have to carry, they are sturdy, large and FREE.  I still needed to buy bankers’ boxes for files but the large boxes were a great help for larger items.
3. Save those large shopping bags: How do you move objects with strange shapes and sizes like phones or computer keyboards?  I ended up putting a lot of odds and ends into large shopping bags. Partly for environmental reasons and partly for their utility, I tend to keep large and expensive looking shopping bags (if you ever bought anything from the Nike Store or Restoration Hardware, you know the type of bag I am talking about). They are great to just put things in when using a box would be a waste of space. Again, they were free (well, they came with the initial purchase of whatever I bought) and reusing the bags is better than throwing them away.
4. Moving is an opportunity to make money: I ended up selling several items of furniture to my landlords. I made $100 doing this. Thus, in reality, my net cost was $200.00 to move.  I also allowed several friends to sell some old computer hardware at their garage sales. Unfortunately, this didn’t work out too well. Someone bought a keyboard and a couple of mouses for $5.00 and, despite my best attempt, I could not sell a 2 year old printer- I ended up giving it away. The lesson to be learned- no one wants a used printer when you can buy a new one for as little as $50.00.
5. Buy office furniture keeping in mind your house as well: This isn’t a money saving technique per se on moving but when I started buying office furniture, I knew that one day I may not have an office or a large enough office to store everything. Thus, I ended up buying a lot of furniture from house furniture retailers rather than office furniture retailers. Buying office furniture is like paying for flowers and photographers for a wedding- it is the universal sign for service providers and/or retailers to charge you twice as much. Next time you goto Ikea compare the prices of shelves/desks/storage for the office versus the same for the home.  I ended up bringing home several pieces of furniture- my round meeting room table is now my kitchen table and I have a couple of new guest chairs. This helps me save on some home decorating costs.  If you are furnishing an office (at home or in a traditional office), keep this in mind. Buy furniture which would not look out of place at the office or at home.

I am hoping next vacation I don’t have to worry about these things.

Here are week four and final observations on my supermarket experiment. The rules are laid out here and the  links to results from week 1, 2 and 3.

Week 4 results did not prove to be too different than week three results. The biggest changes were that tissue and snack bars in the ideal locations went on sale. The sale did not change the tissue results but made the snack bars in the ideal location cheaper than the non-ideal location for the first time ever. As per my rules, the % difference in such a case is 0%.

The results are below. I have also added the average % difference over the course of the experiment as a summary.

Baked Beans (398 ml can)

Ideal location- $1.19 (Heinz)
Less ideal location- $0.79 (Compliments)
Difference- $0.30
% Difference- 21

Average % difference over 4 weeks: 23.25%

As my week 1 post and a reader pointed out, I could not find another name brand in baked beans in my supermarket. This has obviously thrown the results off somewhat.

Olive Oil (1 Litre bottle)

Ideal location- $10.79 (Bertolii)
Less ideal location- $7.99 (Carapelli)
Difference- $2.80
% Difference- 26 *

Average % difference over 4 weeks: 28.25%

Snack Bars (175g box)

Ideal location-$2.49 (Kellogg’s Nutri Grain)- this item went on sale
Less ideal location- $2.99 (Quaker Chewy Bar)
Difference- $.50 in favor of the ideal location
% Difference-0 (as per my rules)

Average % difference over 4 weeks: 4.5%

As discussed above, it took a sale in order to get this item below the non-ideal location price.

Shampoo

Ideal location- $2.19 (Finesse, 330 ml)
Less ideal location- $1.99 (European Formula, 350 ml)
Difference- $0.20
% Difference-9

Average % difference over 4 weeks: 9

Shampoo never changed its price structure over these 4 weeks.

Tissue

Ideal location- $1.99 (120 sheets of 2 ply tissue by Kleenex)
Less ideal location- $1.29 (140 sheets of 2 ply tissue by Royale Ultra)
Difference- $0.70
% Difference-35

Average % difference over 4 weeks: 37.5

The ideal and non-ideal location went from 3 ply to 2 ply tissue this week; I suppose people do not need thick tissues in the summer time. As I have stated before, the % difference between these two items is actually greater due to the quantity difference. Kleenex charges more for less tissues in a box.

Based on a limited 4 week experiment, I can conclude the following:

1. Not accounting for taste, generally, you can save more money buying items from less ideal locations in a supermarket.
2. It took a sale in order to get any item in the ideal location to be priced less than the non-ideal location suggesting that it takes some price movement to occur before an exception to conclusion #1 arises.
3. Price difference in a discretionary item such as snack bars tend to be less than in staples. However, the comparison between olive oil is inconclusive given that there was no ideal or non-ideal location for this product in my supermarket and I could not find 2 brand name baked beans in my supermarket. Thus, this conclusion has a huge disclaimer on it.
4. Tissue had an abnormally high price difference relative to the other products. I have no concrete theories for this other than, based on pure conjuncture, Kleenex has such a dominant strangle-hold on this product that it can charge whatever it pleases and still make sales.
5. Shampoo, which is generally an item you would buy at a drug store rather than a supermarket (at least I do), tends to display very little price differential based on a limited sample size. It may be interesting to see how pricing operates in these types of bodily care items in a drug store where these types of items are bigger pulls for customers into a drug store than a supermarket (experiment part 2?).

That’s it for this experiment. Thanks for reading about it. There may be some sporadic posting for the next two weeks due to business travel. I may post twice in one day and then no posts the next day. Bear with me. Thanks.