The Strump - Financial Blog

Get Results with Incentives

Tom — Thu, 11 Jun 2009 20:33:53 -0500

Well, I'm back (sort of) after taking a bit of a break this past week. I have to say, I feel refreshed after not writing for a week - good to do this every once in a while.

The following is a guest post from one of my Colleagues, a local web designer, Shannon Chiarenza.

What's in it for me? Get better results with incentives

Incentives are enticements that encourage one into action, a reward for participating. It gives people a reason to read your flyer, visit your website, click on that link, sign up for your newsletter or fill out your survey. How many flyers and brochures do you get in your mailbox that you don’t even look at, just toss into the recycle bin? It’s just more background noise in our lives, more clutter we have to deal with.

Give people a reason to act so you don't lose sales.

Our time is valuable, no incentive means I have no time for you

I recently received a letter in my mailbox from a back treatment clinic I've used before. Their treatments are effective and did help my back pain significantly however at $75 a visit it adds up quick, so I can’t go as often as I’d like. When I received this letter saying I was chosen to participate in a survey to help improve their treatments I was happy, I read it front to back looking for my incentive, quickly realizing there was nothing in it for me.

Into the recycle bin it went and a shame to, they spent a lot of money on stamps for their return envelopes and printing, not to mention all the waste of paper. In addition I felt somewhat insulted, they assumed that my being chosen should be reason enough.

What would have made me take time out of my day to spend half an hour on the phone for an interview? A free treatment, that’s it…one free treatment and I would participate. Maybe that’s selfish but my time is valuable to me and that seems like too much work when I get nothing in return. If they offered a free treatment in return for my participation I would've been happy to do it, they get the information they need to improve their service and I get to have a visit to help my back, we both win.

They probably got some people to participate however I wonder how many more they would have if they just offered an incentive? It’s more than just what my time is worth it’s the appreciation for my efforts, a thank you not only for helping their business but a thank you for having spent so much money on them in the past.

What's your incentive?

This is one thing that is hugely overlooked by business owners, not too many people are going to take time out of their day to do anything for you if you don’t offer something in return. If your going to spend the money on mailouts make sure in bold front and centre is your incentive, like " $10 off coupon inside", "free shipping" or "mention this brochure and receive XYZ for free" something that will stop people in their tracks and open that brochure, visit your store or call you up. Make it easy to do and worth the effort, same goes for your website, give people a reason to sign up for your newsletter, bookmark your site or fill out your survey.

Incentives are more than just a way to get people to do what you want, they act as a thank you for doing it, it shows appreciation and that is worth our time.

Shannon Chiarenza is a web-designer here in Vancouver, BC, Canada.

Finally, one of my articles was featured at the Carnival of Finance over at Funny About Money last week,

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How to Make Money from a Car Lease

Tom — Wed, 03 Jun 2009 23:21:04 -0500

Being that it's unbearably hot outside I've decided to include a post from one year ago at this time. I think this post is somewhat relevant since a few of the big car companies are going bankrupt and we're in a recession.

June 2008

One thing I’ve seen recently, on websites such as Craigslist and Leasebusters, is people who want to get out of their vehicle leases and will offer financial incentives to anyone willing to take over. Sounds appealing – but is it a good deal?

I’ve seen ads which offer as much as $6,000 to take over a lease. Granted this was a BMW with payments over $700, but you can certainly find cheaper cars with lower payments; of course, the cash incentive (if any) will be less.

Depending on the incentive and time period left in the lease, it has the potential to save you some money. The cash incentive lowers your effective payment, thus it’s a cheaper option than entering into a lease from day one, AND you frequently can avoid paying a deposit.

Why would anyone want out, after paying large deposits in many cases?

Simple – life situations change – loss of a job or transfer to another city or the birth of a child – there are so many situations where the car could become a financial drain.

What are the costs?

There are various costs to be considered when taking over a lease: there’s usually a lease transfer fee and your vehicle insurance may be higher as the leasing company may require higher levels of insurance.

Also, watch the mileage – make sure there’s enough mileage left on the lease so that it’s worthwhile given your driving habits. If there’s only a few thousand km’s left on a lease, it might not be worthwhile.

At the end of the lease, you’ll also need to make sure you can just give the car back, if you don’t want to keep it. Some leases can hold you responsible for the decrease in value – I would prefer a ‘drop off’ lease, where you simply give the keys back.

Assuming the car has been reasonable maintained you shouldn’t be on the hook for drop in value, if applicable. As always, check the terms of your lease … do your homework!

This brings up another issue – if the previous owner badly maintained the vehicle, you could be on the hook for any drop in value. I would want confirmation from the dealer and/or previous owner that the car was maintained acceptably.

At the end of the day, I like the idea of getting money BACK when purchasing a car.

So, if you’re in the market for a car and plan on leasing, check out lease transfers – get a newer car, save the deposit AND put some cash in your pocket.

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Reducing Your Homeowners Insurance Premiums

Tom — Sun, 31 May 2009 22:00:00 -0500

The following is a guest post from a colleague of mine, Barbara Waltz over at 247Quoteus.com.

While the current economic climate has had varying effects on us, this period has caused a great deal of reflection into our spending habits. One of our larger monthly bills comes from various forms of insurances. Similar to car insurance, if you have a loan out on your current home, the lending institution almost certainly makes you purchase insurance on it, after all if something were to happen to it they would lose out on their investment. It is possible to find affordable homeowners insurance and still maintain great coverage.

Shop Around.

While it is a simple task that we often do for other purchases, many people over look it when it comes to insurances. Just because you are with your current company and have them for other policies does not necessarily mean they are going to give you the best rates. Rates vary greatly and so it is important to take this quick way of making sure you are getting affordable coverage.

Raise Your Deductible

Although it is sometimes considered risky, and if you live in an area prone to natural disasters then it certainly may be, for the most part is a quick fix to lower premiums. When raising a premium, it is important to make sure it is still low enough that you can afford to pay it if something were to happen to your home. There is a fine balance between making sure it is low enough to still pay but high enough to provide a good enough discount to make it worth doing. You know your finances better than anyone, and if a premium of a few thousand dollars would not be possible if it was ever needed then perhaps it is not worth it for your situation.

Policy Bundling

If you have your insurance through a larger company, they likely offer more than just home insurance. Putting your policies together with one firm can often times net a pretty good discount. Moving current coverage to a new company is an option, or if you are buying new policies then you should ask your current company what kind of discounts may be available.

Improving Your Home

A safe house is always going to be cheaper to insure than one that is risky. Having a security system, fire prevention systems or other such devices can lower your premiums. There are many options available and some allow for larger discounts with less investment from your side. Weigh your options and see what can give the best overall savings.

All insurance policies should be looked over on an annual basis to make sure that you still need that level of coverage and that you are not paying too much, the same is true with homeowners. Perhaps a few years ago you bought a nice LCD TV or computer and increased your policy value to reflect that, but now those items have depreciated and it may be more costly keeping them on the policy than removing them. By following these simple steps you can cut a bit off of your monthly premiums and over the duration of the stay in that home save quite a large sum.

This article was written by Barbara Waltz, an industry expert and one of the founders of a well known insurance blog.

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Saturday Linkstuff, Major Project Edition

Tom — Sun, 31 May 2009 04:00:00 -0500

It's been a hectic week with a major project due …

But I still had time to read these great posts from the week:

3 Years of Peer-to-Peer Lending at Four Pillars – it's not as profitable as you'd think.

A Simple Way to Feel Wealthy on a Middle Class Income at ToughMoneyLove – a few simple things to make you feel rich.

The Price of Faith – Muslim & Jewish Financial Challenges at Budgets are Sexy – how religion can play a part on finances.

Building a Solid Financial Foundation at Blunt Money – Some solid financial advice

How to Have a Happy Childhood at Brip Blap – warm days make for happy kids.

Major Changes Coming to the Canada Pension Plan at Canadian Capitalist – our national pension plan has some changes coming …

Your House is Not a Good Investment at Consumerism Commentary – some people think they're living in their retirement plan …

Do You Have Financial Goals? Do You Declare Them? at Free Money Finance – well, do you?

How Do I Invest With Only $20 to Spare Each Month at 7 Million in 7 Years – investing is often about creativity and not how much money you have initially.

Finding Your Passion at Million Dollar Journey – I think this is the holy grail of personal goals.

Memories from a Frugal European Upbringing at My Findependence Day – this post reminds me of my dad, who came to Canada in his 20's and had some strange frugal habits.

Anything Worth Doing is Difficult and Requires Sacrifice at No Debt Plan – if this wasn't the case, we'd all be rich, I guess.

Don't Be a Loser and Wait Too Long at MoneyNing – take action and don't just sit there!

Some of my posts also appear in the following Carnivals:

Carnival of Personal Finance at Greener Pastures
Carnival of Money Hacks at Passive Family Income
Carnival of Pecuniary Delights at Passive Family Income

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Vancouver Blogger Meetup

Tom — Sat, 30 May 2009 18:40:17 -0500

I had a chance to go to this month's Vancouver Blogger meet-up this past Thursday, at the St. Regis Grill and Bar in downtown Vancouver. This month's topic was "Rules, Norms and Web 2.0: Etiquette in an Era of Evolutionary Social [Dis]Organization" and was moderated by local well-known bloggers, Hummingbird604 (Raul Pacheco), Shane Gibson, Raincoaster and Colleen Coplick.

It was definitely a great turnout (50 bloggers) and was a fun way to network with other bloggers and learn something along the way. It was also certainly an eye-opening experience for me. I've only been using social media for a short time and like most people, am still trying to figure it out.

It was interesting to hear about the concept of etiquette and social media. I always instinctively new there were proper ways to communicate online but it was interesting to hear it quantified and now I make sure I try to follow or at least inform myself of what is acceptable and what is not.

WHO CREATES THE ETIQUETTE?

The panel used an analogy of being first to a party – whoever arrives first usually sets the tone for any kind of social event. If the partiers arrive first, you can bet the party will be pretty wild, but if you're 'vicar' is the first one to show up things will be certainly tamer. In another words, the early adopters usually set the rules of etiquette on any given social media platform.

I was surprised to learn that different sites, from DIGG to TECHNORATI, had different kinds of users and vastly different sets of norms. I'm sure I've inadvertantly broken a few rules on those sites when I first started using them.

STRATIFICATION

Raincoaster made an interesting comment about the city of Vancouver – that it is a "friendly city … along as you're within your own little group. People tend to put up walls … and don't let other people in …"

The same thing might be happening within social media – people are building walls and staying in their own groups. An example is the UNFOLLOW ALL MOVEMENT where people only follow the people they truly care about. I actually follow everyone who follows me because I like to come into contact with a varied group of people … although, the spammers can be annoying.

SOCIAL MEDIA AND BLOGS

I've been using social media mainly to promote my blog and meet other people. The questions becomes, 'how effective is social media for blogs?' I think it depends.

I had a conversation with another blogger and we agreed that while social media brought some decent traffic to our blogs, most of this traffic didn't mean an increase in comments, subscriptions or advertising revenue.

Anyways, I'll keep using social media and will probably focus more on the fun social side and meeting new people. It will be interesting to see how it evolves over the next year.

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Exchange Traded Funds or Stocks?

Tom — Thu, 28 May 2009 22:00:00 -0500

In a previous post, I had set up my Questrade account and decided that I was going to purchase the iShares Canadian Financial Sector Index Fund (XFN).

My funds are currently in transit from CIBC to Questrade and once the transfer is complete, I'll be making my purchase.

But after thinking about it and reading some of the comments particularly from the MyFindependence Day Blog, I've decided that for my situation it is better to purchase an individual stock. After taking a real close look at XFN, I realized (and it was pointed out to me) that the top four holdings represent 60% of the value of the fund. That's not a large number.

SAVING ON TRANSACTION COSTS

So, the question becomes, even with a low management expense ratio (MER) of .55% versus an MER of 2% with my old mutual fund, could I save my self some money by simply buying the stocks myself? Why pay any MER fee (admittedly one this reasonable) when most of the holdings are represented by only a few stocks?

I have to say in my case, I could probably buy just a couple of the stocks and pretty much replicate the same result. Granted, I wouldn't have the full effect of holding all the stocks in the ETF but with the level of holdings I have right now, would it really matter? I feel fairly confidant at my ability to research a few stocks and make the proper selection.

WHAT LEVEL OF HOLDINGS?

I have to admit, if my portfolio were worth hundreds of thousands of dollars I'd have no problem purchasing this ETF. With that much capital to protect, it would be a little more intimidating choosing a larger selection of stocks. I'd probably choose a few different ETF's from various sectors but sadly, I don't have that kind of money. :(

You have to really wonder how good that kind of diversification would be if you have a small portfolio (like I do).

Obviously, for beginning investors an ETF would be a great place to start, but I have actually traded some stocks before so I have some experience. I'm also doing this trading for the enjoyment AND as a learning process.

What do you think? Is there a level under which you think it's better to own stocks or ETF's? $10K? 25K? 50K? Or does it matter?

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New Credit Card with Security Feature

Tom — Tue, 26 May 2009 23:04:00 -0500

I received my new Visa in the mail the other day, with a bonus security feature – it's now a chip-enabled credit card. What is that? At chip-enabled credit card terminals, I have to enter a PIN in order to complete my transaction. I received the PIN a few days later in the mail.

What exactly is a chip card?

"Chip cards contain an embedded microchip to encrypt information, making it more difficult for unauthorized users to copy or access data from the card ..."

At the front of the card there is a chip that looks like a thin piece of foil. An added benefit of this chip is that many cards are moving to a "contactless" payment system. Below a pre-determined point (sometimes $25) all you'll have to do is wave your card to complete a purchase.

I noticed that at Starbucks they actually don't require a signature anymore for my coffee purchases. They simply swipe the card and the transaction is done. Kind of scary if a thief gets a hold of my card – Starbucks look out!

It's good to know that I have this extra level of security now. I really like the fact that credit card companies are trying to keep on top of the burgeoning credit card fraud industry. I have to admit, though, I haven't seen too many of these chip terminals around yet, but they will be here soon, I'm sure.

What other security features are available or on the way?

I know right now when I make unusual transactions – like my trip to New Jersey back in February – I'll get a call or they will even freeze my card until I call them back. Some credit card companies even offer a photo-id card with a small picture of you embedded on the front of the card – I know my credit card company offers it but I haven't taken advantage of it yet.

Of course, for many transactions you have to enter your 3 or 4-digit code (CVV or Credit Verification Value) from the back of your card. For most online transactions, I find I now have to do this.

What about online security?

Having a chip-enabled or photo-id card isn't going to help you much from online fraud. Definitely the CVV number is going to help you, but it might not protect you from phishing scams where you get tricked into entering your info. Some cards are even extending the PIN and password to online transactions, as well.

Now that e-Commerce has been around for a long time, and we're switching to a cashless society, thieves are getting more and more ingenious in the ways they can grab our money.

Credit card companies are going to have to keep up and continually offer new levels of security.

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Creative Ways to Use Lines of Credit - Updated

Tom — Mon, 25 May 2009 23:55:31 -0500

I thought I'd reprint this post I did back in November on how to creatively use lines of credit. With the economy in recession, I wonder how many people have had their lines of credit or credit cards unceremoniously closed or reduced? I know some business are facing this possibility and are having their lines of credit lowered or simply eliminated.

NOV 1/2008

Most of us have lines of credit (LOC) these days, either racked up with debt or just sitting there waiting to be used. Rather than just filing away your statement month after month, why not get creative with the way you use them?

Here are a few ways that I try to be creative with the bank's money:

Bank Account - if you have a balance, why not use your line of credit as your bank account? My brother-in-law does this – he has his paycheque and anything else deposited directly to his LOC. He also writes cheques directly from it. The advantage is you’ll minimize your interest and there are no bank charges! The disadvantage is your banker might not like you if you happen to have a credit balance.

Emergency Fund - Many people advocate having an emergency fund of at least six months cash in case something seriously happens to you. I fully agree but I want my cash working for me. So, I keep an empty LOC around just in case – I take the emergency fund cash and invest it in something more worthwhile than a bank account. Quite often, if you invest the cash in something more worthwhile, it may not be that liquid so the LOC takes care of this.

Investment Opportunities - if you don’t have the money to make that stock purchase that you know can’t ‘go wrong’, leverage your finances and borrow. The interest on the LOC may be tax deductible but keep in mind leverage works both ways – if the investment doesn’t work out, you’ll have a nasty debt to contend with. Another option is buying real estate and using the LOC for your down payment - but, you’ll have to qualify and money is pretty tight these days.

Debt Consolidation - pay off your high-interest credit card debt with your hopefully, lower-interest LOC. You’ll save on interest charges but don’t be tempted to rack up those cards again!

I’ve got several lines of credit which are just empty and waiting for the right time to use them – thankfully, none of them have any balances. One of them is kept as my emergency fund and is hooked up directly with my bank account in case I need it. I have another one that is only to be used for investment purposes – this make it easier at tax time to keep track of any interest I’ve paid to earn investment income.

I have fairly good credit, so I’ll probably try to get as many LOC’s as I can, in case I need them.

With the market the way it is, I am biding my time, until the perfect ‘opportunity’ comes up.

UPDATE

Thankfully, I still have my lines of credit and the bank hasn't lowered any of the limits … yet. I'm hesitant to use them right now due to the state of the economy and the fact that I may be looking for a new contract in November.

I could use them for investing purposes … but I don't think I'm willing to do that yet.

Also, with the new credit card legislation soon to be introduced in Canada and already introduced in the US, are credit card companies and banks going to be taking out their frustration on consumers? Will it trickle over into other areas of the banks' business?

Has your bank cancelled or lowered any of your lines of credit or credit cards?

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Stocking Up On Credit

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Could You Buy Real Estate with Someone?

Tom — Sun, 24 May 2009 23:48:23 -0500

As the price of real estate has skyrocketed over the past few years, the possibility of owning a home is getting pretty slim for many people. Here in Vancouver, even though prices have dropped, a one-bedroom condo is around 300K. You need to make a fair salary to be able to afford that or you’d have to save a fairly large down payment. Forget about detached houses – with the average price of a house soaring, it would take a small financial miracle to be able to afford one.

So why not buy with someone else, as the article I link to suggests? With more than one income, you’ll be able to afford that palace you’ve always wanted. I’m not just talking about buying with a loved one, I’m talking about buying with a friend or family member. Doesn’t it make sense to buy with someone you really like and get along with or are related to?

In theory it sounds great, but issues of money can test even the strongest bonds. It’s important to have a well thought out arrangement beforehand to help avoid any issues in the future.

LEGAL

How do you split up the expenses? What if one party brings more ‘money to the table’ than the other party? What if one person wants out and the other one wants to stay? These are some of the issues you’re going to have to consider if buying with a friend. A trip to the lawyer would be wisely recommended. I can’t imagine only agreeing to terms orally and then a few years down the road, problems come up. If you don’t have a document to fall back onto, I could see big trouble.

Here are some items to consider:

Major repairs and maintenance – how to split this up.
The percentage of ownership – based on how much money each party puts in.
Exit strategy – the other party should get ‘first refusal’ as the article points out. If one wants out, the other can purchase and remortgage on their own.

DAY TO DAY LIVING

You’d also better make sure you divide up the daily duties of running the household. What happens if you get one person who is a clean freak and the other who really isn’t that clean at all? You need to have a list in place of what gets cleaned and when.

What if the other starts dating someone and this new person is around the house all the time? Would you be prepared to have a third roommate? You’d have to specify in your ownership contract what happens – would they have to start paying part of the expenses? Would they also have any right to a share of the house? I could see it getting messy, if the relationship becomes common law.

A REAL LIFE EXAMPLE

Friends of mine actually did this and so far so good. A few things have come up:

Utility bills – one has had to carry a few bills while the other gets the money together. Ultimately, everything does get paid though.

Decor – one likes traditional, the other likes more modern and the house is a heritage type house. They don’t always agree on what’s best for the house.

Relationship – a third person is around now – quite a bit … but it seems to be working so far. Should they pay a portion of expenses? That one is still up in the air.

Major Repairs – which ones to do first? There is some disagreement over what is best for the house - cosmetic or maintenance?

At the end of the day, I would consider buying property with someone besides a loved one, but NOT without some kind of extensive agreement is writing.

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Saturday Linkstuff, Multitasking Edition

Tom — Sun, 24 May 2009 16:06:32 -0500

I usually do this post on Saturday but after a night of vodka and ceviche, I've had to 'stagger' it to Sunday.

I wrote a post on Friday about maximizing my time with my laptop and how I like to multitask and do many things at the same time. Someone left a great comment about how they actually prefer focussing on one thing at a time to get the most work accomplished. Much of the literature also agrees and I actually do believe it is important to tackle a few goals first, other you spread yourself too thin.

But I've noticed one thing – I've had a chance to watch many business owners at work and the most successful ones are pros at multi-tasking. They CAN focus on one task, but then they can pause and work on something else of a higher priority, and then come back to their initial task and get it done. The best business owners can juggle 10 things at the same time and still get them done.

So, the name of the game is a balance of focussing and multi-tasking. I know many smart people who simply cannot multi-task, and they aren't as successful. People like this don't end up as very good business owners, but they can be excellent support people.

Here are a multiple of great posts from the week:

Goodness is the Only Investment That Never Fails at Budgets are Sexy – charity is a great investment because you always get a return on your money.

Personal Finance Ratios at My Money Blog – if you're mathematically inclined do the same thing that most businesses do and calculate measurements on how well you're doing.

Frugal Living Myths at Blunt Money – is frugal living a sacrifice?

Seven Great Gifts for College Graduates at Consumerism Commentary – this post had me reminiscing about my school days.

25 Traits of the Not So Well To Do at Free From Broke – if you're broke, check this list … you may be on it.

Case Study – 60 Years Old, Lots of Cash, No portfolio at Million Dollar Journey – I wonder if many people are in this situation – no retirement portfolios but a ton of equity in real estate

Note to Credit Card Companies – We're In a Recession at Money Beagle – Credit Card companies are reacting to the new regulations in the US.

The Day it Clicked at No Credit Needed at No Credit Needed – is there a time when you finally decided you needed to get your act together with regards to money.

How to Qualify a Financial Advisor – 3 Questions to Ask at MoneyNing – do your homework when looking for a financial advisor.

5 Great Reasons to Have Less Debt at Prime Time Money – I love posts like this that give quick lessons and something to take away.

Never Underestimate (or Overestimate) Small Savings Opportunities at Four Pillars

Don't Let This Crisis Go to Waste at ToughMoneyLove – can an economic crisis be turned into an opportunity?

Finally, one of my posts was featured at the Carnival of Money Hacks at Stretchy Dollar

That's it for this week!

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