One of the computers in my house came to the end of its useful life recently. In my house, that means ordering a new computer from Dell. Since I’m a tech guy and have techie friends, I’ve heard time and again how I can save money by buying cheap components and putting the PC together myself. But I’d rather leave it to Dell to put the system together and pay a little extra, but not too much extra. I prefer to buy online, but the Dell web site didn’t allow me to make all the choices I wanted. This meant having to make a call to Dell. This also meant having to turn down all the high-margin items available as add-ons. I was pleasantly surprised when the salesperson didn’t press me on an extended warranty after I turned it down; she just went on with the list of other choices. However, when we came to the end, she began a script: “You know sir, you’re buying an expensive computer...”. For a mere $119 I could extend the standard warranty from 1 year to 2 years. After I turned d...

I’m a victim of marketing. The title of the book Train Your Brain to Get Rich by Aubele, Freeman, Hausner, and Reynolds caught my eye, but the title is misleading. The additional words on the cover, “the simple program that primes your gray cells for WEALTH, PROSPERITY, and FINANCIAL SECURITY,” just add to the misdirection. This book isn’t really about money. As I read through the first quarter of the book, I kept waiting for the financial aspects to begin, but by the hundredth page I suspected that they never would begin, and as I finished the last page, my suspicion was confirmed. This book is really about brain health and the benefits of such things as a positive attitude, meditating, exercise, sleep, and healthy eating. The superficial financial parts of the book could just as easily be replaced with “train your brain to play better tennis.” The financial references actually seem as though as though they were added after the fact by a different writer. It’s as though s...

This will be the last regular post until next year. I may write one or two before then if the mood strikes. To all my readers, I wish you happy holidays and all the best in the new year. Where Does All My Money Go? breaks down the effect of mutual fund fees on a 25-year investment. Check out the spreadsheet that lets you enter your own inputs to see how much of your money goes to your advisor, the dealer, and the fund company. Gail Vaz-Oxlade conducted a poll to find out how much people could reduce their monthly expenses if they had to (in a post no longer online). The most striking thing about this poll is that the highest category is “15% or more”. I could reduce my expenses by 50%. If I absolutely had to, I could go further by moving my family somewhere cheaper. I think people have a misguided sense of the distinction between necessities and wants. Necessities are food, simple clothing, shelter, education, and not much more. The Blunt Bean Counter shows that there i...

Come January, I’m expecting a huge raise. Most workers get a huge raise at the start of a new year, but they don’t realize it. In the last days of the year, you are taxed at your top marginal rate, but in January the slate is clean and your income is untaxed for a while. You won’t see any of this on your pay stub, though. Payroll taxes are designed to smooth out the effect I’m talking about by predicting your final taxable income and taking equal amounts of tax off each pay. But your real taxes are based on your actual income using progressive percentages. For a person earning $100,000 per year in Ontario, after-tax pay at the end of this year is $28.92 per hour, but will rise to $51.11 per hour starting in January (based on 37.5 hours per week and 365.25 days per year). Of course, it will then drop off over the course of 2012. For most of us who collect a regular income for the whole year, none of this makes much difference, but for those who work irregularly of for irregul...

A friend I’ll call Jerry recently complained about his Maclean’s magazine subscription: "I see via your magazine insert I can order a year's subscription for Ontario for $53.62 (tax included) whereas I just recently paid $70.86 to renew mine! While I can understand the ‘bonus gift’ difference, I am quite upset that you are gouging (over 30 %!) a long time subscribing customer (over 30 years)." Jerry went on to demand a refund of the difference, and Maclean’s promised he would get it in 4 to 6 weeks. Of course, the other loyal customers who don’t bother to complain won’t get this refund. Most people believe that loyal customers deserve to be well-treated, but companies seek profits. Apparently, Maclean’s magazine has decided that the most profitable approach is to draw people in with low prices and hope they keep subscribing at higher prices. My guess is that they are right. This doesn’t mean that I think loyal customers deserve poor treatment; I just don’t think t...

We often hear of unions seeking pay parity with other workers. Invariably, a pay raise and possibly some back pay are required to right the supposed unfairness. No doubt there are legitimate cases, but I suspect that most are not. My direct experience is mostly with programmers. Organizations have different philosophies when it comes to paying programmers. Some seek the best talent they can find and give them above-average pay. Most offer average pay and get average talent, and still others offer low pay and try to get by with whoever will work for them. It is too easy for programmers at one company to look at another company’s pay scales and complain. The truth is that most complainers would be rejected if they tried to get a job with the higher-paying company. Superficially, all programmers do similar work, but when we get down to details it is normal for one company’s programmers to be far superior to another company’s programmers. When this is true, demands for pay pari...

Dan Hallett accused mutual fund critics of missing the big picture when they focus their criticism on high MER costs. His main point is not so much that MERs are not a problem but that there are other important ways that investors lose money. He claims that one of these ways that investors lose money is due to a volatility drag that comes with periodic investments or dollar-cost averaging (DCA). I’ve done a couple of experiments and can’t find any evidence that this volatility drag exists. In fact, DCA has a slight edge over lump-sum investing. Hallett explains volatility drag as follows: “You’ve no doubt scratched your head at why a portfolio’s long-term performance hasn’t quite lived up to expectations. It’s likely that volatility drag is one of the big culprits. ... If a mutual fund reports a 7 percent 10-year rate of return, for example, the only way to have achieved that precise result was to invest at the beginning of that period, hold for the full decade and have no buy...