Wednesday, February 18, 2009

Penny Pinching

On first impression, I might not strike you as someone you'd call "frugal" - I have a fondness for scotch and cigars, drive a luxury car, enjoy travelling, etc. - but I'm something of a penny-pincher in other areas of my life, which helps to cover the defray the costs of Cuban robustos and single malt.

I'm always on the look-out for new ways to save money without making sacrifices. So, I'd like to share some of my cost-cutting strategies and would invite you to post yours, as well.

1.) Skype: Although I've only started using Skype recently, I'm absolutely hooked. The best feature by far is the $3/month dial-out service, which covers unlimited calls to anywhere in North America. Based on this, I've been able to trim back my Rogers cell phone plan by another $17, plus tax.

Savings: $15 per month x 12 months = $180, or the cost of a very fine dinner for two at AquaTerra.

2.) Insurance: When it comes to car insurance, I like my coverage low and my deductible high. Having a $2,000 deductible vice a $500 deductible saves between $200 and $500 per year - though I am careful to ensure that I do have liability coverage of at last $1M, which actually isn't that expensive.

I'm also careful to read through the cardholder agreement for credit cards, so I know whether they cover additional warranties, car rental insurance, travel insurance, and so on. I've saved at least $700 in hotel and restaurant costs as the result of travel insurance, alone.

Savings: $1,200 per year, or a week-long trip to Costa Rica during the low season.

3.) Rewards Points: I'm careful to compare the different Visa cards and the rewards they offer. When I switched to a RBC Avion card from the CIBC Aerogold*, they waived the annual fee and gave me 15,000 travel miles, or a free $350 plane ticket (tax incl). If I put on another $15,000 on my card over the year, that's $700 in free travel.

Savings: $700, or three boxes of Cuaba Exclusivos and a bottle of 16 y/o Lagavulin.

4.) Low-Cost Banking: All of my banking is either done at PC Financial (which has no fees) or with institutions where I have the minimum balance to avoid monthly fees. StatsCan says that the average Canadian spends $15 per month on bank fees, or $180 per year.

I also don't allow my credit cards to carry a balance. I've said this before, and I'll say it again - credit card debt is the financial equivalent of a sucking chest wound. It's nature's way of telling you to slow down. I don't even want to think about what average credit card debt is, but I've seen estimates of around $2200 per person, which sounds about right to me. That's around $400 per year, just in interest.

Savings: $580, or enough to purchase sufficient premium gasoline for 5,400 km in an SUV.

5.) Brown-bag Lunch: Before I worked from home, I was one of the few people in my office to bring a lunch with me. Even those who did bring a lunch usually brought some sort of frozen dinner. I'd estimate that the price difference between a cafeteria and a brown-bag lunch is around $6 per meal. It doesn't take long before that starts to ad up in a big way.

Savings: For an employee who eats at the cafeteria every day for 49 weeks a year, you're looking at an annual cost of $1470, or 80 pounds of gourmet, fair trade, shade-grown coffee.

Okay, your turn...

*For a while, I quite liked CIBC Aerogold - then Aeroplan waited four months to inform me that my reward flight had been cancelled, thereby causing me to lose my hotel deposit. When I confronted them about this, they told me to pound salt. When I explained my situation to RBC, they very kindly offered to waive my first annual fee and give me the points for joining.

My favorite part was when I cancelled the CIBC card and they - quite naturally - asked why. At the end of my tirade, all they could say was, "Oh, I see."

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At 3:29 p.m., Blogger ecb said...

I have 2 tips to share:

1) I have a CAA mastercard which has no annual fees. I get points for every dollar I put on the card. Considering I'm going to school in the states, tuition racks up a lot of points. If you are a couple (or share the card with your parent like me), you can add the points together from both cards. The points get translated into airfare. I don't know the exact rate but I've been able to have quite a few flights home for free. Totally worth it.

2. This isn't penny pinching per se but it's a good tip nevertheless. I have a chequing and a savings bank account. I keep very little money in my chequing account at any given time. Whenever I have extra money, I shove it into a high interest savings account (Scotia Bank has a good Money Master account). That way I can make interest on my money while I'm not using it. ING is another place you can squirrel away your money. Or casheable GICs which are especially well suited for students.

At 5:31 p.m., Blogger Duke said...

I'm a big fan of the high-interest bank accounts. I have one with ING and another with PC Financial, and shift funds between the two depending on who has the higher interest rate. I split up money between high interest accounts and GICs, as it tends to give me a better rate, but I still have access to the funds I need.

Doing things to minimize tax payments is also helpful - any kind of pension (such as the one I'll get as a Reservist) are tax deductible, as are RRSP contributions.

Also: Unless it was to support some kind of technology that I thought was absolutely vital, I would never, ever buy a new car. The kinds of cars they make these days - particularly if they're well-built - can last for decades and hundreds of thousands of KM. So, if you can pick one up with 40,000 clicks at 1/3 to 1/4 the original price, why wouldn't you?

Taking the bus is cheaper, but I love having the freedom of a car. It's not actually not that expensive to drive a V8 SUV when you work from home and only go through a tank a month...


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