Don't Waste Money Through Thoughtlessness: A Rant

The other day I passed by an HSBC bank that had a funny little ad in the window. It said "take advantage of our low $1.50 ATM fee." I'm not old, and even I remember when a $1.50 ATM fee was thought to be expensive. Nowadays most bank ATM fees are around $3. (If interested in articles about bank abuses, check out John Crenshaw's site.)

I try to use my bank's ATM, which is still free. (Banks haven't been audacious enough to charge their own customers yet, at least for withdrawals. Charges for checking one's balance are not uncommon, however.) Occasionally, I'm forced to use other banks' ATMs. When waiting in line, I sometimes look at the discarded withdrawal receipts people leave on the counter and floor.

It seems people like to withdraw $10 or $20, and they pay up to $3 to do so. That's 30% on a $10 withdrawal! Perhaps some of them needed just that much cash and no more, and needed it quickly. Others, however, are repeat customers. What's wrong with these people? Why not take out $60 right away, and save the extra $15 by not going back to the ATM for a while?

We don't notice small fees, but they add up quickly. Consider that if one uses an ATM to withdraw $10 for a $1.50 fee every week day, they're spending $7.50 a week, or $390 a year to get their own money. That can be the price of a decent daily lunch--that's what they're using the cash for anyway.

The ATM isn't the only place I see such foolishness. Various packaged products at supermarkets, such as beverages and yogurt, come in various sizes. For example, one product may come in 8oz and 16oz packages. The prices, if you notice, are often higher per ounce for the smaller package. For example, it might cost $1.10 while the 16oz sells for $2.00. I marvel when I see people get two of the smaller package instead of one large one. You might say it's for convenience that they're willing to pay more, but this happens with food that has relatively short expiration dates.

Another example, where I live in New York City, is transportation fares. We have MetroCards, manufactored by Cubic (CUB) (which also does defense contracting), which we use to get on buses and subways. The fare is $2. You can put as much money as you want on a regular fare MetroCard, from $4 to $80. For every $10 you put on your card, $2 extra are added for free--you get a free ride for every $10 on your card.

One would think that everyone would put at least $10 on their card. It's the rational thing to do. It's not at all the case. People put $4, or $6. But why? Yes, some people may only need two or three rides and will never use the transportation system again. I'm not concerned with these, who are mostly tourists anyway. What strikes me is that I see the same people at the subway station doing this on a regular basis. It could be that they're so poor that they can only afford to use $6 at a time, but they would benefit the most out of all income groups by diverting the $4 from their other expenses.

Nevertheless, it's people wearing professional clothing that do this the most. Using the subway five days a week, at 4 dollars a day, they're spending $20 a week, or $1040 a year. If they were to buy a $20 MetroCard every week instead, they'd get 2 free rides a week, which would add up to $208 in savings. That is, instead of spending $1040 a year, they'd spend $832 for the same exact thing. The savings could be invested or spent on Christmas gifts, etc.

Another example is people who use their credit cards to buy things on sale because they are on sale (to save money, apparently), and then pay the minimum amount on their bill. Where's the logic in that?

Consider a last example--brokerage fees. Are those people who pay $15.95 a trade really getting anything better than those paying $7, or better yet, $4.95 a trade or less? I've used Scottrade and TradeKing. I don't see why Scottrade is worth over 41% more per trade than TradeKing. (I'm thinking of trying SogoTrade, which has an even lower trading fee than TradeKing.)

The above are just some examples; there are plenty more. Most of us, some more often than not, commit silly errors. We overpay or don't take advantage of discounts (which is overpaying). Individually, our over payments may not seem like much, but they do add up. This is especially true for those of us who get paid by the hour.

Nothing above should be news to anyone. But it's helpful to be reminded of it once in a while.


Simply Investing Blog Carnival Feb 25, 2008

Welcome to the February 25, 2008 edition of Simply Investing Blog Carnival. There were many great submissions, and I had trouble picking the best three. So, I decided to have 11.

Editor's Top 11:

Raymond presents Qualifying For An Economic Stimulus Tax Rebate Check posted at Money Blue Book.

Brent Mashburn
presents How to Estimate Earnings Growth with Excel posted at luminouslogic.com.

The Investor
presents The secret to investing when stock markets are falling posted at Monevator.com, saying, "Controversial I know given the host blog this time, but the article respectfully makes a case for NOT focussing on your net worth if you want to be a successful investor even when markets are falling. Then the big numbers – the million - take care of themselves."

presents Automatic Investment Plan: The Beginner Small Investors Way In posted at DebtFREE-Revolution, about a way for small investors to bypass the large minimum initial investment requirements of some mutual funds.

Alvaro Fernandez presents A $225m Market to Train Your Brain posted at SharpBrains: Your Window into the Brain Fitness Revolution, saying, "This past Tuesday, the MIT Club of Northern California and SmartSilvers sponsored an event on The Emerging Brain Fitness Software Market: Building Better Brains to explore the realities and myths of this growing field."

Dirk Masuch Oesterreich presents Water – the Commodity that’s not a Commodity posted at Nevada Gold Investor, saying, "Water investing is a much overlooked opportunity. This article looks at the global water business from a fundamental perspective."

Leo Dimilo presents Forex Trading | Forex Support and Resistance Tutorial posted at Forex Trading, saying, "This is a general overview on understanding how to graph support and resistance lines when doing chart analysis for forex trades. I also go over Trader's Remorse and how NOT to get caught in a bear or bull trap."

Erica Douglass presents The REAL American Dream (Hint: It?s NOT Owning A House!) posted at erica.biz - Erica Douglass challenges you to change your life! What is holding you back from your dreams?, saying, "How not owning a house can make you financially free at a young age. Includes extensively researched details (numbers as well as emotional reasoning.) One of the most popular recent posts on my blog...generating a ton of discussion!"

Sagar presents 10 Countries That Benefit from the Falling Dollar posted at Currency Trading.net.

Leon Gettler presents The brain: hard-wired for risky trades, saying, "In the wake of the Societe Generale meltdown, maybe we are all rogue traders at heart. Studies show that our brains are actually hard-wired to give us the thrill of taking big risks and making money," and Subprime explained - crunch time glossary posted at Sox First, saying, "Credit crunch? Credit default swaps? Honeymoon loans? NINJA loans? Negative pledge? The subprime crisis is upon us and investors are confronted with jargon designed to baffle and keep them in the dark. Here is a glossary of key terms you'll need to know to keep ahead of the game."

Nigel Swaby presents Pay Off Debt or Save? posted at Salt Lake Real Estate Blog.

Runners Up:

Bobby Handzhiev presents The Basics of Domain Investing posted at The Shark Investor, saying, "domain investing basics"

John Crenshaw presents The Biggest Scam Your Bank Gets Away With Everyday posted at Truthful Lending dot Com, saying, "This little known scam accounts for a huge portion of fees paid to banks every year and is going on right under your nose. The worst part is, it's completely legal."

Mark Butler presents What Does a Millionaire Sound Like? posted at The Butler Project.

Pinyo Bhulipongsanon presents Investment Strategy, Chasing Performance, or Market Timing? Help! posted at Moolanomy, saying, "If I change my asset allocation now, is it: good investment strategy, chasing performance, or market timing?"

KCLau presents Don’t spend the money you don’t have, to buy the thing you don’t need, to please the people you don’t like! saying, "How one can avoid spending the money one does not have thereby reducing the incidences of overspending" and How Recession Happens? 8 Tips to Prepare for it! posted at KCLau's Money Tips, saying, "Article discussing how one can salvage himself during times of a recession."

Rob Best presents A Killer Forex Strategy: Three Ways to Turn Yourself Into a Profitable Forex Trading Machine! posted at Maverick Investor's Weblog.

Shamelle presents Thinking About Money The Rich Dad, Poor Dad Way posted at Enhance Life.

Jed Norwood presents Forex Tips | Forex Trading Rules posted at Forex Strategy Secrets, saying, "To succeed in the Forex market, (or any market) you have to set some trading rules and learn to play by them. Consistency is key to success in the forex market."

Alex M presents Now Find Out Tips For Buying A First House posted at Real estate: where? how much?.

Lisa Spinelli presents Stock Market Investing Tips 101: # 6- What Makes a Good Stock posted at Greener Pastures, saying, "Beginning things to look for when narrowing in on a good stock."

Jeffery A. Smith presents Step 4: How to Buy Index-Based Funds posted at YooperSmith.com, saying, "Discusses stock-based index funds and assest allocation with examples, links and wit."

Super Saver presents 2/18/08 Stock Purchase Update - Potash and Priceline Boost Portfolio posted at My Wealth Builder.

Dave presents High Dividend Yield Plus Capital Gain Potential posted at Cheapo Groovo.

That concludes this edition. Submit your blog article to the next edition of simply investing blog carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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