Your Money Book

I often get e-mails and feedback from people frustrated with bad service, high rates, or rip-off fees.

But you have to believe that you and me as customers really do have the ultimate power. We often feel there’s nothing we can do about fees, charges, interest rates, or really bad customer service. But that’s not true at all. You have total power to fire any company you choose, and that’s the best and ultimate power of all.

One of the most powerful stories, which is now being heard around the world, is of a Halifax musician. I can relate to this story and my personal horror stories with this company. It’s from a musician by the name of Dave Carroll.

Dave flew on a United Airlines flight out of Halifax. When he got his guitar from checked baggage, it was damaged. He filed a report, and did what he was told to do. But United told him: too bad – they were not covering the damage to his guitar.

Well, Dave wasn’t done – AND he’s a musician. He proceeded to actually write a song called: United breaks guitars. But get this: He posted his song on You Tube (here is the link: http://www.youtube.com/watch?v=5YGc4zOqozo&feature=fvst ). So far, this video has been viewed more than FIVE MILLION TIMES.

At about two million views, United had a change of heart and contacted Dave to pay for a new guitar. Too late, Dave told them – it’s been two years, but did tell them they could donate the money to charity.

Another Canadian story is a web site on twitter where Canadians can vent their frustration at banks and their service, fees, or the likes, or just give others a heads-up on some bad practices. It’s been set up by ING Direct, the 7th largest company in the world, and a great alternative to the no-service banks, in addition to credit unions.

Sadly, ING takes out the specific bank, because they do not want to appear to be one bank knocking another. But all the information is there, ranging from a petition to venting and a number of polls. You can access it at: www.fairfees.ca

The Financial Times of London did an extensive survey asking who we actually trust. And for 92% of us it’s word of mouth from friends, associates, or colleagues. That compares to around 60% for traditional advertising.

The lesson is that a companies’ image is not what they it is, but what real people experience in the real world and spread through word of mouth.

In a recent survey, 71% of respondents felt that their standard of living would be lower coming out of the current recession.

What? I was quite shocked when I read that. But to start with, what is a lower standard of living? Is it less income? Is it less cash flow to buy all kinds of stuff? I would bet, for the majority of people, those two make up majority of the responses.

But does our standard of living decrease when we cannot buy a new iPod every year? Are we somehow deprived when we cannot afford to go out for dinner twice a week, or afford the payments on a new car every three or four years?

How many of us are confusing consumer spending with wealth building? How many would take a cut in pay, if we were assured we would have more savings, a growing RRSP, and at least an emergency savings account? All of those build wealth, whereas our spending is a wealth robber!

Is our standard of living somehow affected when we DON’T drive a new car? I would bet for most people that may be their thinking. But isn’t it exactly backwards? If we drive a new car, we now have a big payment going out the door, and our standard of living decreases exactly BECAUSE we have this new car to finance! So is someone’s standard of living better or worse when they can bank a ton of money by not having car payments?

I ran into a lady recently, who really wanted some help in getting her monthly expenses under control. When I asked her how much a month she wanted to save, she didn’t have a number in mind at all. Well, isn’t that kind of like getting into the car and starting to drive, with no idea where you want to go? In order to save money, you need a number – a firm goal of where you want to go and what you want to accomplish! After that, it’ll become a whole lot easier, exactly because you have a goal and a fixed plan.

But while I was talking to her, she was playing with her iPhone. When I asked what her monthly bill was for the iPhone, she became rather sheepish, and it took a bit to confess that it was around $130 a month. Yikes! Mine is around $25 a month, and it makes phone calls, too. Yet, that was something she just didn’t think she could ever do without, and proceeded to attempt to “sell me” on the cool features and gadgets. Nice try.

There is something economists refer to as our marginal propensity to consume. It’s a fancy term for saying: when we make more income, we spend more money right along with it. A $500 raise, and pretty soon, we’re spending to our new and higher income level. It works for us average people just as much as the rich. It’s how Michael Jackson earned around a billion dollars, yet died about $500 million in debt!

We need to be careful with the yardstick we use to measure our standard of living and not confuse “stuff” with wealth. For many people, their thinking is backwards: It is their stuff which reduces their wealth, and not the other way around.

For the millions of Canadians who make a trip across the border to the U.S. each year, it is certainly easy to notice some huge pain, and some big differences, in the economies of our two countries. Here are just a few things:

There are some seriously great travel deals to be had south of the border: For my holiday, I am staying at the Marriott in Scottsdale, Arizona for $28 a night. Yes, you read that right, thanks to priceline.com, and the place is still only about a third full, from what I can see.

Here in Arizona, the state legislature is actually considering selling the state capitol building and leasing it back. They’re looking to fund the current deficit. Not to put it on the debt – just the deficit. If you sell your home to pay OFF the mortgage and bills – that’s often a great deal. But we’re talking about selling to pay this year’s utility bills and payments. But then, there’ll be a lifetime of lease payments which will make the budget worse in perpetuity. That’s nuts! But that’s how many politicians think: Worry about today, because years from now, they won’t be there to deal with the mess in the future.

Coincidentally, MSNBC, which is generally a soft liberal TV network, called this mornings’ two-hour program “sticking it to the kids.” It was a show discussing the $12 trillion national debt, the $1 billion health-care proposals, and that Medicare is already in a deficit right now.

I’ll share some more insights from south of the border in the coming weeks.