Water Waste of Money

A few years ago, I bought a water butt for the back garden. The idea is that I get to keep all of the rain that falls on the back half of my house roof and then use it instead of the liquid gold I’m currently getting charged for by Southern Water.

At the time I realised it would take ages to repay the cost of it, by the time I had bought the barrel, the stand, the piping and the tap; it would be something like 50 barrel-fulls before it would break-even. I was doing my bit for the environment, though; plus it’s something useful to have (at the time there wasn’t an outside tap).

The other night it was raining and I was just locking up downstairs before going to bed. Then I heard the water trickling from the supply pipe into the water butt. It sounded quite loud and that made me realise something: if it’s loud, then the water must be falling a long way from the supply (at the top of the barrel) into the current level. That can’t be right because it’s rained for the past three days and it was full before that.

So at 1am I was outside in the rain with my torch and discovered that there’s now about 3 inches in the bottom of the barrel. Hunting around I found there appears to be a split in the bottom of the water butt and there’s a steady stream trickling out of it. I think the weight of the water must have something to do with the size of the split, because the last time I looked, it wasn’t losing any more.

So that’s a waste of money and the savings have literally gone down the drain.

Swoopo

There’s a lot that’s been written about the auction site “Swoopo” and the general opinion that it’s a bit of a con. It’s not actually a con – it just takes advantage of greed and stupidity.

To sum up how things work, here’s an example: the Swoopo website auctions off a Nintendo Wii. Normally these are around £170. Like using eBay, I bid online at £100. Someone outbids me, so I bid £105. Someone outbids me again, so I bid £110. The auction then ends with me as the highest bidder, so I win the Wii for £110.

But with Swoopo, there’s a trick.

No there’s not, there’s two.

Or maybe three if you count the fact that many auctions are international.

Every time you bid, you use up credits which must be purchased in advance. Each credit (bid) costs 50p and increments the auction price by a fixed amount. In addition to this, every time someone makes a bid, the auction time is extended by about 15 seconds. So unlike eBay, there is no fixed closing time and things can be ending “in less than a minute” for several hours. Plus, bids are non-refundable: if you don’t win the auction, you don’t get your money back. And that’s the rub. Everyone who is bidding on an item is paying for their bids. Here’s a real-world example of an item that finished recently.

A Nintendo Wii Fit (normally around £70 in the shops) started at 0p. The item sold for £57.90, with a bid increment of 10p. The headline figure is that someone picked up a bargain Wii Fit for £57.90 + P&P instead of £70. But, to reach a final price of £57.90 with a 10p increment, that means 579 bids must have been made on the item. Now at 50p each, I make that £289.50 to Swoopo in bid money alone. Now the winner also needed to pay the auction price of £57.90. Total to Swoopo is £347.40, plus P&P for the item. Now you’re starting to see why people think it’s a con.

True, the winner of the Wii Fit could have made one bid and won it at £57.90, making a total cost of £58.40. But they almost certainly bid many more times than that.

Now actually bidding on any of the items is a bit pointless, but I’ve started to make a habit of browsing the completed listings to see what people are buying and how much they’re spending. The trick is to look down the “Savings” column to find the “0%” markers. That usually means someone has lost money on the deal.

Here’s some real world examples that I have pulled from the website. By the way, the “advertised price” is what Swoopo reckons is the retail value, not what I could have got the item for online. You make your own mind up as to whether that figure is artificially high.

Samsung LE46B650T2 46" Full HD Crystal LCD TV

With an advertised price of £1,008.17, the winner placed 1540 bids and won the auction at £79.00. Total cost to winner is £849.00. Not bad going.

Samsung UE32B7020 32" LED TV

Advertised price of £849.99. Winner placed 1516 bids and won the auction at £119.30. Total cost to winner is £877.30.

Dumb-ass.

Microsoft Arc Mouse (Black)

Proving people can lose out on cheap goods too, an advertised price of £30.97 went for £15.20 after the winner placed 64 bids. Total cost is £47.20.

Nintendo Wii Console + Wii Sports

As above, advertised price of £174.96. Winner placed 261 bids and won the auction at £94.00. Total cost is £224.50.

Bet the kids were pleased, if not the wife.

Genius

My favourite out of all of this has to be the notion that the website auctions off bids for its own website. The following auction was to win a “50 bids voucher”, which by its very nature, would normally cost £25.00.

The winner placed 47 bids to secure the voucher at a bargain price of £18.10. So this genius has managed to spend a total of £41.60 to end up with £25 to spend on the website. He (and it was an American “he”) could have saved his time and burned a 20 dollar bill, yet still been up on the deal.

What Recession?

For the first time in its history, IBM has announced revenue exceeding $100bn, with record pre-tax profits of $16.7bn.

Either figure represents a lot of money – to give you some idea here’s some stats: on average, last year IBM received over $3,200 in revenue per second; that’s over £23,000 per hour in profit (note that really is pounds).

Software group (the bit I work in) earned over $22bn last year in revenue at a gross profit margin of 85%. That means for every pound IBM receives, they can keep 85p of it as profit. Compare that with the personnel-intensive Global Business Services area who can only manage a margin of less than 27%.

Money, Money, Money

The way money gets talked about in the press these days, it’s hard to maintain a reasonable perspective on exactly what you can buy and how much it costs.

For example, a transfer of a football player worth £2m would hardly raise an eyebrow these days, even in League Division One. Yet to most of us, £2m is an unimaginable amount of money. Counting that out in twenty pound notes would easily take the best part of half a day.

At the other end of the scale is yet another financial rescue package announced today of £37bn. Loads of money isn’t it? Well actually, in 2007 IBM had revenue of $98.8bn or £56.9bn at today’s exchange rate. So the UK government is actually bailing out banks with less money than IBM can turnover in a year; plus we need to keep shareholders happy.

Another thing is the perceived value of winning the national lottery. Many people assume that if their six numbers came up, they could retire and live on the interest. Actually, you probably couldn’t.

Say you won £2m on the lottery: great. Pay off the mortgage, loans, and credit cards: £150,000. Throw a big party, go on a celebratory round-the-world holiday, and buy a fancy new car: another £150,000. Significantly more if you’re into some exotic Ferrari etc. Give a bit to friends and family: that’s anywhere from £200,000 upwards. So you’re left with £1.5m in the bank and you’re still in your original house. So you want to move to somewhere bigger / quieter / more relaxing / requiring less work. You’ve now whet your appetite with your taste of the good life, so you’re talking about £300k+.

So now we’re all content with our nice house, nice car, happy family and you’ve quit your job. Plus you’ve got around a million in the bank – sorted aren’t you? Well no, actually. To “live off the interest”, you need to invest that cash into a safe place. And “safe place” automatically means “low yield”. You can’t go round gambling with it into stocks and shares (or even property these days), because this is now your livelihood. If the stock or property markets take a tumble, then you’re struggling to pay the bills. You also need to get the money on a regular basis, so you can’t have it tied up in 5- or 10-year trust funds. So you’re now looking at the high-end of regular savings accounts. Unfortunately, things aren’t that easy either.

Inflation currently stands at around 5%, so if your money is earning 5% interest in a bank account, then it’s quite simply “standing still” in real terms. What cost £100 last year now costs £105, so you’re not any better off. Obviously as a long-term plan you need to be getting an interest rate better than inflation. Say you find a good couple of investments and manage to sort out something for 8%. That means for every million you have in the bank, you get £80,000 back in interest. But of course, you’re taxed on that (at higher-rate tax band), so there’s another £22,500 gone. And of course, you can’t touch the bit that’s put aside to cover inflation, so you’ve just effectively lost another £50,000. £80,000 in interest and you’re only allowed to have your hands on £7,500 of that per year.

Now that doesn’t sound bad – after all you don’t have any mortgage or other debts to pay off, do you? But you’ve moved to the bigger house which costs a fortune to heat and light. Plus, you’re now used to fine dining and the expensive holidays which you don’t really want to cut out. You’re no longer employed, either, so you need some hobby to fill-in the time between now and death. £7,500 is now significantly less than you thought you were going to get as a pension when you planned for retirement before all this happened. That “millionaire’s lifestyle” of you and beloved flying business class to New York for a weekend costs over £7,000 (excluding accommodation) and is now looking very distant indeed.

business_class

Money: stay happy without it, because if you do happen upon some, it’s never as much as you think. Unless of course you’re a bank, in which case gamble it anyway, because someone will come along and rescue you if you ever get into trouble.

My Exploding Money

I’ve been driving around quite a bit more than normal in the past few months: mostly the usual commute to work as well as visiting family in the North East. We’re up in Sunderland just once more before Christmas, so I can look forward to spending a bit less on fuel. What I hadn’t appreciated was exactly how much diesel I have been using recently.

A quick pre-amble to the figures below: every time I buy fuel, I fill the tank. I need diesel and it’s painful buying the stuff so why make it any more frequent than need be? I also write down the odometer reading and the amount of fuel used: this lets me keep track of fuel economy, which is a handy way of keeping an eye on how the car is running as a whole. I use Microsoft Money to keep track of the finances, which means I can lookup any transaction I’ve ever made since starting to use the program. That all sounds quite anal, but it’s my little world and I’m not harming anyone, so there.

I filled up on 4th June with the odometer reading 48,121 miles. I filled up again on the 9th and 19th June, then on the 7th, 14th, 19th, and 29th July. Next fill-up was 4th August, then a huge break until another tank was needed on 24th, and again on the 30th. I filled up again yesterday, with the odometer reading 52,677.

A total of 4556 miles in just 99 days (that’s just over 14 weeks). If I kept on driving at that rate, that’s an annual average of 16,800 miles: perhaps not huge by a sales rep standards, but still pretty high for someone who works at home at least 2 days a week.

What is distressing is how much fuel those 4500 miles had required: a shade over 500 litres (110 gallons). Painfully putting all of that into money equates to £650, and that doesn’t include the £60-worth that I hosed in yesterday: the vast majority of which is still in the tank. Ouch.

On the plus side, I have a very nice 54-plate Honda Accord which makes the driving quite pleasurable, even for long journeys. And yet, for such a big, comfortable saloon I consistently get 41mpg which I certainly can’t complain about. I wouldn’t gain a great deal of economy if I bought a small eco-hatch and then we would struggle to get all the baby stuff in when it came to the long northerly trips.

Another bonus is the wonderful i-CDTi diesel engine manages to kick out just 140g/km of CO2, which means I still get into the (relatively) cheap road tax band C. That’s “just” £120 per year at the minute, with the cost actually falling to £110 per year in 2009. Result.

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