Wednesday, January 11, 2017

Lessons From An Italian Restaurant

Like many teenagers, I worked a part time job while I was in high school. I needed to earn money to pay for my car, gas, and insurance, plus some extra to finance my music habit.  One of the first jobs I had was working as a busboy in an Italian restaurant. I learned things in that job that still serve me well today.

A restaurant works a bit differently today than it did back when I worked in one. Today, you might have a waiter take your order and a food runner bring your food and drinks out to you. The waiter might clear your dishes or another person might do that. The waiter might take your check or someone else might do that. So, today you could have up to 4 different people handling your table. But back in the day, restaurants only had two people working a table – the waiters and waitresses and busboys (and busgirls, but where I worked, they were all male). The person who took your order was the one who brought you your food and drinks and took care of your check. The busboys brought you bread, filled your water glasses, cleared your plates, and cleaned and set the table for the next group when you were done. It was hectic but when things were running smoothly, everything flowed well.

What I Learned

Hierarchy – The restaurant staff could be divided into two groups – those that interacted with customers (“front of the house”) and everyone else (“back of the house”). Each group had its own hierarchy:

Back of house
Head chef
Sous chefs

Front of house
Wait staff

The higher up you were in the hierarchy, the more respect you had, the more you were listened to, and the more likely the manager was to accommodate your requests for time off, specific work shifts, etc. Right or wrong, fair or unfair, that's how things work. The more important you are, the more likely your requests are to be fulfilled.

Customer Service Can Suck, But It Teaches Valuable Skills - I firmly believe that everyone should work in some sort of customer service position, be it waiter, fast food, or whatever. Learning how to deal with a wide range of customer behavior is an important skill. Most of the people you'll deal with are nice, but you will come across those who are unreasonable or demand the impossible or are just plain mean.

Learning how to deal with those types of people with a smile and, more importantly, learning how to prevent them from ruining your day, is important. As a bus boy, I dealt with angry diners and diners that were impossible to please (and these were often the same person). As you will learn, sometimes, you have to grin and bear it. As an added bonus, later in life, you might think back to your time in that position and think twice before flying off the handle at someone trying to provide you service.

Being Nice Pays Off - Closely related to the above, once you learn how to be nice, you'll start to see the benefits of it. Working as a bus boy, if I was pleasant and nice to the customers, they would often leave a bigger tip. Because the wait staff split their tips with their busboys, that meant more money for me. That was a direct, immediate payoff to being nice and a lesson that was pretty hard to miss.

But being nice wasn't only about monetary benefits. Each busboy had his favorite waiter or waitress to work with and it usually had nothing to do with how much those servers tipped out at the end of the night. The waiters who were most coveted were those that were nice, those that didn't yell at you when you forgot something or those that asked nicely for things instead of demanding them. They may or may not have been the best tippers, but they were the ones we wanted to work with because they made working so much more pleasant. And, as a result, we would often go out of our way to help them with stuff that wasn't normally our job. If they were falling behind and needed to make salads or soups for a table, we'd do it, and we'd do it with a smile because we wanted to help them.

To this day, some 30 years later, I still remember Mark and Andrea as my two favorite waiters to work for. I can't remember any other waiters from my time as a bus boy, but I remember those two because they were nice.

Don't Leave Stuff On The Table - Everyone looks out for themselves. If you drop $5 on the street and don't notice, someone behind you is gonna pick it up and, more often than not, pocket it. No one is going to give you money or offer you a better deal on something just for the heck of it. If you pay too much for something, it's your loss and their gain. Sometimes it doesn't take much to get a better deal (indeed, sometimes all you have to do is ask), but if you never ask, you aren't going to get it. This is point of my Don't Leave Money Of The Table series.

At my Italian restaurant we, naturally, served pizza. People would often not finish their entire pizza and ask for a box to take the remaining slices home. Sometimes when they left, they forgot to bring the box.

Now, the bus boys I worked with, including myself, were teenage boys and teenage boys are always hungry. When someone left a box of pizza on the table, that table was immediately cleared and the pizza box taken in the back to the bus boy's station, where we quickly devoured the contents. I mean, it was gone instantly. We had diners who hadn't even made it out to their car before realizing they left their pizza inside, then come back in and ask for it. Too late. We told them we had already thrown it in the trash, but the reality was, it was eaten. Be sure to seize your opportunities when they come up. Don't assume you can get them later.

And never leave pizza behind.

Wednesday, January 4, 2017

Goal Update: End Of December 2016

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of December, 2016
Current value: $28,584
Change from last month: +$2,827
Percent of Goal:  26.29%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I finally saw a good sized increase this month - almost $3,000! Most of that was due to Realty Income stock rebounding a bit. However, I also changed jobs at the end of December and I have used some of my increased income to up my monthly Tesla savings. I also received some cash for Christmas gifts that I funneled towards the car.

I'm finally over the quarter way mark!

Net income this month from my online courses was $150.29. My hard money loan generated $133.33 in income.

I've got a fair amount of cash sitting in my Tesla fund. Normally, I would buy stock with it, but my hard money loan is coming due in February and, at that point, I'm going to make another loan. The loans I make last for one year, so my plan has always been to invest funds throughout the year in stock and then once a year, when I make a new loan, roll the funds from stock into a new loan. (I earn a higher interest rate from the loan than from the stock dividends, which is why I do this.) Realty Income stock has been a bit volatile the past couple of months, so rather than buy more and possibly see it drop in value by the time I have to sell in February, I'm just going to sit on the cash.

I spent almost half of December on vacation, so I wasn't paying close attention to my finances.  As a result, I don't have much else to report here. (We did visit that castle in the picture from my last blog post - Castle Neuschwanstein. It was amazing! Once things have returned to normal and I've caught up on things, I'll post some pictures from the trip.)

Net Worth Update

For December, our net worth rose by $26,063. I'm pretty surprised by this because we took a two week vacation in Germany. The airfare and lodging expenses were paid previously and didn't affect my net worth this month, but we did spend a fair amount on gifts and food, which did.

I changed jobs at the end of November, so the pension plan I had at my old employer is going to be rolled into a new IRA account. When I left the company, they issued me a statement on the value of my pension account. The value went up from the $11,000 I had been using here to a new value of $16,000, so that accounts for $5K of my gains. It also looks like the value of my house increased, according to Mint.

November 2016December 2016
Note: categorizes our HELOC as a credit card debt, not a loan, hence the apparently high credit card balance.

If you have any questions or suggestions for topics, please drop me a line in the comments section!

Wednesday, December 21, 2016

On Vacation

No post this week or next, as I'm off on vacation in Europe.

Happy holidays! See you in 2017!

Wednesday, December 14, 2016

This Christmas, Ask For Higher Credit Limits

Your credit score is an important number. We all know that is the number companies look at when you want to get a loan or open a new credit card. But did you also know it can affect how much you pay for home and auto insurance? Did you know someone with a poor credit score can pay twice as much as someone with a high credit score for the exact same insurance coverage? Check out this post from FinancialLibre for more info. For that reason, even when I am not looking to open any new lines of credit, I still work to keep my credit score high.

As part of my mission of retaining a high credit score, once a year, I contact my credit card issuers and ask for a credit line increase. How does this help my credit score?

Credit Utilization Ratio

One of the variables that goes into the calculation of your credit score is something called your credit utilization ratio. This can be calculated on a per-card basis (that is, the credit utilization for each card by itself) and overall (based on all your credit cards). Most credit scores use a combination of both ratios to determine your score. The lower this ratio is, the higher your credit score.

How It Is Calculated

As with all things credit cards, math is involved. But it's easy math, so don't fret.

Your credit utilization ratio is simply the amount you have outstanding on a credit card divided by the total amount of credit available on that card. Let's look at a single card first. Suppose you have a credit limit of $1,000 and you have a $250 outstanding balance on that card. Your credit utilization ratio for that card is 250 / 1000, or 25%.

Easy peasy.

Now let's look at your overall credit utilization. Suppose you have three credit cards with the following credit limits and balances:

CardOutstanding BalanceCredit Limit
Card 1$250$1,000
Card 2$700$1,000
Card 3$1,400$2,000

First, let's look at the individual credit utilization ratios for each card. This is done just like we did previously for the single card. Here's the table updated to include that:

CardOutstanding BalanceCredit LimitC.U.R.
Card 1$250$1,00025%
Card 2$700$1,00070%
Card 3$1,400$2,00070%

To find our overall credit utilization ratio, we add up all our outstanding balances and divide by the sum of our credit limits:

CardOutstanding BalanceCredit LimitC.U.R.
Card 1$250$1,00025%
Card 2$700$1,00070%
Card 3$1,400$2,00070%

So looking at this, we can see you are using more than half of the total credit extended to you.

How Does A Credit Limit Increase Help?

So how does increasing your credit limit help your credit score? By increasing your credit limit, your credit utilization ratio will decrease - even if your outstanding balances do not change! Why? MATHS!

By increasing your credit limit, you are increasing the denominator of the ratio. This means you are dividing by a larger number, which results in a smaller number. Let's say we called up all our credit card issuers and got a $500 credit limit increase from each of them. Here's how the table looks now:

CardOutstanding BalanceCredit LimitC.U.R.
Card 1$250$1,50016.67%
Card 2$700$1,50046.67%
Card 3$1,400$2,50056%

Look at that. Even though your outstanding balances did not change, your credit utilization ratio for each card dropped, as did your overall credit utilization ratio! Because all of these figures are used to calculate your credit score, decreasing any or all of them, will increase your credit score.

In Practice, It's Not That Simple

There is one other thing to watch out for. Another part of your credit score is based on how many recent "hard" credit inquiries you have. A slew of credit inquires in a short amount of time will drop your score because it could indicate you are opening a bunch of new credit accounts. How many is "a slew" and how long is "a short amount of time?" That's a secret. The credit reporting agencies don't share that information. The Illuminati forbid it.

So what should you do?

First off, some credit cards don't run a hard credit inquiry when you ask for a credit increase. You can tell if they are going to because they have to ask your permission before doing so. Go online to your credit card's website. You should be able to find an option to request a credit increase. (Note, not all credit cards allow you to do this online. One of mine required that I call the number on my card.) You can go through the process of requesting an increase and, if they ask for your permission to pull your credit, you can simply abandon the process at that point.

Or, go ahead and let them. If you feel your credit is good - or at least, hasn't gotten worse since you opened the card - or if you are not planning on applying for any new credit soon, go ahead and let them pull your credit. If you aren't looking to get a new loan or credit card in the near future, any small hit your score might get from the additional credit inquiries should be gone after a few months pass.

No matter which method is used, you should get an answer to your result immediately.

When you go through the process, you'll need to provide your current income and your current rent or mortgage payment amount. Some cards will ask what you want your new limit to be and some won't.

My Results

My wife and I have our own credit cards - no joint cards. There is no real reason for this. It's just how things started out because we lived together for a while before we got married and combined our finances.

Bank Of America Travel Rewards Card - This is a new card I got about 6 months ago because I'm going to be going to Germany soon and this card has no foreign transaction fees. I was able to request an increase online. I asked for a $1,000 increase and was given a $3,000 increase. Because this is still a fairly new account, I was surprised I got anything at all.

Chase Freedom - I was not able to do this online and when I called the number on my card, they said they had to do a hard inquiry on my credit, which I consented to. I did not ask for a specific amount of increase. They ended up increasing my limit by $4,600 - exactly 20% of my old credit limit.

Citi Black Diamond Visa - This is my wife's card. I was able to request the increase online, but they asked to do a hard inquiry on my wife's credit report. I consented. I asked for a $1,200 increase and they said I would get a response in a few days. Less than 24 hours later, I got an email saying I was approved for the amount I requested (which was about a 20% increase).

My Discover card - I asked for an increase online, no specific amount. They did not check my credit and I got a $500 increase. This was the smallest increase I got and I wonder if it was because I rarely use this card.

My wife's Discover card - Jackpot! I was able to request this online and they did not ask for a credit report. I did not ask for a certain amount and she end up with a $5,000 increase! That represents a 33% increase from her old credit limit!

Your Mileage May Vary

I should also note that both my credit score and my wife's are currently 800 or higher, so we're in the "Excellent" credit rating range. We also never carry a balance on our credit cards, so this process will likely have minimal impact on our scores. So why do I bother?

I look at this as preventative maintenance. The future is uncertain and you never know what may happen. It's easier to get credit when you don't need it than when you do, so I have a reminder in my calendar to do this every year in November.

If you are trying to increase your credit score, this is one method you may want to look into.

Does anyone else do this on a regular basis?