Wednesday, January 25, 2017

Alarming Misinformation About Alarms

These days, the subscription model for businesses is where the money is. Making a product someone pays for once is so passé. Why settle for a one time payment when you could be collecting money month after month from your customers? Understandably, some consumers are concerned with this trend, so marketers like to point out all the ways a monthly subscription will give you more benefits and may, in fact, even save you some money.

Alarm monitoring companies are huge promoters of the latter. If you have a monitored alarm system, they point out, you will likely receive a discount on your homeowners insurance. One figure widely touted is a savings of up to 20%! Check out these claims (click the images to be taken to the quoted site):

Home Advisor - How Alarms Systems Add Value While Keeping You Safe

Home Advisor - 2017 Alarm Monitoring Costs

SafeWise - 8 Benefits To Owning A Home Security System

A Secure Life - Top 10 Reasons To Install A Home Security System

Always Remember Your Source

The claim that a monitored alarm system can save you up to 20% on your home owners insurance seems to come from a 2011 study conducted by the Rutgers University School of Criminal Justice. However, further examination will reveal that the study was paid for by the Electronic Security Association, a trade advocacy group for manufacturers and sellers of security systems. That's a pretty good reason to view the findings with a critical eye.

A widely used quote from the president of the ESA is that the insurance savings can be substantial enough to offset a portion of the monitoring costs:

Sounds good! I might be more likely to pay a monthly monitoring fee if I can recoup some of the cost via savings on my home insurance!

Turns Out, Those Savings Claims Are Wildly Optimistic

My house has a monitored alarm system and has had it since the day we bought it. The house was bought new and the alarm system was included, so I don't really have any installation cost to examine. However, I do pay a monthly fee for monitoring that runs about $37.75. I could pay only $32.75, but I cancelled my landline phone line eight years ago and had to switch the alarm system to a wireless receiver, which added $5 per month to my bill. The installation fee for the wireless receiver was $125, but I have long since recovered that cost from the savings I've obtained from not having a phone landline for eight years.

Several years ago, I thought about cancelling my alarm service. I even called up the monitoring company, but I was given a hard sell and was talked out of quitting. (I wasn't so financially savvy back then.) One of the things I remember the person on the phone telling me was that if I cancelled, they would have to call my insurance company and tell them, so my insurance rates would go up. That scared me - no one wants insurance rates to go up! It never even dawned on me that they didn't have a clue who my insurance company was, so they couldn't call anyone if they wanted to. Doh!

I Finally Crunch The Numbers

Fast forward many years to the present. Last week, I noticed my alarm panel was reporting an error code. I called and was told that my wireless receiver was no longer functioning. It used old wireless 2G technology and all the 2G cell towers in my area were decommissioned, so the unit had to be replaced with a unit that used the 3G network. I was told there would be a $79 fee for the change. I asked why I had to pay that, since it's their equipment, their service, and I had done nothing that required the change. I was put on hold and a few minutes later, was told that the fee would be waived. Score one for me.

Their brazen attempt to get me to pay a fee caused me to re-examine the whole alarm monitoring concept, so while I was waiting for the service tech to show up, I starting crunching the numbers.

Because my home owners insurance is billed annually, let's look at the alarm system costs on an annual basis. I pay $113.33 per quarter, or $453 each year to the alarm company. My city also requires all users of a monitored alarm system to pay a $10 annual alarm permit fee to my police department.

Total Annual Cost For Monitored Alarm: $463

My yearly homeowners insurance premium, including all discounts, is $635.06.

The discount I receive for having a monitored alarm is:


This was so far off from the "up to 20%" claim I had read, I actually called my insurance company to see if this discount was being quoted on a per month basis. Nope. That's per year.

My monitored alarm system is only giving me a 0.8% discount on my home insurance.

Is It Worth It?

No way. I'm spending $463 to save $5. Guess what service I just cancelled?

There Are Benefits - They Just Aren't Monetary

I'm not going to say that alarm systems have no benefits. My alarm system can be set so it beeps whenever a door or window is opened. This was really nice when my daughter was a toddler and we were worried about her walking outside without us noticing. The feature can also provide comfort when someone is home alone and worried about possible intruders.

My wife likes to open windows when it isn't too hot outside. Later, when it becomes too hot, I'll switch on the A/C. Because the control pad can tell me which windows are open, I use it to find and close any windows my wife might have opened to make sure I am not running the A/C with any open windows.

Additionally, an alarm system can provide security even if it is not monitored. If my alarm is triggered, an extremely loud siren goes off whether or not the system is monitored. That's going to scare away any thief.

The lack of monitoring does not make my system completely worthless.

It Comes Down To Your Peace Of Mind

Newer alarm systems can also monitor for fire, carbon monoxide, and all sorts of other dangers. Those features won't likely need to be monitored to work either. However, if you want the peace of mind that comes from knowing someone will call the appropriate authorities if your alarm is triggered, then go ahead and pay for a monitoring service. Just be aware of the true costs and don't be misled by inflated claims of potential savings.

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!