Wednesday, 23 July 2008

We Wasted $100 Today!

One-hundred dollars is gone! A series of unfortunate events caused it. Firstly, I have a bank account with the Commonwealth Bank (ASX: CBA). CBA has treated me well ever since I was a little boy. My dad started up an account at this bank for me. The main problem with these accounts is that they charge $5 per month in fees. Since I was a university student these fees are waived. However, since my days as a student are numbered, these $5 will come back soon. Therefore, I tried to fix the problem by signing up for a cash management account from CommSec. I figured I might as well sign up and check it out since everything is free and there is no monthly fee for the cash management account. I was asked to transfer some money from my old CBA account to my CommSec cash management account, so I elected to transfer $10. When I did this I had about $60 in my bank account, so everything seemed fine. However, it took ages for CBA to get everything working and by the time everything was ready there was only $8 in my bank account, which meant that I was overdrawn by $2 and therefore the Commonwealth Bank will charge me $30 this Thursday after I get my pay. I'm pretty annoyed because I spent all this time trying to avoid fees and then in the process of trying to avoid fees I overdraw and get slammed with fees anyway. My brother blames me for not being organized with my cash and my dad blames me for not keeping enough cash in my bank account just in case. However, I have always believed that cash is not king and that holding money in the form of currency is a bad idea not only because of loss of investment opportunity but also because of inflation. This is why I always try to get rid of cash as soon as I get it. I wouldn't mind putting my money into the Commonwealth Bank's mutual funds (those managed by Colonial First State) but the problem is that many of them seem to have high fees. As a rule of thumb, do not invest in any managed fund or mutual fund that has MERs greater then 1 per cent.

My family lost another $70 because this week my mom got a second-hand car. It's a 7-year-old car. In order to get the car we have to trade in my mom's old car. However, my mom accidentally filled the car up with petrol and now we are going to give the car to the used car people with a free tank of petrol. One tank of petrol is worth about $70. We tried to siphon the petrol out but the car we have seems to have some mechanism that prevents that.

What surprises me is just how much pain my family and I feel when we see for ourselves the fact that we have lost money. However, both my parents and I have assets in the form of mutual funds and property that fluctuate in value wildly, and yet because all this is relatively invisible we don't feel any loss aversion or emotion.

Update 25 July 2008:
I have been paid from my employer and it seems as if the Commonwealth Bank hasn't charged me any overdraft fees yet. This is slightly strange, but maybe it's because the money transferred didn't actually go out of CBA since it was transferred between NetBank and Commsec, which are both owned by CBA.

Commsec looks interesting. They give cheap trades ($20) but I am a little bit wary about trading. I remember last year when I lost some money buying and selling on the ASX. I might dip my toes in later when I feel more comfortable.

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