Wise savings vs. stupid savings.

A few weeks ago I griped about money being a frequent topic of next-to-coffee-machine conversations, while with time I come to think it is quite natural that people share their tricks how to spend less money, after all this is what a rational homo economicus does. But one can be thrifty which is commonly positive as a virtue and one can be a skin-flint, which is perceived as a shortcoming.

In many aspects of life humans can seek way to cut down on their spending, however each cost-cutting must be wise, i.e. not to cause us troubles, or incur additional expenses in the future. People pursue savings on nearly every step, hence below I share what I believe makes sense and what can make us regret.

Property purchase.

Wise savings:

- waiting for some time for an opportunity to arise (does not apply when prices are soaring), instead of buying in haste,

- handling the process without a property agent, whose value added is debatable,

- striking a decent trade-off between expectations towards a dwelling and budget for the purchase.

Stupid savings:

- looking out for a “slightly” worse location, where prices are more acceptable and then bleating about troublesome commuting, lack of infrastructure, etc.,

- finding a property whose location or layout or technical state or other features fall short of our expectations – the upshot is being fucked up every day by the dwelling – nevertheless in the era of expensive flats, limited creditworthiness, some concessions must be made.

Car and its usage

Firstly, think seriously whether you actually really need a car. Below a certain mileage fixed costs are high enough to justify switching to hire or car sharing or taking a taxi.

Secondly, reduce the number of vehicles in your household. I believe in Warsaw with decent public transport, one car is fair enough to be shared between spouses (and if necessary with their adult children).

Wise savings:

- buying a brand-new car (a compact one is fairly enough for 2+2 family) of mass-market brand once in 10-15 years (after that any vehicle will require high maintenance outlays on account of old age) and looking after it properly,

- investing in a garage, which is not just a convenience, but markedly reduces a vehicle’s wear and tear,

- repairing a car with spare parts produced by renowned manufacturers of aftermarket parts.

Stupid savings:

- having the car serviced by non-qualified mechanics and using cheap or second-hand spare parts – poorly looked after car will pay back with poor service,

- neglecting the regular maintenance or shrugging off defects (don’t play with safety, life and health are priceless),

- buying a used car at a bargain price – usually results in loads of money going down the drain for repairs.

Purchases of durable goods

Wise savings:

- think of number of functions of a device you actually need and you would actually make use of. Buy something which will be up to the mark, not above it

Stupid savings:

- buying stuff of poor quality whose reliability could be questionable. Far better to pay more once for a device which should serve you longer. Unfortunately you never know how quickly a defect occurs.

Everyday shopping

Wise savings:

- looking out for bargains,

- keeping up with leaflets of your nearby supermarkets,

- stocking up on goods which can be stored when they are sold up cheaply.

Stupid savings:

- buying food and other stuff of poorer quality at the expense of lower price.

Buying clothes, footwear, etc.

Wise savings:

- looking out for sales, bargains, etc,

- switching towards less known brands, for which you don’t have to pay for a tag (Polish shoes of broadly unknown brands do not get behind all-the-rage brands in terms of style and quality),

Stupid savings:

- buying shoddy things which will wear down quickly (I leave out here the matter of style) – you will pay several times for a few items which would be outlived be one high-quality item.

Travelling and holidaying

Wise savings:

- if I mention once again “looking out for bargains”, the post would get boring,

- go in low season if you can, if you are not constrained by school holidays or course of business within your company, June and September are great months for summer holidays.

Stupid savings:

- skimping on stuff that impinges your comfort – holidays after all are about rest, so standard of your accommodation and its location and other stuff should matter.

Though I am not yet involved in it, conceptually I have begun to advocate the economy of sharing. Economically, it pays off to rent an infrequently used item, instead of buying it.

And for the very ending, think twice whether you actually need what you want to buy. Maybe for some reasons it will not come in useful, maybe you can just borrow it.

(Not) homeless, (not) hopeless

Yet another post written to vent my anger and out of hopelessness. While you are attempting to succeed in something for months and fail to pull it off, fall over and then get up, the risk of growing weary increases, along with the risk of taking a regrettable decision.

It may sound like an absurdity (though I have heard some stories of people in a situation akin to mine), since if somebody sleeps on a heap of cash, they should simply buy a property, instead of picking and choosing endlessly. I realise I have precise expectations towards a flat I would like to own, each one I had found and wanted to purchase had some drawbacks, yet acceptable.

Since that update I found another four flats (which means one flat generally meeting my expectations per month, I suppose not a bad result).

Flat 1 in Kabaty had one disadvantage I could not get over, namely a pub with beer garden was run beneath its windows and balcony. I feared the noise and smell coming out of it and having taken advice of a few people who shared my reservations that residing there could become a nuisance, I abandoned it.

Flat 2 in Bielany was under construction (completion and handover planned for 4Q2018) and I fell in love with the layout of it. The price was acceptable yet the charm was gone when I cycled to see the building and see that:
- the amount of light coming into the flat was grossly reduced by a nearby 15-storey block of flats,

- the flat was just next to a street, busy and noisy even on Saturday afternoon during the 9-day April-May weekend.

On top I learnt from the developer the flat would be just above the grocery store.

Flat 3 in Natolin had a nice layout, was in a lovely building in a lovely location, but was completely ruined by previous tenants, so lots of money would need to be put in to restore it. Sadly, the owner got stuck to the desired price of PLN 9.3k per sqm and asserted he would not let anybody beat it down even by a single zloty. The flat remains unsold until now.

Flat 4 in Kabaty was found quickly after the comeback from holidays and seen immediately. The first impression was that it was quiet, sunny and had large potential (also ruined by tenants and in need to comprehensive refurbishment). My father got involved in preparing a renovation calculations, however the flat was given up not for cost and hassle reasons, but because of poor layout which fully transpired at the stage of planning / designing (bathroom would fit nothing except for shower booth, washbasin and toilet bowl, kitchen also gave little room for manoeuvre, corridor would fit nothing expect for a closet) and location on second floor without a lift.

In the meantime, media reports of skyrocketing property prices and shrinking supply began to flourish. Indeed, demand is still propped up by people withdrawing money from bank deposits (oddly enough my bank savings fetch 40% higher return that a year ago despite central bank rates unchanged, only thanks to increased competition to attract depositors), on top banks have loosen their mortgage lending criteria. Supply of flats on the secondary market is constrained by owners who believe it pays off more to let a flat rather to sell it and put money on a low-interest bank account.

To find out what is actually happening on a property market, you can draw on many sources. I find bleating developers, property agents, loan brokers and financial advisors less credible that National Bank of Poland and AMRON-SARFIN databases. The two transaction registers and still patchy, since NBP database relies on data voluntarily passed by property developers and estate agents, while AMRON-SARFIN base is compiled by mortgage-lenders, so flats purchased for cash only fall out of the sample.

NBP data which differentiate between primary and secondary market indicate that transaction prices on secondary market indeed went up a bit, yet were higher in mid-2017 than recently and that the gap between asking prices and transaction prices increased. No wonder. If in any newspaper and on any webpage you can read the prices are going up, vendors naturally reach out for more.

AMRON-SARFIN data which show the broad picture of the market astonishingly indicate a minor q/q decline in Warsaw in 1Q2018 which might be attributable to the seasonal factor and some transactions under MdM programme. Year-on-year change in flat prices is no longer close to zero, but still far from 10% of which those who benefit from price incline speak.

Some of you could ask why have I focused on secondary market and does not want a brand-new flat. It is not even a matter of waiting or of higher prices (here the 5% y/y hike is a matter of fact) or even idiotic layouts. Those factors do matter, yet the biggest risk which I observe as bank analyst (having insight into some information before they hit the headlines) is the risk of construction not being completed, on account of cost pressure on building materials and labour force sides. I know of some developments where construction works have been halted and an investor faces a problem. The phenomenon is already signalled in the press, but I fear also somewhat shrugged off.

Tensions in the economy are more and more visible, though officially the economy is steaming ahead at full blast. The currently observed salary growth, not followed by inflation pressure is not sustainable and it is a matter of months or quarters before the economy overheats. I also believe the National Bank of Poland is doing an evil job of not jacking up interest rates, when the economy would easily withstand tighter monetary policy but threat of imbalances would be fended off. As I pointed out several times, if the price of money is too cheap, those in possession of surpluses of cash would flee low-earning investments and chase higher returns. Currently, such are offered by property rental, but with:

- growing supply of flats for rent, rent rates are unlikely to go up,

- if flat prices rise and rent continue flat, yields will go down,

- on top if interest rates go up and banks keep on fighting for deposits, the gap between nearly risk-free bank deposit and risky property rental would narrow down.

Since most of flats purchased today are not bought for own use, but to be let to someone else, a sell-off is conceivable one day…

But on the other hand, the market can stay irrational longer than you can stay liquid. Poland is growing richer and one of evidences of it is the increasing number of people who can afford to buy properties out of their accumulated savings only. Besides, in terms of number of square metres which can be purchased for an average salary, Warsaw still ranks among the most affordable property markets in Europe. This makes sad news, if London or Paris appear as gloomy benchmarks.

Eurotrip 2018 - part II

As I was looking for accommo-dation in Portoroz, to ensure the lodgings would be located near a beach. Quite easily I found one some one kilometre from the sea shore. Sadly (or not), I forgot to check the terrain shape. As it turned out, the Slovenian coast is featured with the highest cliffs by Adriatic sea and each walk to the beach or to the city centre involved a steep descent and then a steep ascent back. According to my estimations, the higher parts of Portoroz and nearby towns are close to 100 metres above sea level. The first climb was a nasty experience, however with each consecutive day we grew more and more seasoned and fitter!

Visiting the Adriatic seaside in the third decade of May has most advantages of low season. Though on Saturday and Sunday some locals and probably some visitors from central parts of Slovenia, popped over for a weekend rest, droves of sun-thirsty tourist were unseen. On Thursday the beach looked like that. The snap is somewhat misleading since we were not the only holidaymakers around. There were less than plenty but more than few tourists from Germany (judging by licence plates of cars, not only language audible) and Russia.

After a day of sunbathing and swimming in the sea (water temperature around 20C, similar to what one can enjoy in Polish lakes in July or August, so bearable, not yet comfortably warm) we marched towards Piran, the historic Italian town which in the wake of political decisions was adjoined to bygone Yugoslavia in 1954. The architecture reminds of Italian roots of this place. The town has its climate, especially near sunset (a pity we did not take an evening trip there), but when the heat reaches +30C sightseeing conditions are not at their best, yet we were in Mediterranean climate, it should not have been chilly actually. 

Each evening we took a bottle of local wine (less than 2 EUR per litre, an excellent beverage for my not refined taste) and sauntered to a promontory to observe the sun going down into the sea. Unfortunately, each day the western sky was kind of cloudy and clouds lingered above the horizon, so we missed the breathtaking sight, being out of luck just as in January we missed out on Northern Lights, but a week after we few back a massive aurora explosion was witnessed in Tromso. Yet sipping wine and staring at the smooth sea was a sheer bliss anyway.

Monday, 28 May 2018

After spending four full days in Portoroz, we headed back towards Poland. The first stop, recommended by a friend who had also travelled to Slovenia by car in 2016, was Bled lake, one of two picturesque lakes (the other is Bohinj) in the central, hilly part of the country. Out stopover there lasted just an hour, enough to catch the climate of the place and grow fond of it, yearning to come back for more one day.

On the same day we turned up to Maribor. The accommo-dation there, a three-star, just refurbished apartment one mile from the very city center set us back mere 42 EUR (cheapie!). Maribor is the second biggest city in Slovenia, yet it smacks of a bigger town and I must say one afternoon is absolutely sufficient to get about it. We roamed around town, but climbed up a hill called "pyramid" (due to its shape), from which we could lap up another city view from above. We pitched up atop more than one hour before sunset (not the most magical time of the day), yet gazing at such landscape compensates the strain ascent involves.

Tuesday, 29 May 2018

The last stop (actually the penultimate one, before spending two days in Bielsko-Biała again) was the capital of Slovakia, which was the let-down of the trip. My memories are negatively skewed as all cards were stacked against us. As we were driving in, a massive downpour hit the city, then it cleared up, but air humidity was far higher and temperature hit +30C - not a conducive temperature for sightseeing. Our hotel (Hotel Turist) turned out to not to have undergone a renovation since the split of Czechoslovakia (in Poland one would struggle hard to find hotels where time stopped before the collapse of communism), odour of cigarettes was in the air, breakfast was worse than indecent. Fortunately we just stayed one night there (but escaped on Wednesday before 8 a.m.) and the location was two miles from old town. I did not even bother to take out a camera too many times. Had I taken pictures of Bratislavia and stripped them off advertisements and modern cars, the photos would have been easily eligible for Michael's old-school photo challenge. Truth be told, I recommend visiting Bratislava to nobody.

Eurotrip 2018 - part I

Decided to split the blog coverage of the recent holidays into two posts (expect the second chunk and snaps of the story next Sunday).

I had hatched the idea of taking longer trip by car several years ago, yet this year I managed to put it into practice. Within 12 day we covered 2,583 kilometres through four countries, visited three capitals, did not fall into troubles…

Day 1, Sunday, 20 May 2018

We set off to Bielsko-Biała where my girlfriend’s parents live. A visit there was our first stop on the way south. The drive would have been a smooth one, had it not been for being stopped by the police for speeding (ignored the 70 kmph limit somewhere between Częstochowa and Katowice and carried on with 100 kmph on cruise control) – upshot: scored 4 penalty points and the first fine in my driving career, 100 PLN down the drain, paid with credit card on the spot (traffic patrol officers had had payment terminals since February 2018). Nevertheless, I have to boast about economical driving – fuel consumption over the whole trip – mere 6.11 litres per 100 kilometres (I drove 100 – 110 kmph most of the time). Had it not been for air-con on, my Megane would have consumed less than 6 litres.

Day 2, Monday, 21 May 2018

We headed for Vienna early in the morning and pitched up to our hotel, Ibis Budget Sankt Marx, just after 1 p.m. A long afternoon is far too little to do the decent sightseeing in Austria’s capital, therefore one day I will definitely have to return there. My greetings to Bob, who has virtually kept me company and advised where to go!

Hundertwas-serhaus was the first stop of our Vienna-wide journey. The concept’s originator claimed he had designed it not to let anybody build anything uglier in such place. Actually I find the idea quaint, but rather as a tourist attraction, not as a place I would like to reside in (those who know me know I am fond of order, not chaos).

From the housing district we headed for Schoenbrunn palace. Our underground ride was impeded by railway modernisation, forcing us to take part of the route by bus. We roamed around the scene, dropped in on ticket office to learn our museum entrance time would come in an hour. We spent that time strolling around huge gardens behind the palace (this was the first hill to climb during the holidays).

After eating out a hearty dinner (was not a lunchtime anymore) we made our way towards Prater, the famous amusement park. We could not do without buying tickets for the Riesenrad wheel, from top position of which tourists can enjoy sights of Vienna’s panorama. We timed our visit there to roughly match with the sunset, yet found ourselves at the top more than half an hour before sun went down. Nevertheless, the views were memorable (even in camera’s eye).

As it was getting dark and we were already tired out, we took a short walk around the centre of Vienna, here we sauntered past Graben, but also saw from outside St. Stephen’s cathedral. Anyway, we could have done with at least a day of intensive sightseeing in Austria’s capital.

Day 3, Tuesday, 22 May 2018.

After a decent breakfast in the hotel, we set off to Ljubljana, Slovenia’s capital. That city is far less remarkable than Vienna, with less than 300,000 inhabitants, is the biggest city in Slovenia anyway. Our lodgings was mere 3 kilometres from the city centre and was surrounded by terraced houses whose dwellers grew vegetables in their gardens. The city was small enough for us to get about it on foot only (buying bus tickets is quite complicated). Here, the snap from our stroll – castle hill seen in a distance.

There was no excuse not to scramble up the steep castle hill from which a beautiful panorama of Slovenia’s capital splays out. The weather was conducive and actually this was the only day of our trip when temperature in the afternoon oscillated near pleasant +20C.

Day 4, Wednesday, 23 May 2018.

Early in the morning we spontaneously decided to take a stopover in our 130-kilometres trip to our destination, to see Postojna caves. The attraction is absolutely breath-taking and tough quite expensive (spent over 70 EUR for tickets, audio-guide and parking), worth visiting. Snaps taken with a camera without a tripod and proper light enhancement do not render beauty of the place. If you happen do visit Slovenia, Postojna cave is a must.

To be continued :)