I’m always intrigued by advice that goes against conventional wisdom.  That’s not to say that I’ll necessarily follow or advocate using such advice, but considering alternative points of view can either strengthen your conviction in your current course of action or open up superior alternatives.  The specifics of one’s situation can also lead to a solution that wouldn’t necessarily benefit the majority of people.

I recently picked up a few personal finance books at my library’s annual book sale.  For a dollar a bagful, I grabbed any that looked even slightly interesting.  One of the books was an older title, How to Get What You Want In Life With the Money You Already Have by Carol Keeffe.  The non-conventional advice was that you should pay the minimum on your credit cards.

It took some restraint to continue reading after seeing that advice in print, but following the author’s logic there may be cases where that is an appropriate course of action.  Her basic premise was that

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As regular readers have probably picked up on, I’ve been in the process of relocating once again.  This should be the last move for a very long time, perhaps ever.  I loved my time in the Midwest (and it certainly had its advantages), but I’m happy to be back in New England.  While many costs between the two locations are similar, there are a few differences worth considering.

Housing

This is the major difference.  In the Midwest, people complained about the high cost of housing, but they really had no idea how inexpensive it was.  One woman lamented that “you can’t even get a starter home for under $60K any more.”  I hate to tell her, but a comparable home here in New England costs upwards of $300K.  Out there we built a brand new, 5 bedroom home with all the upgrades for just over $200K.  Here we found a wonderful 4 bedroom home, built in the early 70s, that cost well over twice as much.  My mortgage payment basically tripled.  Higher property value also means

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It seems as though many in the personal finance blogging community enjoying playing disc golf, and I am no exception.  I am blessed to live in one of the greatest small cities in the country for disc golfers, with many beautiful, free, and challenging courses.  In fact, the disc golf courses here helped my wife to sell me on the idea of relocating.

As I was playing last week, it crossed my mind that many of the lessons I’ve learned playing disc golf are highly applicable to personal finance.  Here are some that come to mind:

Until It’s in the Basket, The Hole Isn’t Done

It’s easy to lose focus on short putts, because they seem so easy.  What happens as a result?  Some easy birdies become pars and some sure pars become bogies.

Finance Implications: You can’t half-heartedly track your finances and assume everything will be OK, stop managing your investment as retirement nears, or count your profits before you sell a stock.  Losing focus before any of these tasks is fully complete could allow things to quickly get out of control.  In that sense, as the end of an effort approaches, we should focus on it even more intensely.

When Conditions Change, So Too Must Your Approach

I’ve played the same hole a hundred different ways based on the time of year, wind, how I’m feeling that day, or simply due to the fact that my capabilities change as I age.  A hole in one is so hard to repeat because even if we do everything the same internally, external forces are at work.  Understanding those factors, and modifying your approach, is essential to finding continued success.

Finance Implications: Managing your money in a bubble doesn’t make sense either.  You may choose to increase your emergency fund as unemployment rates fluctuate , invest more when market conditions are favorable, prepay your mortgage when alternative investments are less favorable, or reallocate your portfolio as you age.  There may be times when you cut your budget to the bone and others when a little luxury spending will be allowed in.  Learning to see that conditions have changed, and adapting your strategy for the new reality, will help to keep your finances on track.

Don’t use a Hydra on water holes

The Hydra is one of the few discs with the apparently desirable ability to float.  This makes it the perfect disc for holes with large water hazards, right?  Wrong!  Using a disc that floats

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This week’s book review is Right on the Money by Pat Robertson.

The first thing many readers would probably want to know about Right on the Money is the amount of spiritual influence found in its pages.  Author Pat Robertson gained fame as a televangelist, founding the Christian Broadcasting Network and hosting The 700 Club.  Right on the Money is not at all preachy.  While Robertson’s beliefs are certainly evident within the book (particularly in the introduction and the chapter on families), the book reads much more like it was written by a true financial expert with strong spiritual beliefs rather than a preacher who also knows something about finances.  Robertson balances his actions (”In my financial planning, giving takes precedence”) with the caveat that you may have different priorities and should tweak his generalized advice to your particular situation.  In one part, he specifically states that an implementation strategy is intentionally omitted, since you’ll need to tailor that to your situation.

The book starts with a concise summary of how the financial crisis occurred. So few people realize the chain of events that led to our current economic state that many would be well serve to read the book just for this point. I liked this book right from the start.  To paraphrase an early excerpt: “Ignorance is no excuse….nor has it served finances well.”  I couldn’t agree more.

Robertson advocates using the

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Many readers of Richer by the Day would be surprised to learn that I have an iPhone.  Isn’t the iPhone the gold standard example of exorbitant luxury spending totally at odds with someone who blogs about personal finance and frugality?  It turns out that my iPhone actually costs a lot less than you would think due to the many ways it saves me time, money, and even electricity.

Before we begin, note that I didn’t say the iPhone pays for itself, but that MY iPhone pays for itself.  Your use, lifestyle, and alternatives could make it even more cost effective for you or a horrible waste of money.  Here is the analysis for my situation.

Background and Assumptions

The smallest talk plan has almost always been sufficient for my cell phone needs.  In this analysis, I’m comparing the cost of my previous phone service to the iPhone.  My first assumption is that I need a cell phone.  My old Verizon plan came with a free phone and gave me 450 minutes plus 250 TXT messages for $40 + $5 + taxes and fees.  A 20% discount through my employer made my monthly bill $43.  The iPhone 450 minute plan, 200 TXT messages, and required Unlimited Data plan costs $40+$5+$30 + taxes and fees.  I again receive an employer discount (17%) so my total bill is $72 per month.  So the premium I pay for having an iPhone is $29 per month.  That’s the expense I’m trying to justify.

There are obviously some apps that save me money directly such as

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There are many different types of energy audits you can perform in your home.  I wanted to determine the cost of unused electronics, known as phantom energy use.  This includes both the cost of devices turned off, but still using power and those that are on (or in standby mode) despite not being used.

I focused my efforts on things that I could change with little or no impact to my life.  An example is the TV I have in my guest room.  Leaving it unplugged, versus plugged in but off, wouldn’t affect my life since that TV is only used when visitors are here.  Plugging it in before they arrive would take minimal effort.

The Device for Testing

For my testing, I used the P3 International Kill a Watt, model P4400.  This energy monitor allows you to measure the kWh (and more) of any devices connected to it.  By using a power strip, you can measure multiple devices.  Since it cost about $21, I was hoping to be able to identify

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Buy and Hold is Dead.  So reads the headline across blogs, discussion boards, and print media.  Before you send your condolences, let’s take a closer look at the rationalization driving the obituary and whether or not it warrants acceptance.

First, we have to remember that Buy and Hold means different things to different people.  For some, it means buying a stock you like and never selling it.  For others it means buy and homework (a Cramerism) meaning buy a stock you like and hold it until the reasons you liked it have changed.  Still others concede that since they can’t beat the market, they’ll buy low cost index funds to match the market for as long as they hold them.

With market indexes hovering around 10 year lows, I suspect that many people who say that Buy and Hold is dead mean that this last definition of Buy and Hold is dead.  Of course, using that definition, Buy and Hold can never be dead because even with the terrible performance of late, index investors still achieved their goal of matching the market.  Even so, let’s look a little more closely.

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Even with the gains in the stock market over the past week or two, we are still down considerably from the October 2007 peak and basically flat for many companies over the past decade plus.  This, coupled with the sagging economy and irrational pessimism towards the stock market, has caused some to claim that buy and hold is dead as an investment strategy.  I want to remind everyone of a common flaw in comparing recent performance to historical returns.

As John Bogle reminded us late last year, roughly half of the commonly touted 10% historical return of the stock market is comprised of dividend income.  You might look back on the last 10 years and say that we’re under-performing historical returns by 10% per annum, but when dividends are considered we’re not nearly that bad.

Consider the case of General Electric, a favorite among large-cap dividend investors.  GE has recently been trading around $10 a share.  It last traded around a split-adjusted price of $10 in September of 1995.  So you might conclude that an investment in GE for the last 13.5 years earned you a big fat 0% per annum.  Considering dividends changes that conclusion entirely.  Each share you bought for $10 in September of 1995 would have paid you

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My post, Should the Penny Be Eliminated, remains one of the most popular of all time here on Richer by the Day.  With that in mind, I thought I’d cover whether the Dollar bill should be replaced by a Dollar coin.  Speculation is growing that the Dollar bill’s days may be numbered.  Previous efforts with Dollar coins, including the current Presidential series, are not likely to thrive as long as the paper currency remains.

Unlike the penny, which costs more than face value to manufacture, the production cost of a Dollar bill is only about 4¢.  Though Dollar coins cost about three times that amount (actual cost varies with spot metal prices) the much longer lifetime of coins makes them a more cost effective option.  The generally touted statistic is that Dollar bills wear out in an average of 18 months, versus 30 years for coins.  The estimates of cost savings from using coins vary, but a 2002 Government Accountability Office report put the number at $500 million a year in production costs.

Typically cited reasons for not changing include the weight and bulk of carrying coins, the costs to retrofit automated coin readers and vending machines, startup costs to transition to high volume coin minting, and the difficulty of discriminating the Dollar from other coins.  This last fact was a big problem with

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Daylight Savings time begins at 2AM on March 8th here in the United States, so advance your clocks one hour ahead before bed on the night of Saturday March 7th. 2009 is the second year of a provisional expansion of the daylight savings schedule.

Daylight savings time began as an energy reduction measure and that primary reason continues to be cited today. The basic idea is that by shifting time by one hour, more of the natural light of the day will be available during the afternoon hours. This not only gives workers sunlight for outdoor activities during non-work hours, but also reduces the need for artificial lighting in the evening. Having that extra hour of sunlight during the afternoon, as opposed to the early morning when many people are still asleep, seems to be a reasonable idea.

The true economic benefits of daylight savings time are highly controversial. First, artificial lighting accounts for a significantly smaller percentage of our energy usage than it did when daylight savings time began in the United States in 1918. Also, recent advances in compact fluorescent bulbs even further reduces the cost of lighting. Second, many of the benefits seen by one sector of the economy are offset by declines in other areas. Outdoor equipment manufacturers and leisure facilities certainly stand to gain from the extra afternoon sunlight. But indoor entertainment business likely suffer proportionally.

Even if the effects of daylight savings time are a wash economically, the average citizen is probably still in favor of the shift. Since the standard workday remains fixed throughout the year, daylight savings time gives workers the option of spending their leisure time indoors or out. I know that my mood always improves after the time change and I suspect that holds true for the majority of workers on a fixed schedule.