My post discussing whether the penny should be eliminated reminded me of the other redheaded stepchild of US currency: The $2 Bill. You may not realize that $2 bills are still in circulation, but I have a friend on a mission to change that perception.

Every time his supply of $2 bills is depleted he goes to the bank and withdraws $100 worth. I didn’t realize that you could do this, but as I said $2 bills are still legal tender so it should be no surprise that banks still have them. My friend doesn’t waste his bills, he just uses them in place of other cash. Using them as a tip is ideal because then he doesn’t have to explain his rationale each time he uses them. He effectively places them blindly into circulation.

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Being frugal should not be confused with being unable to spend. In fact the opposite is true. Carefully monitoring your spending, following a disciplined budget, and saving in as many ways as possible allows you to spend more in the areas that are important to you.

Since budgeting reduces unnecessary and wasteful spending it leaves more money available for discretionary purposes. Choosing the areas where you will spend that extra money is part of the fun of being frugal.

Looking at this topic another way, by being frugal most of the time, you create a situation where you can spend a little extra some of the time.

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This post is part of my Freaky Financial Fridays series, where I argue a case from an opposing view, generally in contradiction to my own philosophy or conventional financial advice.

Comparison shopping sounds like a great idea. Research the best product or service to meet your need, exhaustively look for the best deal, and only make a purchase when you’re sure that you couldn’t possibly save any more money. The problem is that such a method is often a waste of time and thus a waste of money.

Undervaluing your time is selling yourself short. Your time is probably worth a lot more than your employer pays you on an hourly basis. To estimate what your time is worth, you can use this calculator.

Once you know how valuable your time is, you quickly see why comparison shopping isn’t worth it. A quick check on a comparison shopping websites might be worthwhile, but any more effort than that and you’ll probably be spending more money in terms of your time, than you can hope to save.

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There are many reasons why my finances are in good shape. In coming up with a list of those reasons, I noticed that a few were key to my getting ahead. I call these my wealth accelerators because they have had a dramatic effect on my net worth. Without these I would still have a positive net worth, but it wouldn’t be anywhere near where it is. Your wealth accelerators may not be the same as mine, but I suspect that many of these are common to most people.

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Many convenience stores use drop safes to prevent burglaries. A drop safe allows money to easily be deposited, but not easily withdrawn. A cashier might deposit a set amount of cash into the drop safe once the register hits a certain limit. Doing so keeps the unprotected amount (in the register) small while allowing the protected amount (in the drop safe) to grow. Applying the concept of a drop safe to your financial plan can help you to save.

The idea of a drop safe is useful, but as we rarely want our savings to be sitting in cash, a “virtual” drop safe is more appropriate. Just like it’s real world counterpart, we want it to be easy to put money into and hard to get it out of. As in the convenience store case, the reason to use a drop safe is to protect your money from being stolen. In the case of your personal finances, you are trying to protect your money from yourself

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In the past, I have advocated building a cash emergency fund. By “cash” I mean a liquid form of money which could be actual currency, but preferably would be savings in a high yield direct bank account. There has been some insightful commentary recently that has caused me to re-evaluate my position and add some justification to it. Of the many posts on the subject, two were my inspiration for this post. In the first one, Mike from four pillars discussed why a HELOC can be used instead of an emergency fund. In the second one, the money gardener explains why he doesn’t need an emergency fund.

In most cases, an emergency fund is really just a method to avoid debt. If a true emergency arose, which exhausted our cash reserves, most of us would just use credit cards, a home equity loan, or a P2P loan. All of those methods are nearly as liquid as cash and easily obtained, with a cost association in the form of interest.

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A recent statement by US Treasury Secretary Henry Paulson has renewed the debate about the existence of the penny. In an interview, he said that the penny is worth less than any other currency and that he’d like to get rid of it. So today I’ll discuss the pros and cons of keeping the penny.

Supporters of the penny suggest that getting rid of it would mean higher prices, as retailers round up to the nearest nickel. Since it’s common for items to be sold for prices ending in .99, rounding to the nearest nickel would cause prices to go up (to the nearest dollar). This argument is countered with arguments that sales tax and multiple item purchases would reduce this effect. This only holds true if totals are rounded, not individual prices. The reason why retailers use .99 pricing is

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With oil prices hitting record highs, it’s no wonder that gas prices continue to remain high. To help combat overspending, shop around for the lowest price and fill you tank at the coolest time of day.

To accomplish the first point, use GasBuddy.com. There you can enter your zipcode and find the cheapest gas in your area. It doesn’t make sense to drive to a distant gas station to save a few pennies, but as they say on the site, gas prices can vary by as much as 20% within only a few blocks. Going slightly out of your way for a

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Buying generic products can almost certainly save you money. You have to remember though, that there is more to a purchase than just the money you spend. There is also enjoyment that you derive from using a product.

If we based our purchasing decisions purely on cost, then many of us would never buy anything but generic. There are also times when we don’t have a strong emotional attachment for a name brand product. As with most things I try to balance practical with pleasurable.

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Published rates for popular Direct Banking sites, updated weekly

Rates as of March 13, 2008:

ING Direct: 3.10%
HSBC Direct: 3.55%
Emigrant Direct: 3.30%

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