We’re in. Not much more to say than that!

The Cost of Meat: Too High To Pay This is a very interesting, well-researched, and informative article on the costs of meat consumption and the benefits of being a vegetarian. Really well worth reading - in fact, if you really read one link a week from these roundups, this is the one to read. (@ wise bread)

Why Smart People Are Not Better Off Financially Overspending is a cultural phenomenon not connected to a person’s intelligence. (@ free money finance)

Kids Still Living At Home But Not Helping Financially (Your Advice) Some good advice on this situation, especially in the comments. (@ personal finance advice)

The Simple Dollar Retro: The Simple Dollar’s Detailed Tipping Strategy Basically, I reward good service, but I don’t drop down to “no tip” for terrible service because I may not know what’s going on and it may not necessarily be the server at fault.

In Iowa, E10 gasoline (fuel composed of 10% ethanol and 90% gasoline and safe to use in normal engines) is typically $0.10 per gallon cheaper than 100% gasoline. However, the E10 fuel is less efficient than pure gasoline, enough so that it is noticeable over a long sustained trip - we typically drive three hours in a row to visit family and the difference in gas left in the tank is noticeable at the end of the trip.

I did some research and discovered that E10 fuel is about 3% less efficient than non-E10 fuel. So, for example, let’s say my truck gets exactly 17 miles per gallon with regular fuel. This would mean that it gets 16.49 miles per gallon with E10 fuel.

As I mentioned earlier, E10 fuel is typically $0.10 per gallon cheaper than 100% gasoline here in Iowa, so is it cheaper to use E10 fuel or regular fuel in my truck? Current gas prices are $3.29 per gallon for E10 fuel and $3.39 per gallon for regular fuel, so we divide each of those by the respective miles per gallon I get to find out that the difference between the two is microscopic: $0.1994 per mile for “normal” gasoline and $0.1995 per mile for E10. Thus, the price difference is completely negligible and you have to consider other factors when determining which to use (environment, octane, etc.).

What can we learn from this, especially if we look outside of Iowa’s borders?

First, there is a real difference between 10% ethanol blend fuel and non-blended fuel. The non-blended fuel is simply more efficient than the ethanol-blended fuel, as I’ve noted both by research and by observation. If you can get both E10 and regular fuel at the same price, the regular fuel is the better choice.

Second, the difference in gas prices in most areas even outside Iowa brings them close together in terms of cost per gallon. This is mostly because ethanol costs about $1.20 a gallon to produce, and thus a E10 mixture reduces the price of the gas by just a few percent - almost equivalent to the lack of fuel efficiency.

Third, the environmental issue, at least in this comparison, is negligible. The E10 is better per gallon for the environment, but you get fewer miles out of that gallon, so in the end, the benefit becomes very tiny. Don’t let environmental issues sway you, at least not until E85 comes into wide adoption and engines designed to use E85 (or pure ethanol) are in use. When that happens, then the ethanol will be as efficient as gasoline and much more friendly to the environment.

To summarize, if you have a normal car, the environmental and cost benefits of 10% ethanol blend gas are negligible, and if you can get normal gas at the same price, go for the normal gas. However, when E85 or pure ethanol engines break into the mainstream, they’ll have engines that are designed to run optimally on ethanol, at which point you’ll be much better off using those in terms of both cost and environment.

Several readers have asked me how a person’s primary residence should be used when calculating net worth. As we’re on the verge of buying our first home, this becomes a very relevant question to us for the first time, so I spent some time looking at the options:

Include the debt, but don’t include the house at all. The argument here is that if it’s your primary residence, then you’re not going to be liquidating it ever, thus it’s not an asset. For many people, this would push their net worth far, far into the hole and if you’re making interest-only payments, it’s a hole you’ll not be climbing out of.

Include the debt, but only include the equity in the house. In other words, only include the portion of the house that you could draw equity from through something like a home equity line of credit. This means that any payment directly to the principal actually counts double towards your net worth, as it decreases the debt and increases the equity in the house.

Include the debt and also include the purchase price of the house. This means that the house itself has no direct effect on your net worth upon purchase and it slowly goes up as you reduce the principal of the debt. Many people seem to follow this path because it somewhat disguises the debt.

So what are we going to do? We’re going to actually follow a fourth path, which is an interesting one.

Include the debt, but only include the assessed value of the house. This means that right after purchase, our net worth takes a small hit, but as time goes on it climbs back as we make debt payments. Plus, each time the house is reassessed, the value of that asset changes - and given the location and the quality of the house, it will likely go up. In essence, this route means we are not counting the appliances as assets in any way, nor are we considering some of the more aesthetic appeal of the house that isn’t directly affected by the tax assessment.

What this means is that in the short term, my monthly net worth calculations will look disastrous, with some big losses, particularly in the month where we sign all the papers and take possession of the house. After that, however, our net worth will begin to climb again, albeit at a slower rate than before because our housing payments are going up. Then, whenever our home is reassessed, our net worth will likely see a bump (even though that also means that we’ll be paying more in taxes, which is a downer).

I would recommend that others follow the same path as well for including the primary residence in calculations. It is an asset and can be liquidated, but the aesthetics of the house and the appliances within and so forth will often make some difference in the actual purchase price that may only be of value to you.

A recent article in Money lists 43 ways to deal with an unexpected windfall - in the article’s case, a $5,000 windfall. There are a lot of good suggestions in the article that make a lot of sense to me, like paying off your highest-interest credit card debt or investing for the long term with the T. Rowe Retirement 2045 mutual fund or a Vanguard fund mix.

The only problem with such an article is that it overwhelms you with options. I went through the article and eliminated everything that didn’t apply to my situation and that still left me with roughly thirty options to choose from, and that’s if you only limit yourself to the choices from the article. How can you quickly evaluate and narrow potential options for a windfall?

Here’s the thought process that I would follow if a windfall fell on my lap.

First, do I have an emergency fund? I’ve written about emergency funds before, and I think it’s very prudent to have two months’ worth of salary for every dependent on your taxes in a savings account. For us, that means six months - and soon, eight months, and I’d like to eventually have more than that just to be secure. As an absolute bare minimum, you should have $1,000.

Second, do I have any high interest debt that’s outstanding? This also involves considering the deductibility of such debt - if you have a house loan at 6% but are in the 28% tax bracket, that means your true rate there is about 4.5%, decidedly not high interest. I use 7.5% or so as my “line” between high interest and acceptable interest, but others may find this line to be higher than that. I have no debts that are high interest, so if I got to this step, I’d keep on going.

Third, what are my biggest goals? If you close your eyes and ask yourself what you’d most like to do with the money in the future, what comes up? Try to think beyond a few months so that you’re not tempted to do something like buy a monstrous flat panel television. Do you see a wonderful vacation in a year? Do you see a house in five years? Do you dream of retiring at age 50? Each of those options tells you a different thing you should be doing with your money. Figure out what your most important goal is, determine how far off that goal is, and look for investment goals in that timeframe.

If I were to get a $5,000 windfall today, it would likely go entirely into an emergency fund, which would bring it close to a level that I want. I’d use any leftover money to work on my investment portfolio that’s geared towards building our dream home in fifteen years or so, or possibly towards a car fund that’s about three years off.

We’re supposed to hear later today about whether our house offer will be accepted or if a counteroffer is in the making. My wife and I are making all sorts of plans already - it’s quite fun, especially considering our livable square footage will be increasing more than threefold if we get this house. For instance, we have a family room and a living room and the sum total of stuff we have to put in them is… a love seat and an old television. That’s it. It should be really interesting.

Five Of The Best Deals You Can Get At Your Local Dollar Store Much of the stuff found at the local dollar store near here is terrible, but every once in a while you can find an amazing deal on a staple, occasionally even name brand stuff. I once bought 24 bars of Lever 2000 soap there for pennies per bar and we’re still using them. (@ not made of money)

Couple Learns The High Price of Easy Credit The day you get into a home that you can’t afford if anything goes wrong is the day something goes wrong. You don’t need to live in a McMansion. (@ nytimes via blogging away debt)

Five Money and Currency Facts Your Banker Never Told You A mix of both interesting and useful stuff here about actual currency. (@ the digerati life)

The Simple Dollar Retro: Comparing Warehouse Shopping Chains - And How You Can Get In For Free! Warehouse shopping is great, especially if you have storage space. The house that we placed an offer on has a Costco and a Sam’s Club that are roughly equidistant (and the home will have a lot more storage space), so I’m going to have to do some serious comparisons.

I spent some time reading through the site recently and I realized how often I talk about myself and my own experiences on here, everything from my specific goals to my values and dreams, as well as a lot of the financial realities of my life.

Now, given that this site focuses on personal finance issues, why do I feel the need to write about myself so much? It’s a question that some of my readers have hinted at in the past and also one that troubled me when I first started the site. I posted my Road to Financial Armageddon series very early on, but I considered it to be a pretty major act of hubris, so early on I didn’t post much else about my goals or values.

As time went on, though, I began to reconsider this stance for several reasons:

Goals and values are foundation pieces of personal finance. Decisions like what house to buy, when to retire, and so on are all choices deeply rooted in individual beliefs and desires. What do you want out of life? Would you prefer to live in a less expensive house and retire a few years earlier? Do you consider it worthwhile to buy a highly reliable but expensive car, or do you look solely for the bang for the buck? Is going into business yourself the best way to go, or is there too much risk for you? All of these questions have different valid answers - it depends on the values and goals of the person answering them.

My specific goals and values often shade my perspectives on the site. I’m not a financial planner - I’m a person figuring out my own financial path and sharing what I’ve learned that might be relevant to your life. Because of that, I recognize that my own goals and values shade the advice I give here on a regular basis. For example, I don’t look deeply into some small business opportunities because I find them to be overly risky, so my suggestions focus on small business with minimal risk and low capital investment (like blogging or home computer consulting). I also focus a lot on mutual fund investing because I’d rather spend the time needed to chase individual stock investments with my family - I know I’m passing up potential amazing gains here, but I’d rather spend that time with my wife and son, so I don’t follow individual stock picks much. Those are just two examples - there are lots of smaller examples of such shading around here.

That means in order to make my advice as clear as possible to everyone, I’m open about my values and goals and I try to connect them to my conclusions when I can. I could just toss up my financial opinions without such a framework, but I would be criticized for it and rightly so - the advice wouldn’t have a whole lot of value for many readers. Instead, by connecting what I’m saying to my own values and goals - and clearly wearing those values and goals on my sleeve - I create a situation where most readers (not all, unfortunately) can see the connection and apply it to their own life even if they don’t have the same values and goals.

This is why I mention defining your own values and goals so often: they strongly influence every financial decision that you make in your life whether it’s obvious or not. For instance, if early retirement is not important to you, then you are much less likely to build towards it.

A recent commenter on the site summed it up very well when he said the following:

Even though some of your priorities are different than mine, your clarity about your priorities and what it means to really *live* them in the choices you make, is really helping me see *my* priorities more clearly.

And that’s how it should be - that’s why I write The Simple Dollar.

Over the weekend in a post answering anonymous reader questions, I wrote the following:

Savings accounts are wonderful places to keep money that is very liquid (meaning you can get it if you need it) and earns a small rate of return with very little risk. Because of these factors (liquid, low risk, some return), they are great places to store emergency funds, which is a fundamental part of any personal finance strategy. An emergency fund is a buffer to prevent budgetary disaster in the event of a personal crisis.

This inspired the following question from a very faithful reader who sent me an IM less than five minutes after that article was posted:

It seems to me like it is always good to put your money in a savings account that earns 5% like HSBC Direct. Why would you do anything different?

As I mention, there are indeed a lot of advantages to savings accounts. You can get at the money at your convenience, it can make a nice return in the right account (HSBC Direct, for instance, has a 5.05% APY and some smaller banks do better than that), and there’s very little risk as the account is insured by the FDIC up to $100,000. It is without a doubt a stellar place to put your cash that you may need in the short term.

However, once your savings reaches a point that is out of the reach of your emergency fund needs (at least a few months’ worth of salary), it’s time to start looking for a place to put your money for the long term. For example, the Vanguard 500 has returned an average of 12% a year since 1976, but that return isn’t guaranteed year in and year out - some years have had a net loss, while others have had returns far above 12%. It’s still reasonably liquid in there, but you can pull out at any time (we’ll not get into the taxes on your gains here, but at most you’ll have to pay the same rate as your normal income and it may be substantially less than that). There are many real estate investments that can return spectacularly, too.

Why do this? The potential returns are too good to pass up. If the Vanguard 500 continues along at the historical rate, the money in it doubles every six years, while in a 5% savings account, your money doubles roughly every sixteen years. Let’s say you put a dollar into the savings account and a dollar into the Vanguard 500 and waited 20 years. The savings account would have $2.65 in it, but the Vanguard fund (if it continues at the historical rate) would have $9.65 in it. Multiply those by a thousand or ten thousand and you’ll see why it’s a big deal.

So why not just invest everything in the Vanguard 500 or another investment if it returns that kind of money? The reason is that it’s not insured and it’s far from a guaranteed return. There have been many years where the Vanguard 500 has lost fistfuls of money (the returns from 2000-2002 were positively nightmarish, with 20% losses) - the positive numbers are only over the long term because the good years overall outweigh the bad. On the other hand, a savings account won’t lose its value - it will just stay there and chug along quietly for you, keeping your money quite safe for you.

In other words, keep enough in the savings account so that your short term needs and emergencies can be met, then take the rest and play with it for the long term by investing it somewhere.

Eight days ago, I wrote a lengthy review of Never Eat Alone, a book about how exactly to network and maintain a large circle of friends and acquaintances, a skill that I myself often feel that I’m not good at.

After writing it, a few readers wrote to me and asked what the point of writing about such a book on a personal finance site was. I made a point of discussing the reasons, but during this house buying experience, we found out exactly how much spending time with friends and building relationships can really be worth.

Even though I don’t view myself as a particularly social person, I have built up a lot of acquaintances in my local area. I do most of the things discussed in Never Eat Alone: I keep tabs on people, offer my help when I can, and introduce people to one another when their meeting would be mutually beneficial, but I rarely ask for much for myself.

However, when I spread the word that we were putting an offer in on a house, within two days, I had the following offers without asking for a thing:

A new deep freezer (or another new major appliance)
A deep freezer from a foreclosed house that was used less than a year
A quarter of a cow’s worth of meat to put in said deep freeze
A two year old refrigerator
A new KitchenAid mixer for our new kitchen
A $250 gift card to a local appliance store (an unused wedding gift, it turns out)
One moving truck with driver for a day
Six pickups with drivers for a day
Thirty two people to move boxes for a day
Four offers of a day’s worth of babysitting to keep our child out from under foot
A free catered barbecue dinner for everyone who helps us move on the big day
Ten day passes to Adventureland (a local amusement park) for when my extended family comes to visit to see the house

What’s the point of this? Spending time with friends and helping them out comes back around. I didn’t expect any help - I was merely passing on some good news to my circle of friends, but I received an abundance of offers of help and other things.

Next time someone asks you to help move furniture or asks for some serious advice from you, help them out. When you have a chance to connect one friend to another, make it happen. It might take you some time and effort - it might even make you grumble a bit. But when things happen in your own life, you will be met with an abundance of blessings.