I made some bananas Foster for dessert last night, something that impressed my wife with the ease of cooking it. All you have to do is put half a stick of butter, a cup of brown sugar, and a half teaspoon of cinnamon in a bowl together, mix it until it’s consistent, then cut four bananas lengthwise. Put all of it in in a frying pan, stir and cook it over medium-high heat until the bananas just begin to turn brown, then stop stirring and slowly add the half cup of rum on top of the mixture. Let it sit for about twenty seconds, then tip the pan so that the rum just touches the hot part of the pan - whoosh! a bit of flame! Then just put a scoop of vanilla ice cream in a bowl, put a half-banana from the pan beside it, then spoon some of the sauce on top of the banana and ice cream. Great dessert, everything’s cheap except for the rum, easy to make, and the flame will impress people. (Sorry, I just had to give into my cooking desires here).

6 Summer Travel Tips Great advice for starting a trip this summer. Everyone should do these things if they’re thinking about a road trip this summer. (@ zen habits)

Why You Spend And Save The Way You Do: The Science Behind Money Behaviors An interesting look at psychological reactions and an attempt to differentiate between a frugal person, a spendthrift, and a tightwad. (@ the digerati life)

Is It Better To Buy A Stock Before Or After It Splits? I think it’s all psychological - Jeremy seems to agree with this assumption. (@ generation x finance)

The Simple Dollar Retro: Individual Business Cards: When Are They Appropriate And Are They Worth The Money? This is a really worthwhile question to think about for people in self-employment situations or those with side businesses. For me, they’ve been useful.

Usually, I like to stick to personal finance topics I can quantify, but I felt this was an interesting issue worth discussing.

Let me start with a story. Several nights ago, I went grocery shopping in the evening with my wife and son, intending to bring him straight back and put him in bed. Typically, we go shopping on weekend mornings, but we made an exception in this case. However, once we were at the store, my wife and I both noticed that we were much more likely to be not selecting items very well and, even worse, somewhat likely to pick up unnecessary items and put them in the cart. Even more interesting, when I looked over the receipt the next morning, I found several purchased items that were nearly inexplicable based on our dietary habits.

The only significant unusual factor I could find in the shopping trip was that my wife and I were both rather tired. It was at the end of a long day of unpacking and we were both on the edge of exhaustion. We knew we needed to stock up on some things, so we assembled a grocery list (not entirely coherent, either) and used that as the basis for a shopping trip.

What can I learn from this?

First, for us it is much more cost-effective to go grocery shopping in the morning. We are alert and awake and thus less susceptible to impulse purchases because our minds are more awake and able to handle the information.

Second, tired minds are likely more susceptible to advertising as well. That’s likely why, if you look at the cost per viewer for advertisements, prime time ads are more expensive than ads at other times on the schedule. That’s also why all the good programming is on in prime time, because if the cost per viewer is highest, then maximizing viewers also maximizes dollars. Families are watching television, are a bit tired, and are susceptible to ads.

Third, this is yet another argument for adequate sleep as a cost-effective measure. Many of my friends seem to operate on the perspective that sleep is merely wasted time, but quite often you can simply tell that they’re exhausted. This suboptimal performance stretches into many areas of life and, based on my experience, can directly cost money.

On the other hand, it might be a bright idea for grocery stores and department stores to look at late evening specials to get tired people in the door. If tired people are more prone to unnecessary spending, this is probably a brilliant marketing tactic for such stores - get them in the store, have them go to the far side of the store to get the bargain, and likely in their tired state they’ll pass by items that they’re more likely to pick up due to a touch of sleepiness.

I’d love to see some research studies focusing on this topic, and I also look forward to hearing your comments.

I felt compelled to write about this topic after reading a comment by Garvey on Is A Deep Freezer Worth It?:

There is no way a freezer costs $10-15/month … to run. It’s more like $3-4.

This was in response to my statement that the cost of owning and maintaining the deep freeze is about $130 per year, or about $11 a month. I came up with that figure by calculating both the electricity use of the freezer ($75/year) as well as prorating the cost of the freezer ($450/8 years, or $56/year). Add those together, and you end up with that $11 a month figure for the cost of owning and operating the freezer.

You can do similar figures on nearly any appliance or device in your home. Our television is on its last legs (bright blue spots are appearing on the screen and starting to obscure things). We bought it for only $150 six years ago, which we use for 2 hours a day, actually costs us about $9 a year in electricity. So, we pay $0.75 a month in electricity, but we’re also spending $2.08 per month for the actual cost of the television, bringing our monthly bill just to have that television in our home up to $2.83 a month.

Some will undoubtedly state that this isn’t a fair way to look at the cost of things, because once you’ve paid for the item, the cost of the prorated usage is basically free. I actually feel that’s a terrible way to look at it, because it makes the appliance cost appear as “special” costs that will make you hit the credit card or tap the emergency fund when an appliance goes out, and it also creates some skewed calculations when buying an item.

Let’s take a look at washing machines, for example. If you look at the Consumer Reports recommended appliance, the Whirlpool Duet HT GHW9400P, you’ll regularly find it in stores for $1,400. On the other hand, you can buy a low-end toploader for $200. What are you getting for that difference? The Whirlpool Duet uses less energy per wash (about 1 kWh for an average wash, versus 1.9 for a low end toploader), handles larger loads (about 4 loads in the Whirlpool versus 5 loads in the low end toploader), and will have a significantly longer life (14 years is the estimate, versus 6 for the cheap toploader). If you do, say, 20 loads a month in the toploader, you’ll be doing 16 a month in the Whirlpool. That gives a monthly energy use of 38 kWh for the toploader ($3.80) versus 16 kWh for the Whirlpool ($1.60). The Whirlpool’s cost per month of the appliance itself is $8.33, versus the cheap washer’s $2.78. This means that the cost per month of the cheap toploader is $6.58, while the cost per month for the Whirlpool is $9.93. This does not include detergent and water savings with the Whirlpool, which are pretty small ($0.50 a month or so). If you’re a heavy laundry user, those numbers get closer and closer together, so for a family with multiple children, the Whirlpool gets closer and closer to the toploader in terms of cost.

Now, the question when you do such a comparison is is that extra cost each month worth it? With the Whirlpool, you’re buying reliability (it will have fewer repair issues and won’t have to be hauled out of the laundry room as often), somewhat better cleaning, and aesthetics (they are more stylish than the cheap toploader). Is this worth $3 a month for 14 years to you? There’s no immediate answer, but for me, the reliability makes it worth it.

What’s the point? You don’t often seen the true cost of an appliance until you look at the cost of owning it per month that you’ll use it. Many people look solely at the up-front cost of an item, then when it’s purchased and paid for they forget about it until a replacement is needed. A better approach is to at least be aware how much these items are really costing you each month and recognize that when you bought the item, you effectively “pre-paid” for those months of use of the item. It’s a great way to comparison shop and it often makes more expensive but reliable and energy-efficient items look like a much closer deal than you might initially think (because they are).

With a title like that, I’m sure to grab some attention, but it’s true - unless you are already rolling in the cash, frugal choices and finding ways to save money is much, much more effective than maximizing your investments. That’s not to say maximizing your investments isn’t worthwhile, but that you can often find a lot more money at home than in the stock market.

Let’s look at Joe, a reader of mine who actually wrote to me a while back asking some financial questions. He and his wife bring home about $3,000 a month and they have a $900 mortgage payment. At the end of the month, Joe reports that they’re usually about $250 ahead, and that $250 goes into a savings account.

Joe’s initial question to me is how he could invest that money better so it would get a better return. I told him to just stick it in a low-cost index fund at Vanguard and instead spend his time worrying about cutting his spending so there’s more breathing room. Here’s why.

Let’s say Joe just sticks that $250 a month in an index fund that returns 10% a year. At the end of five years, Joe would have $19359.26 in that account. That’s a nice little amount to get started - you can buy an excellent car in cash with that kind of money.

Let’s say, instead, that Joe gets seriously into investing. He manages to spend three hours a day doing stock research and takes that $250 a month and actually gets a return of 18% a year. Tremendous! At the end of five years of focusing on investing, Joe has $24,053.66 in his account! The investing is paying off, right?

Let’s take another tack. Let’s say Joe just spends one hour a week looking for frugal things to do, like going for more energy efficient lighting, installing low-flow showerheads, making some homemade meals, and so on. Joe manages to save $75 more a month in the budget this way, giving him $325 a month ($75 isn’t hard to do at all from almost any monthly budget without much life change). If he puts that $325 into that index fund at 10%, he’ll have $25,167.05 in his account. Even a bit of frugality blows away an incredible investment.

Unless you have a tremendous amount of money to work with, you’re better off spending some time looking at frugal techniques than looking at investments. Naturally, there comes a point where the effort of squeezing out an extra percent on the return will be much more worthwhile than preparing meals at home, but most investors simply aren’t at that stage - and the ceiling is much higher than people think. If your investment isn’t well in the six figures yet and you don’t have an immediate clear way of adding more than a percent to your investment return, you’re better off looking at how to increase the amount you can add to the investment.

So, the next time you have an hour to burn and are looking for ways to improve your bottom line, spend the time figuring out ways to tighten your budget rather than looking for an extra percentage point on that investment. Frugality provides far better returns.

Lately, I’ve been choosing to write posts that don’t always have a clear-cut answer, or have another perspective or two that aren’t in the post. Why? They spur discussion, and frankly, the comments on many posts are at least as interesting (if not more so) than anything I write. That’s because of the passion and interest of you readers. Along those lines, I am thinking of starting a Simple Dollar forum to channel some of this discussion… is this of interest to anyone?

15 Tips On How To Deal With Car Dealers And Salesmen This is the fourth part in a fantastic series on buying used cars (the first three parts: Classic Confusions, Understanding Vehicle History, and How to Inspect a Used Car). I’m a big fan of buying late model used automobiles (cars fresh off of a lease) and this is a wonderfully in-depth guide to the buying process, well worth reading for anyone who might also be interested in such purchases. (@ money, matter, and more musings)

8.5 Free Things To Do On A Rainy Day Great suggestions; in fact, I’ve actually been working on a series very similar to this topic that will be coming in a few weeks (to tell the truth, I’m working on it in advance for the week that my daughter is born so I have some good posts for you all to read while I’m at the hospital holding my new baby). (@ wise bread)

Getting The Guts To Relocate To A Cheaper City There are a lot of interesting cities in the Midwest with a low cost of living. Seriously, check out Madison, Wisconsin or Minneapolis, Minnesota, just for starters. They both have wonderful cultural sensibilities, lots of interesting stuff going on, and are rather inexpensive, too. (@ get rich slowly)

The Simple Dollar Retro: An Average Day: Ten Tweaks I Made To My Daily Routine To Start Saving Money These little changes in my routine - none of which bothered me much at all once I got out of the rut - made a huge difference in my financial state.

Yesterday, I spent much of the day assembling a propane grill given to us as a housewarming gift. It was a fun project, but along the way I began to wonder exactly how cost-effective propane grilling actually is. In this comparison, I’m going to exclude the cost of the appliances themselves, though over the long haul they would roughly balance out.

My grill puts out 36,000 BTUs per hour - when you see the BTU measurement on the box, it refers to how many British Thermal Units the grill can produce in one hour. A gallon of propane contains 91,600 BTUs, and a standard 20 pound tank has 4.72 gallons of propane in it for a total of 431,613 BTUs of energy. Thus, one tank will allow the grill to run for twelve hours. Given the cooking time I’ve witnessed with the grill, most of our family meats will require an average of about 35 minutes of grill time, which means that I’ll be able to grill about twenty times on a single tank. As I can get a tank refill for $12 at the local hardware store, it costs about sixty cents per grilling session in propane costs.

This, of course, assumes that I fire up all three burners, which each consume about 12,000 BTUs per hour. If I grill with just two of them (likely, so I have a cooler spot on the grill), my cost per grilling session goes down to about forty cents. This is just an estimate - I am not intimately familiar with cooking on the grill and I was doing some experimenting during my first uses.

On the other hand, using our electric range and cooking things in a skillet eats about 800 watts and takes, say, twenty minutes to cook a hamburger. At that rate, the energy use costs about three cents. On the other hand, preparing baked fish in the oven (about 5000 watts for twenty minutes) eats up about seventeen cents on the ol’ electric bill.

Clearly, using an internal electric stove is more cost-efficient than using a propane grill, though neither is particularly expensive. It does, however, encourage healthier food preparation (much of the fat drips right out of the meat onto the fat catcher) and the taste can be tremendous (you can’t get that kind of heating from a skillet on the oven).

Is it worth it? It depends entirely on the meal. Many meat preparations are healthier on the grill than in the skillet and also many meats are substantially tastier when grilled due to the vastly different heat environment on a propane grill. Is it worth that extra twenty to forty cents a meal? It certainly is to me.

Now, if we’re talking extra tasty, I would like to eventually have a grilling pit where I could grill over wood and then use various woods to contribute subtle flavors to the meat … but that’s a topic for my long-dreamed-about cooking blog.

This MSN Money article argues quite vehemently that renting is cheaper than owning a home:

I have something un-American to confess: I rent an apartment despite having enough money to buy a house. I plan to keep renting for as long as I can. I’m not just holding out for better prices. Renting will make me richer.

I normally write about stocks for SmartMoney.com, but the boss asked me to explain to readers my reason for renting. Here goes: Businesses are great investments while houses are poor ones, so I’d rather rent the latter and own the former.

The author goes on to provide a litany of reasons why renting is more cost-effective than home ownership, mostly in the idea that you end up money ahead if you invest the difference between the total cost of home ownership and the total cost of renting.

Here’s the thing: during the period of paying for a house, the author is absolutely right. You can do far better on investing as a renter than you can as a homeowner with a mortgage. The total monthly cost of a home, with a mortgage payment, utilities, insurance, and taxes, far exceeds the cost of renting, a difference that can be invested.

However, when you reach the point where you actually own a home and the mortgage is paid off, you’ll have significantly more available to invest than the renter will, and you’ll also have a large asset that will slowly appreciate over time and provides inexpensive housing for you and your family.

Let’s say, hypothetically, that you have a home that is eating $1,200 a month in payments, $500 a year in insurance, $1,000 a year in extra utilities, and $3,000 a year in taxes versus a rental situation that costs $800 a month to rent and $100 a year in insurance. The home will cost $767 more per month for the life of the mortgage, but the day that the mortgage is paid off, you own an asset worth $200,000 or so and suddenly have $433 a month more to invest than the renter.

Here’s my feeling: home ownership takes the long view. It is there to provide housing for you throughout your life - you’re essentially paying more now while you can so you can pay less later on and have an asset of significant value (possibly to be cashed in for care during one’s dotage or passed onto children).

Home ownership also enforces financial discipline, something that many people do not have. They pay their required bills, then are much more likely to do unnecessary things with the rest of the income. A home ownership situation raises those required bills so that they’re not left empty handed in old age. From recent experience, saving and investing while renting was a constant battle of the wills - I knew I could take some of that money and buy frivolous things. However, a mortgage payment is a required payment - I have to plan for it and have to pay it.

I think that, overall, renting is a better solution for a person with a strong sense of internal financial discipline that is willing to choose to invest hundreds of dollars each month. However, if you’re likely to dip into that investing money on a regular basis, you are lacking the financial discipline it takes to make renting more cost-effective than home ownership. The author of this article assumes financial discipline from the reader, which is a very big assumption in this day and age when the savings rate is negative and many American households are carrying stupdendous debt loads.

As most readers know, after months of saving and planning, I finally splurged and bought a Nintendo Wii and a few accessories for it (Wii Play - mostly for the second controller - and some points to download old games). Aside from the joy of downloading and playing some fondly-remembered old games and getting routinely defeated by my wife at both Tennis and Bowling, I’ve realized that the Wii has actually taught me several valuable lessons about personal finance.

Saving up for splurge purchases like this makes the reward sweeter. There is absolutely no guilt in having spent money foolishly when I play it. I saved very slowly and methodically for it and did things that actually reduced my monthly spending significantly in the process. Having saved the money myself and paying for all of it in cash instead of on credit was a wonderful thing because I could actually see the benefit of making healthy financial choices.

Items that you can share with others always wind up being more fun than things you solely play by yourself. The most fun I’ve had with the system is playing Wii Sports with my wife, seriously. Our son’s in bed, we have the baby monitor on, and we’re down in the family room swinging our remotes, playing tennis or bowling (and I’m usually losing). We laugh a lot and unwind from the day while doing something that encourages us to interact a lot. It actually reminds us of when we lived with a roommate while in college - the three of us would spend much of our free time playing board games. It was social, fun, and actually very cheap when you look at the amount of play versus the cost of the game. I think the Wii may actually reach that level of value.

Being out of the marketing loop means less temptation. I really don’t expose myself to many channels that Nintendo would use for marketing, so I have little idea of other games for the system. We just have Wii Sports (the pack-in game) and Wii Play and have downloaded a few games and that’s it. I’m barely even aware of other games for the system, to be honest - my only recommendation has come from one of my wife’s relatives, who thinks we would both enjoy Big Brain Academy. I may rent a game or two, but with previous game consoles, I used to be aware of titles by the hundreds because of the marketing. With the Wii, I’m basically outside their marketing loop - and that’s just fine with me, because I’m quite happy with the games I have.

Purchases with heavy repeat use have a lot more value. Let’s say, for example, that I buy a DVD for $15. It’s a two hour movie that I watch twice and lend to my friends to watch once. That’s $2.50 an hour for that DVD. Let’s compare that to a Wii, which cost $350 (with the accessories and extra game that I purchased). All I have to do is play it for 140 hours to reduce the cost per hour down to that DVD, and all future play makes that hourly rate lower. Let’s say I play it for a half hour a day by myself, my wife plays it for half an hour a day by herself, and we play it for half an hour together (a fair average estimate), so it gets an hour and a half of use per day. It takes three months for the Wii to be as cheap as the DVD. In a year, the Wii’s cost will be down in the cents per hour range. What do I conclude? The more you potentially use an item, the better its value is, and I get the sense we’re going to use the Wii quite a bit.

The easier you make it for people to spend money, the more likely they are to spend money. Having the possibility of entering a credit card number to download old games is brilliant - you can sit there on the couch with your remote, type in your credit card number, and get those games so effortlessly. Thankfully, I have our wireless at home pretty secure, so this doesn’t actually work (it won’t allow the connection), but I can imagine I would be incredibly tempted to use it regularly if I could. Instead, I have to go to the store and actually purchase point cards, which gives me ample time to use things like the ten second rule to keep my unplanned spending in check.

My wife and I have had a ton of fun with my Wii so far without spending much money at all beyond the cost of the basic console. Reflecting on the purchase and how we use it, though, has brought some psychological returns as well.