It’s easy to compare two similar products, but what if you’re comparing apples and oranges?  I’ve considered switching from disposable razors to an electric, but the frugalist in me insists on figuring out which is a better value. 

I’m going to detail how I compare two related, but different products.  Not because smart razor choices will make me rich, but because using a logical approach to compare products will save me money.

It’s like the example of throwing a pebble into a pond.  It won’t make much of a ripple by itself, but if you fill a bag with pebbles and drop them in, you’ll make a big splash.  By consistently making smart choices and buying high value products and services, you can save thousands of dollars over the course of your life.

Consider the true value of something, not just the initial cost

I put off buying an electric razor because of the upfront cost.  I didn’t want to pay $50-$200 for something that only costs me a couple dollars every few weeks.  Then I realized that over time, the cost of disposables will add up, and may actually be more than the electric. 

Because the upfront cost isn’t a fair analysis, I need a better way to compare.

When comparing products, make sure to find a common denominator

I can’t use cost alone, so I decided to calculate the cost of ownership over time.  I’m going to figure out how long an electric razor lasts, then figure out the cost of using each for that long.  Now that I have my criteria, I need to gather the details. 

To make sure you do a fair comparison, you need to…

Do your research first - including price comparison

There are a ton of disposable razors available.  I use the Gillette Mock 3.

I did some price checking, and found that Target has a good price on the Mock 3 razor starter (with two blade cartridges) at $7.44.  For refill cartridges, I found that BJ’s Wholesale has the best deal at 20 blades for $34.99.

It’s a little harder to choose electric razors.  There are two distinct styles (foil or rotary), and a variety of qualities and prices.  I decided to go to Consumer Reports to guide my decision.  In 2008, they recommended the Braun 360 Complete as the best electric razor, at a cost of $164.99.

Now that I’ve chosen my products, I can make sure to…

Include all variables - like ongoing maintenance costs

With disposable razors, you need to replace the blades.  I find that one blade normally lasts two weeks.  I don’t use any foam/gel, because it doesn’t seem to help me.

With the electric, you have to buy cleaning supplies as well as replacement foils and cutters.  The cleaning cartridges cost $14.99 for a pack of three, and each lasts a month.  The foil and cutter need to be replaced every 18 months, at a cost of $35.98.

From the reviews I’ve read, it seems like the Braun 360 should last at least 3 years, so that’s what I’ll use for my calculations.

After you’ve considered all the ongoing costs, you can…

Do the Math

Cost to buy disposable razors for three years:

• Initial cost: $7.44 (with two cartridges)
• Replacement cartridges: 20 for $34.99
• Number of cartridges needed over three years: 78
• Total cost: $147.40

Cost to maintain electric razor for three years:

• Initial cost: $164.99
• Cost of cleaning supplies for three years: $179.88 (ouch!)
• Cost of replacement foil and cutter: $35.98
• Total cost: $380.85

After you know the costs, make sure to…

Consider the intangibles

Disposables are cheaper and offer a closer shave, but they lack the safety and convenience of electrics.  I find that with disposables, I shave every other day or so.  If I had an electric, I’m guessing I’d be motivated to shave every day, and cut myself less too.  That being said, having a continuously close shave isn’t a priority for me, so the extra cost isn’t justified.

Now that you have all the factors, you can…

Come to a decision

The Braun 360 may be more convenient, but it costs 2.5 times as much as disposables.  To me, it’s not worth it.  Even it lasted six years, it would still cost 2.3 times more.  I’ll stick with disposables.

Conclusion

I know that this is a ridiculously detailed analysis about something as trivial as razors, but it goes to show that using a methodical approach when comparing products can save a lot of money.  By using the approach described above, you can save small amounts on a daily basis, as well as thousands when choosing bigger products like cars, housing, or loans.

What sets “The Wealthy Barber” apart from other books is that it makes personal finance simple and approachable.  It’s a fictional tale, written from the point of Dave, a soon-to-be-father.  He is inspired to learn about money after realizing his wife is pregnant.

Confused about where to start, he approaches his father.  His dad sends him to a surprising mentor - their barber, Roy.  The father explains that Roy taught him everything he knows about money, and offers to call Roy and let him know that Dave is coming in for a lesson.

Dave, joined by his sister Cathy and best friend Tom, go to the barber for a financial lesson.  Roy is a small town barber who has amassed a small fortune on a small salary.  He explains that he did this by following a few simple rules, and offers to teach them to the trio on a monthly basis.

The lessons include:

1. Take 10% of your salary, and save it by paying yourself first.  This is not a retirement or emergency fund - it’s a get rich fund.  Every time you get paid, take 10% of your paycheck and invest it.  The author suggests mutual funds, but I’d be willing to bet that if I had a newer copy, he might suggest index funds too.  I’d add the caveat that you should invest 10% or your pre-tax salary if you really want to get ahead.
2. Make sure you have a will and life insurance.  You need to think of your dependents, even if you’re not around.  No dependents?  Don’t worry about life insurance
3. Save for retirement, and don’t rely on social security.  No advice on how much to save, but he explains the different types of retirement plans available, including 401K, 403B, IRA, pensions, SEP (Simplified Employee Pensions), and Keoghs (for the self-employed).
4. When deciding whether to rent or buy, do a comparison and make sure you think of the consequences.  Roy leans heavily towards buying a house due to tax advantages, increasing value, and leveragibility, but he also points out that depending on your situation, renting might be a better value.
5. Be thrifty and frugal in your day to day finances.  The barber suggests having a budget, but also says if you’re saving and planning for retirement, you can afford to be a little wasteful. 
6. Make smart investments (even if the investment is paying down debt), and learn how to minimize your taxes
7. How to handle emergency funds - only have a small one.  This one of the few areas I disagree with.  The author says that you don’t need to worry about having a significant emergency fund, as you can always use credit cards or loans in a crunch.
8. How to save for your childrens’ education
9. The importance of disability insurance.  I agree completely.  All it takes is one accident to change your way of life and ability to earn an income.  You need to protect against this if you want to protect your lifestyle.
10. The importance of staying informed of financial news.  You don’t need to check your investments continuously, but you should at least be aware of what’s going on in the economy.  An informed investor is a smart investor.

Unlike many books that make finance seem too complicated, the Wealthy Barber emphasizes that anyone can get rich.

The fictional story line makes for an entertaining read, even if the jokes are corny.  The three protagonists provide a good sample of the potential audience: a married man with a family, a single business owner, and a single worker.  The diversity shows that the lessons apply to you, regardless of your situation.

This is a great read for everyone.  It covers the basics of finance well, and also makes the principles of building wealth available to everyone, regardless of income.  It’s an enabling and encouraging point of view.

Executive Summary:

Title:  The Wealthy Barber

Book Jacket Summary:

Regardless of your income, you are probably making a salary that would have looked like a small fortune just a few years ago.  And yet, if you’re like most people, you are not on your way to financial independence.

The amazing thing is that even if your income were twice what it is today, or more, you would not necessarily be any wealthier.  Most people simply become broke at a higher level - the more they earn, the more they spend.  And if you’ve tried budgeting, you’re realized that it is as ineffective as dieting - it only makes you feel deprived.

Thankfully, with this special book, there’s a way for you to become wealthy gradually, starting today.  The Wealthy Barber has already shown hundreds of thousands of people how to improve their fortunes by taking a few simple and painless steps.  And by successfully helping so many get ona  sound financial track, it has proven that a small salary is no barrier to financial well being - as long as you follow its simple, easy, and enjoyable plan.

Author:  David Chilton

Target Audience:  Everyone

Pages:  200

Topics / Chapters:

1. The Financial Illiterate

2. A Surprising Referral

3. The Wealthy Barber

4. The Ten Percent Solution (saving and investing money to get rich)

5. Wills, Life Insurance, and Responsibility

6. Planning for Retirement

7. Home, Sweet Home

8. Saving Savvy

9. Insights into Investment and Income Tax

10. Graduation

Should I Read It?  Read it twice

At the end of each year, I like to take a look back and think about the things I’m thankful for.  It helps me appreciate how lucky I really am.  Here are some things I’m thankful for this year:

• I’m thankful to have married the woman I love
• I’m thankful to be employed at all right now, let alone in a job I like that helps me grow
• I’m thankful for my health, and the health of my family and friends.
• I’m thankful that even though I got in a car wreck, no one was hurt (except my dignity), and the damage wasn’t too bad
• I’m thankful for the second chances I’ve been given.  I won’t waste them.
• I’m thankful to have four great dogs, and two awesome cats.  My animals bring me so much joy.

I know it may sound a bit cheesy, but it helps me focus on what’s really important in life.  It’s too easy to get wrapped up in material things that don’t matter.

I recently did something I’ve never done before: donate money to charity.

My wife and I took a different approach to Christmas this year.  In years past, we set a limit on gifts for each other, and then we would inevitably exhaust the entire amount.  Instead of trying to find the perfect gift (regardless of cost), we spent it all out of fear that the other would spend more.

This year, instead of setting even a small limit, we made a donation to charity - something neither of us had done before.

We’re animal enthusiasts (now 4 dogs, 2 cats), so we decided to make a donation to the local branch of the Humane Society.  On Christmas eve, we walked in and surprised the receptionist by asking to make a donation.  She was caught off guard, but very appreciative.

They gave us a receipt to use on our taxes (which will help us get back between 25%-33% of the donation), but that’s not the reason we did it.

We knew they were in need, and wanted to help.  They’re so stretched that they may have to start putting down healthy animals just because they’re overcrowded.

This was hard for us to stomach.  All our dogs came from the Humane Society, and they have been wonderful additions to our home.  The amount of happiness, joy, and entertainment they bring to our lives is unbelievable.  We couldn’t stand the thought that other dogs may not get a chance simply because the shelter is out of room.

So after we made a donation, we took a look at the dogs.  They showed us puppies first, but we asked to see the older dogs.  Its easy for puppies to get adopted, but much harder for the older ones.

They walked us past a row of dogs, all clamoring for attention.  One stuck out in particular.  It was a beautiful Akita that was trying to use its nose to open its cage.  I was struck by his intelligence, and within a few minutes, we were filling out the adoption papers.

We took him home a week later, and he immediately fit in with our other animals.

I’m not writing this because I want a pat on the back.  Instead, I’m trying to motivate others to make a difference.

For too long, my wife and I said “we’ll help animals someday”.  We never bothered to make a plan, or define when the mysterious “someday” was.  We kept putting up barriers.  We said we’d do it after our finances calm down.  Once we have more time to volunteer.  After our debt is paid off.

After a while, I got tired of excuses.  I realized that if I have enough money to eat out and buy booze every week, then I have enough money to help a good cause.

Even our small contribution was enough to have an immediate impact.  Due to their lack of funding, the Humane Society can’t spay/neuter every dog that comes in.  The money we donated will pay for another dog to be fixed, which will allow it to be taken to “adoption days” held at area malls and stores (greatly increasing its chances of adoption).

And by adopting a dog, we actually help out two animals.  First, the dog we took home will be spoiled beyond belief.  Also, we freed up room for another dog at the shelter.  It means one more dog will have a chance at finding a loving home.

So please, make an effort to help out a cause you care about.  Charities need more help when times are tough, and we all have an obligation to help those that are less fortunate than us, especially if they can’t help themselves.

Hope you enjoyed the holidays, and are enjoying the college bowl season.  Here are this week’s links.

Mike at Oblivious Investor ponders When to Panic and Stop Investing in Stocks, then decides that such a time doesn’t exist.

Josh at The Reformed Broker has some great advice on Rolling Over a 401K to an IRA.  If you’ve recently changed or lost your job, then you need to do something with your 401K.  Most people make the mistake of just leaving their 401K where it is and forgetting about it.

Meg at All Financial Matters discusses changes that the Credit Bureaus are making to their credit score formulas in 2009.  Your credit score greatly affects your life, so you should be aware of the changes, and how they affect you.

Doctor S at Finance Your Life has some advice for making your New Year’s resolutions, as well as a round up of some other resolution links.

 And for the funny link, a timeless source of knowledge: an old Calvin and Hobbes comic foreshadows the financial crisis.

In one of my first posts, I started a series called “Get out of Debt!“.  It chronicles my quest to pay off all my consumer debt.  All $10,793.86 of it.

All of it is on 0% interest cards, but I’m still uncomfortable having any debt, let alone that much.  It’s manageable now, but if something happened to my health or job, I’d be screwed.

So I decided to get out of debt as soon as possible.  I’ll sleep better at night without it, and I could use the extra money to generate wealth.  I’m treading water now, but I’m not getting anywhere.

I track my debt in real time, but this is the first update on the site.  After 75 days, I’ve paid off 4.68%, or a little more than $500. 

I thrive on visual motivation, so I put together a graphical summary of my progress:

Each square in the “Credit Cards” section represents 4% of my original debt.  As I pay down more debt, I change the color of the squares from red to green.  My one green square is looking lonely, but I’ll add more soon.

Paying off only $500 in two and a half months may not seem like much, but I’d like to give it some context.  In October, I got married.  I went on my honeymoon in November.  My wife and I paid for the wedding and honeymoon ourselves, and we did it without generating more debt.  I’m proud of that.  We even did some major home improvements before the wedding, like building a 400 foot fence, without using credit.

So ideally I would have paid off more by now, but I’m happy with what I’ve accomplished given the circumstances.  I’m expecting things to move a lot more quickly in 2009.

Do you have any tricks you use to motivate yourself to pay off debt?

My 401K is down 45% this year, but that doesn’t bother me (very much).  I try to take a long term point of view with my finances.  But I recently realized that even my decades long point of view is far too short sighted.

I’ve never taken the time to figure out exactly how much money I need for retirement.  And more importantly, I’ve never stopped to think about what I want to do when I get there.

Lee Eisenberg tackles both of these topics in “The Number - A Completely Different Way to Think About the Rest of Your Life.”  For me, the book was an eye-opener.

The Number is that magical net worth you need to stop thinking about a career and start thinking about fulfillment.  It’s best summarized by a Wall Street broker in the book: “it’s f*ck you money”.  After your net worth reaches this number, you have freedom.  Freedom to walk away from your job and travel the world.  Or start your own business.  Or dedicate yourself to a higher cause.  All this assumes that you’ve planned accordingly, and have reached your goal.

Eisenberg doesn’t tell you exactly how to calculate your Number.  Instead, he suggests some resources and gives you some things to think about.  First, you have to know what you want out of retirement.  Where you want to live (and how many houses you’d like).  What kind of lifestyle you want.  How much money you’d like to give to charity, or to your family.  How often you’d like to travel.

Most importantly, he gives advice on the hardest part of retirement: figuring out what to do with your time.  Even if you have all the money in the world, it won’t bring you happiness unless you use it to do something that brings you a sense of fulfillment.  This is what sets “The Number” apart from other books.  It doesn’t tell you what to do.  It forces you to think about what drives you.

Its secondary goal is to help you prepare for retirement.  To do this, you have to consider the difficulties and uncertainties you’ll face along the way.  Among them are an uncertain economy, social pressures to spend, and the potential of being drowned in a sea of complicated and ever-changing financial choices.

This book is definitely aimed at an older crowd - baby boomers on the verge of retirement - but I don’t understand why it is not marketed at a younger crowd.  The principles apply to all ages, but you’re in a better place to adjust your plans at a younger age.  After all, time is our best friend in the financial world.