So I made the booking. Then, like a good shopper, I kept checking other websites for lower rates. Turns out I was lucky: a couple weeks later, I found the exact same reservation on Priceline.com for $30 cheaper.

I quickly submitted a price matching claim and called up Hotels.com so they could confirm the lower rate and provide a refund. I thought I had followed all of their rules, and for extra evidence, I submitted a screenshot of the lower price.

And that’s where the fun begins. They confirmed the price, but then informed me I was not eligible for a refund. Huh?

Here’s what they explained to me, and how I was able to negotiate almost the same discount.

Hotels.com price matching guarantee

Here are the terms of the price matching guarantee:

Hotels.com reservations are guaranteed to be the lowest rate you can find. If there is a lower rate publicly available for the same dates and the same hotel or vacation rental and room category, you must contact us prior to the hotel’s cancellation deadline. Deadlines vary by hotel and travel dates. Please refer to your booking confirmation for the applicable deadline.

Bookings that cannot be cancelled are not subject to this guarantee.

If your booking qualifies for this guarantee, we will either, at our option, refund the difference to you, or, if you would prefer, allow you to cancel the reservation without penalty.

If you book a hotel that does not require payment at the time of booking, your Price Match Guarantee request will be refunded within 72 hours upon verification of your completed stay, once you have checked out of your hotel.

The policy seems generally fair: if you find a lower publicly available price on another site, they will match the price.

The catch

You have to read between the lines to see why the price matching guarantee does not offer much power.

It’s specifically the second condition: “Bookings that cannot be cancelled are not subject to this guarantee.”

Think about this more closely. Hotels.com is saying they will only price match on reservations that CAN be cancelled. But in that case, who cares about a price matching guarantee?

If the booking could be cancelled, I could just cancel it for free and then make a new booking at the lower price.

Hotels.com is basically saying they will price match on bookings that you on your own could have cancelled and gotten a lower price!

If, on the other hand, you actually paid them money up-front, and you found a lower price, then oh well, you are out of luck.

This is a pretty big catch in the price matching guarantee.

My story

So that’s the technicality that got me. My booking was a non-refundable reservation and thus not eligible for price matching.

I felt this was an absurd policy, so I immediately asked to speak to a manager to explain it.

The manager turned out to be helpful, probably because she had dealt with this issue before. To alleviate the situation, she quickly offered me a one-time courtesy 5 percent discount, which amounted to about the same amount as if I had gotten a full refund.

All in all, I will give the call center credit for quickly resolving the issue. After all, it’s not their fault that Hotels.com has such a quirky price matching policy.

(Perhaps it’s no surprise that Hotels.com is being sued over its price matching guarantee policy.)

In the end, the experience has made me hesitant to book non-refundable rates on Hotels.com and other websites as well with the weak assurance of a price match guarantee.

I’m largely going to stick with reservations that can be cancelled (so I can rebook if I find a lower price) or look for last minute deals.

My local grocer sells a variety of egg sizes. Can you figure out which one is cheapest?

Here are the prices:

Here is how I approached the problem.

Step 1: get the weights

To solve the problem, one needs to find the weights of the various sizes.

In my case, the weights were actually written on the egg cartons. But if they weren’t, I could have looked up the USDA regulations on egg sizes to find the following weights.

Step 2: compare unit costs

Now we can attack the problem. We will divide the cost by the weight to figure out the unit cost of each egg size.

It is clear from the table that eggs slightly decrease in unit cost the larger the size.

It’s not a big change: the jumbo sized eggs are roughly 3 percent cheaper than the medium sized ones. Still, this value adds up because I buy eggs almost every week.

Step 3: consider yolk:white ratio

There is one extra consideration. The unit cost is the appropriate measure if I were eating the entire egg.

But clearly I am going to throw away the shell. And as is the case, I typically throw the yolk away and just eat the whites.

If the extra weight from the larger eggs were due to the increased shell size or yolk size, then the larger sized eggs would not make sense.

So the question is: do the larger eggs contain more egg whites to make it worth it?

(Incidentally, buying eggs and throwing away the yolk is also a lot cheaper than buying products that only contain egg whites)

I did a bit of searching and luckily found a research paper on exactly this topic of the ratio of egg yolks and whites–it’s amazing the amount of information out there.

It turns out that the weight of the contents in an egg are proportional to its size. As a general rule of thumb, an egg’s weight is roughly 11 percent due to its shell, 31 percent from its yolk, and 58 percent from the white.

This means that egg white will increase proportionally with the egg’s size, and so the jumbo eggs are still the cheapest in unit cost.

Here are the numbers to confirm that jumbo eggs are still cheapest in terms of an egg-white only basis.

Conclusion

At these prices, it’s best for me to buy the jumbo eggs.

In general, one can compare the unit cost of egg sizes to figure out the best deal. This is true even if you care only about the egg whites or yolks, because both typically increase proportionally with egg size.

Most advisers will say to dollar cost average, but I do not think this is the right answer. Dollar cost averaging has nearly universal support among financial education teachers, banker, brokers, and money advisers. And yet, there has never really been a compelling mathematical case for dollar cost averaging.

To see why, let’s take a step back and understand the reasons people suggest to use dollar cost averaging. Then, we can explore the academic and logical arguments and suggest other alternatives. This article is outlined in 5 parts.

1. The standard explanation of DCA
2. Academic papers showing why DCA is wrong
3. Why the standard explanation is wrong
4. The people who really benefit from DCA
5. Alternatives: better ways to invest

(Standard disclaimers apply: I am not a money expert and you should always consult a professional before making your own decision.)

1. The standard explanation of DCA

Dollar cost averaging is about investing a set dollar amount of money regularly. Why would anyone do this?

Here’s an explanation that comes from our own government, in an article about investing basics at the SEC:

Consider dollar cost averaging.

Through the investment strategy known as dollar “cost averaging,” you can protect yourself from the risk of investing all of your money at the wrong time by following a consistent pattern of adding new money to your investment over a long period of time. By making regular investments with the same amount of money each time, you will buy more of an investment when its price is low and less of the investment when its price is high. Individuals that typically make a lump-sum contribution to an individual retirement account either at the end of the calendar year or in early April may want to consider “dollar cost averaging” as an investment strategy, especially in today’s volatile market.

The explanation is usually accompanied by a chart along the following lines:

table from about.com

Notice how the person ends up with more shares when the price dips and fewer shares when the price rises.

This is supposed to “reduce risk” and be good for investors. It sounds nice, but is there any merit to the argument?

2. Academic papers showing why DCA is wrong

I first read about why DCA is bunk in an excellent article by Timothy Middleton on MSN Money: the costly myth of dollar cost averaging.

Middleton cites two from a handful of papers that show DCA is not a good strategy. The first paper is from 1979 called “A Note on the Suboptimality of Dollar-Cost Averaging” by George Constantinides (pdf). This paper shows why DCA is not as good as another investment strategy in a theoretical perfect market setting.

This work was further refined by a 1993 paper “Nobody Gains from Dollar-Cost Averaging” in Financial Services Review pdf. This paper did analytical and numerical analysis to show that DCA is worse than a regular buy and hold strategy or an optimal portfolio rebalancing strategy.

These papers should end matters, but it does not explain why dollar cost averaging has universal support. Let’s explore why people think it’s a good idea.

3. Why the standard explanation is wrong

The promise of dollar cost averaging is tempting, but if you think about it, the claims are hollow.

First, there is a sleight of hand about what you are really doing. Dollar cost averaging is supposed to be an averaging mechanism because you buy more as the stock price rises, and less and the stock price falls. The problem is you are not really doing any averaging at all but instead mindlessly investing. The truth is you are putting in the same dollar amount regularly, without any regard to what the market does!

Second, the discussion of risk is very unsatisfactory. Dollar cost averaging is said to lower risk when compared to investing a lump sum all at once. But notice this: there is actually no measure of risk provided, at all! This is an obvious omission. But most people are tricked because they hear the word “average,” which is associated with the middle and avoiding extremes. This is another sleight of hand in the marketing of dollar cost averaging.

(Dollar cost averaging can avoid the risk of some extreme losses if you’re planning for retirement (paper here), but this is not the same as reducing risk. The papers cited above explain why DCA is not sensible on a risk-return basis).

4. The people who really benefit from DCA

If dollar cost averaging does not make sense, then why is it taught? I suspect there are two main reasons.

The first is the financial incentives. If people buy into dollar cost averaging, then that means people will invest money regularly into banks and brokerages. In fact, people who truly buy into dollar cost averaging will mindlessly invest even when the markets are tumbling and there is cause for concern! It is therefore definitely in the interests of banks and brokerages to promote dollar cost averaging so that mindless investors will pour money into accounts on a regular basis.

The second reason is paternalism. The argument is as follows. The common person is afraid to invest in stocks because of perceived risk. This is to their detriment, as the market has tended to rise over longer periods of time. Dollar cost averaging is a way to reduce fears and get people to invest through small amounts. Therefore, even if dollar cost averaging is not technically correct, teaching it is a way to get more people to invest and that serves the common good.

You’d be surprised to learn how many advisors subscribe to the second view. The truth is that many advisers are smart, and they are aware that dollar cost averaging is not a good idea. But rather than trusting people to learn, they are happy to get a second best solution. After all, dollar cost averaging has such a good image, why not capitalize on it?

Or think about it another way. If an adviser tells you to put all your money in, and then the market falls 10 percent in a week, you end up an angry customer who probably fires the adviser and complains to others. So the adviser will happily say it’s fine to dollar cost average as a way to reduce THEIR risk of losing you as a client.

I can sympathize with advisers in this regard, but I still do not think this justifies the widespread agreement about dollar cost averaging.

Financial education should teach the truth and let people decide. And the numbers show that dollar cost averaging is just not a good idea.

5. Alternatives: better ways to invest

There are two major alternatives to DCA. One is to invest the money all at once, as a lump sum. This strategy does require some patience and nerves, but it will be the best if the market is expected to rise.

Another alternative is to invest the money at random days. This is a modified version of dollar cost averaging, as one is investing the same amount, but at random times.

Middleton’s article shows an example of how both methods can be better than DCA. The article was from 2005 so the example is from 2004 data:

Table data from this article

In this example, dollar cost averaging is the worst return. This example does not prove anything, but it is an illustration of what the academic papers cited above were claiming.

A third alternative is to do an enhanced dollar cost averaging method (EDCA). This is an idea I found in a 2011 paper from the University of Nebraska (pdf). In regular DCA, you mindlessly invest the same amount every month. In EDCA, you will invest extra money if the market falls, and invest less or hold off as the price rises. This strategy was tested to be better by 0.3 to 0.7 of a percent based on historical data.

The long and short: dollar cost averaging is a popular and tempting way to invest, but its track record does not back up its claims.

I thought about a few reasons why one should tip for tap water.

It takes just as much work to fill a glass of water as it does to pour a glass of draft beer or soda.

The bartender could be serving someone drinks instead and getting a tip for sure.

If enough people tipped, it would be a lot easier to get tap water in bars.

So lately I’ve been tipping a dollar when I get water, and most of the times the bartenders are very appreciative of the surpise gratiuty.

Ideally bars would offer water in a self-serve station, both so drinkers can stay hydrated and so bartenders could concentrate on doling out drinks.

But until that happens, I feel better to tip for my water.

What’s your opinion: should you tip for tap water in bars or not??

Now I will already admit this was probably not the best decision. If you are trying to save money, it is often better to avoid overpriced dealerships and go to other mechanics (a former mechanic makes this case of how overpriced dealerships can be.)

But I’ll save that debate for another article. Let’s just say I was convinced I wanted to do servicing at the dealer and look for the second best solution.

So here’s the situation. During the servicing, I got a call suggesting to do other work. I really wanted to get the work done to avoid future hassle so I immediately agreed.

Then I realized I should probably negotiate a little bit. So I said a few words, and amazingly, it worked.

Applying the lesson: it pays to ask

This is one of the best money-saving lessons I’ve ever learned. You don’t have to take prices as a given. It almost never hurts to ask if there are any sales, promotions, or discounts. You lose nothing when rejected, and gain every time it succeeds.

The hardest part about this lesson is applying it. Occasionally I’ll feel awkward asking for a discount. But then I remember I’d rather feel awkward for a few seconds from asking than feel regret the rest of the day from keeping silent and paying more.

Immediately after I agreed to the extra servicing, I asked a simple question.

This sounds expensive. Can you offer any discounts? I think I can get it for less at my local car service shop.

This question put the salesperson on the defensive. He explained other service shops did inferior work, as in, they not use original parts for the job, etc.

I wasn’t sure this was true, but I just kept quiet to show my skepticism.

He then explained that he could help me out on the price. He wasn’t going to knock down the price by a lot, but he said he could give a discount.

I then mentioned I’d be test driving some cars while I wait.

The final result

Now you can see how little I actually did and how poor my negotiating skills really were. If I had to do it again, I would have researched the prices in advance and done even better. Heck, I even forgot to look around for coupons before I went out.

Still, what little I did and said actually did pay off. Not only did I get a discount on the additional servicing, but he actually applied a discount to the entire bill so my scheduled service also was discounted.

I got a 10 percent discount on all of the work, which amounted to about $60. Not bad for asking a simple question.

I should clarify that the point isn’t that I got a great deal on the work, as the dealership was probably still overpriced compared to other options.

The point is that I was actually prepared to pay for the full amount, and that just by asking I knocked the price down by $60.

In personal finance, you might not always be able to get the best deal (in this case, going to a local mechanic or doing the work myself).

But you should at least be getting the second best deal (in this case, getting a discount at the overpriced dealership).

Remember and apply the mantra, good things come to those who ask.