(Note: this post is written as part of My Money Forest’s Group Writing Project. Head there to participate or read more posts by others on the subject of “My Best Piece of Financial Advice”.)

Money is a funny beast.

As much consideration as you give to what stocks to invest in, which credit cards to sign up for, how much in loans to take out, or dream big about how you’ll make your millions, it’s wise to evaluate your relationship with money itself from time to time.

Several years ago, I remember my CPA telling me once that people reacted very extremely to windfalls (of whatever size), and almost never in a good way. Those who won lotteries often lost their winnings because they felt “it wasn’t really supposed to happen anyway”. This also often happened to people who inherited unexpected money from a relative. People who won large settlements due to an injury or illness often spent their money quickly and angrily, as if in revenge for the high cost they had to pay to get the settlement. What’s the overriding theme here? I believe it’s that none of these people had a good emotional grip on money.

If you look at it, it seems the emotion most commonly associated with money is fear: of not having enough of it, or losing it once you do. The former might represent people who have large amounts of debt and therefore feel in a sense enslaved to money. The latter might include those who forget that money’s purpose is to be used and not simply amassed. Finding a balance between these two teeter-tottering fears is a hard task a neverending process, because life is always changing. Which of the two categories do you relate to more? Personally, I fall more into the latter.

This might also be why most personal finance articles out there (including ones written on this site) tend to emphasize savings and thriftiness rather than spending and enjoying money. It’s apparently taken as a given that humans have a predilection for spending every dollar they earn, and that emphasizing the enjoyment of using and spending money leads down a slippery slope.

However, it dawned on me recently that if you truly have a healthy emotional relationship with money, the joy of spending and saving should go hand-in-hand, or at least be a non-issue. But maybe being able to do that would be the financial equivalent of reaching Buddhist enlightenment or something.

Still, isn’t it a worthy goal to work toward? Think about it: like so many other things in life, decisions about money based on fear can lead to bad results because instead of you controlling money, a means and tool, it’s controlling you.

That’s why the idea of building long-term wealth by putting away a percentage of your paycheck and growing it in an index fund seems to work for many people. It takes away the difficult day-to-day emotions associated with deciding what to invest in, when to do it, and how much money to put in. But it’s not the only way, or else there wouldn’t be successful and famous businessmen and entrepreneurs out there, either.

The bottom line is, no matter what path you’re on, it’s worth remembering that money is a necessary means to live life, one to be saved, used, donated, considered, and enjoyed, but hopefully never feared.

I’m trying to decide whether having pet health insurance is worthwhile.

We recently brought a new French Bulldog puppy to join her sister in our home. Upon registration with the AKC, one of the features offered is a 60-day free trial for a pet insurance policy that covers accidents and injuries only within the 1st 30 days and accidents, injuries, and illnesses during the second half of the trial period. So far, we haven’t had to use it at all. The AKC insurance plan is apparently offered through PetPartners, a UK company, and once our trial is up, there are a few different plan choices available.

We haven’t used or had pet insurance in the past for Lola, our other Frenchie. But then again, we also weren’t living in the Bay Area, where vet expenses seem to be easily double what they were in the Pacific Northwest, even for routine care. Earlier this week, when I brought our puppy in for a checkup, I asked one of the staff if they recommended any particular pet insurance company. They gave me a brochure for VPI. It seems AKC’s plan is costlier, but covered incidents are covered at 80% (a 20% copay), whereas the VPI plan is fee-based and cheaper.

But based on my research so far, I’m still disinclined to sign up for pet insurance. Here’s why:

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While biding my time during a long layover at O’Hare International Airport on my recent trip, I was pleasantly surprised when I stumbled upon War Reporting for Cowards. It’s a short autobiographical work by Chris Ayers, a British finance and business journalist who found himself assigned to Iraq in 2004, embedded on the front lines with the US Marines.

Though Ayers doesn’t disappoint those expecting self-deprecating British humor, don’t think that this is a laugh-out-loud book that belongs on the “humor” shelf at Barnes & Noble. Nor is it a book that takes a particular stance on whether the war in Iraq was right or wrong.

Because he makes no pretenses about being a brave war journalist, what Ayers gives us is a rare look into the reality of being on the front lines of warfare, and I admire that he doesn’t hide his emotions, be they fear, terror, or admiration. He also found himself right in the middle of 9/11 while serving as the Wall Street journalist for the Times of London, and I appreciated his sincere portrayal of both the horror and surrealism of what was happening around him. Perhaps because we’re about the same age, I found myself relating to and chuckling at his observations and thoughts throughout the book.

War Reporting for Cowards is more of a general-interest book, but I found myself liking it well enough to recommend it here. Thanks for allowing me this non-finance-related post diversion.

While browsing a local Sunday paper, I found a question in a Q&A column about APR and APY. (I haven’t been able to find a link to the original article yet, but it appeared in the 9/17/06 edition of the San Mateo County Times). Here’s the reader’s question and Mr. Cliff Pletschet’s (the columnist’s) response:

Q: World Savings advertised an annual percentage yield (APY) of 5.76% on a 10-month certificate of deposit, but a rate of 5.60% was typed into my passbook after I opened the account. The teller and her supervisor explained that I was getting the lower rate because the CD was for 10 months only and that if I wanted to get the higher rate I would have to roll over the CD after 10 months. I demanded my money back and opened a one-year CD at another bank for an APY of 5.70 percent. Can you explain what happened here? -A.B, Fremont

A: The math gets a little confusing, and the people at World Savings actually gave you the wrong information or you misunderstood their explanation. You would have received the 5.76 APY had you opened the account at World. The 5.60% is the actual rate on an APY of 5.76. The difference is the result of compounding, and, under federal law, banks must disclose the APY as the true return on a bank account, according to Julie Holbert, World Savings customer service manager.

Unfortunately, the mistunderstanding or misinformation sent you off to another bank where you actually ended up with a lower rate. In all araeas of investing, no matter how simple the process may seem, there’s an ongoing learning process.

The answer is spot-on (and as an aside, here’s the FDIC law that requires banks to disclose APY figures), but I’d like to delve into a little deeper an explanation by going through the difference between APR and APY and how they relate. This way, we won’t make the same mistake if we find ourselves in this person’s situation.

First, don’t get bogged down by the three-lettered finance acronyms. Unfortunately, APY and APR look so similar as to be interchangable, and their spelled-out definitions (annual percentage rate and annual percentage yield) don’t give us much of an additional clue about what they really are. In fact, neither the reader or (it seems) the professionals at World Savings understood the difference well enough to understand what was going on!

The difference between APR and APY essentially boils down to compounding.

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Last November, I purchased shares of PORK at $18. If you recall, I’ve previously written about my decisionmaking process on this purchase and concluded I’d bought at too high of a premium. It’s wobbled back and forth a bit since then, but never actually returned to $18, confirming my suspicions of paying too high a price.

On Friday, the stock abruptly jumped almost 7% to close at $17.73, about the closest it’s gotten to my purchase price since I bought it, and today it was revealed that Smithfield Foods (SFD) has announced that it plans to acquire PORK. If approved (and there might be some antitrust concerns), PORK shareholders would receive 0.678 shares of SFD and $1.25 in cash for every share they hold. SFD is currently trading at about $28.50 or so, which would make each share of PORK worth around $20.57 or so. I’m inclined to sell on the news announcement later today, especially based on my experience with PORK so far. (Update: I sold my shares at $20.40.)

I’ll be honest and say I think I lucked out on this investment in terms of not having to realize a loss on it. I’d concluded a while ago that until I know more about what I’m doing, large-cap value plays might be safer choices (assuming there are any to be found), but this has been a nice surprise. The unfortunate reality, however, is that I doubt I’d be able to consistently identify small-cap companies that will be acquired by their larger competitors to the extent that I could make a consistent return on them!