How to Use Merits
It should be noted that NWoD Merits are somewhat dissimilar to Backgrounds from previous versions of the World of Darkness. First, backgrounds are pretty much entirely "Social Merits" this time around, as now Merits measure more of your capabilities other than just who you know and what you have. Second, backgrounds were a lot more 'basic'. In general, everyone was expected to have contacts and allies and those without them were generally 'loners'.
NWoD Merits are "extra"; they denote special capability, rather than just stuff everyone has. Just because you get along well with your family doesn't mean that you need "Allies (My Family)", though that could indeed be a perfectly acceptable Merit in some circumstances. Similarly, Contacts isn't the secretary that you occasionally chat with in the hall, but denotes all the avenues that you keep touch with. It's important to note that even if you don't have these merits, you still have friends and can learn about stuff. The contacts represent special above-norm relationships!
This is also important from a gaming point of view. It's perfectly fine to have build off stuff that happens in game and take advantage of it without buying them as merits. However, the expenditure (along with appropriate RP) makes it more concrete. There's a difference between just knowing and being friendly with a number of people from CalTech, and having one dot in Allies (CalTech).
The Cost of Merits
During Character Creation, it's important to note that you have exactly 7 merit points. This means that you can at most have three separate 2-dot merits, two separate 3-dot merits, or a single 4-dot merit. You CAN start with a five-dot merit, but the last dot costs double, so you'd only have a single point left. Especially when it comes to those merits that you can "only get at character creation", this limitation is particularly real.
Experience point-wise, merits have the following costs:
The above chart is important when buying "flat-rate" merits in play, or when designing such merits for inclusion into the rules. Also, prerequisite chains are important as well! My "wealth beyond avarice" merit ultimately costs 80xp to purchase entirely in play (40xp for members of the Invictus). 30xp for Resources 5, 20xp for "Millionaire" (a level four merit which requires five dots in Resources), and 30xp for "Wealth Beyond Avarice" (a level five merit which requires millionaire). The cost would only be 10+20+30 = 60xp for someone who started play with Resources 4 (reflecting a rise from...well, not rags to riches, but riches to swimming pools full of cash).