As prices of almost everything on the grocery store shelves seems to creep higher, we seem to get a bigger buzz than ever by saving money in the checkout line. Coupon use is on the rise, and this week was the series premier of TLC’s "Extreme Couponing" television show. Yet while it’s nice to save a little money when you reach the cash register, and every bit of savings helps a little bit in the long run, let’s keep it all in perspective: clipping coupons, a little or even a lot, is not the key to a comfortable retirement. When we talk about the importance of saving for long-term wealth accumulation, it’s about the savings that you invest, not the discounts at the cash register. The road to long-term financial success is not paved with coupons!
The inspiration for today’s blog post comes from a lot of the buzz I’ve been hearing this week about coupon activity, kicked off by the premiere of TLC’s "Extreme Couponing" show, which some have already pointed out appears to be a demonstration of unhealthy hoarding behaviors as much as diligent couponing (e.g., the woman went and collected 70 newsletter to get 70 coupon inserts to buy 70 bottles of mustard in one visit to the grocery store!?). Here’s a tip: If you save 50% off the purchase price and then throw 50% of the stuff you purchased in the garbage can when you haven’t used them 1, 3, 5, or even 10 years later, you didn’t actually save anything. And generally speaking, getting a discount to buy something you don’t need and probably won’t use isn’t saving money, it’s wasting it.
But even done in a "more reasonable" context, is couponing really the way to secure long-term financial success? For most people, I think the answer is "no", absolutely not. Why? Simply put, for three reasons, because: 1) there are other ways to save a lot more money; 2) most people won’t save enough money for it to matter; and 3) there are other – and often more financially successful – ways to use your time. Let’s look at each of these briefly.
The first issue – and my biggest gripe about why I don’t like the obsession about couponing as a way to achieve financial success – is that it distracts from the bigger picture of what really impacts our long-term financial lives: the big purchases. I’m talking here about where you live, and how you get around; in other words, your home and your car. Making good spending decisions about these big items has far more positive impact on your lifetime financial success. For instance, imagine a "moderate" average coupon-clipper who manages to rack up enough coupons to save $40, every week, diligently, all year long, on the family grocery bills. Total savings: about $2,000. On the other hand, when the family chooses to buy the next minivan, getting the Kia Sorento instead of the Honda Odyssey: about TWICE the savings of a year’s worth of coupons (based on dealer MSRP). The latter represents a brief decision made at the car dealership. The former represents a great deal of diligent coupon-clipping work week-in and week-out all year long. The point here is not that Kia is great and Honda is bad, but simply that we can spend an amazing amount of time working on all that coupon-clipping for a few dollars a week, and remarkably little time choosing which car purchase might save us thousands of dollars at once. Or for an even more extreme yet dramatic example, look at the cost of shelter. You can generate far more savings than even this diligent couponer by buying a house that is $30,000 – $50,000 cheaper; did you really need all that space you bought (never mind those who buy houses that have whole rooms that aren’t used where the savings could have been even higher!)? Could you have lived in a slightly less expensive area? Could you rent a slightly smaller place?
On the other hand, another concern about my couponing example above is that I’m not even certain $40/week is realistic savings for a lot of people. I realize that often when people start doing couponing, they enjoy some big initial savings… as they stock up on supplies that they won’t need for a while, but hopefully will use in the foreseeable future. But at some point, you’ve used the big savings coupons to buy a year’s worth of toilet paper and 6 months of snack packs for the kids, and you won’t be doing much more savings on those items for a long time to come. When you average it out over the year, and count perhaps a few weeks when you didn’t really have the time to do the coupon-clipping and just had to go shopping anyway, I’m skeptical whether a lot of people are even going to enjoy more than $1,000 of savings through the year, even being "reasonably" diligent about coupons. Yes, I realize there will be exceptions to this for the "hard core", but I’m talking about the "average" person! Of course, even $1,000 of savings isn’t bad, but frankly there are lots of ways to change your habits to save $1,000/year. Heck, you can save about that much by kicking the 5 days/week Starbucks habit and just brewing the coffee yourself!
And for many, the challenge of coupons isn’t just about the dollars, it’s about the time it takes to clip those coupons. Time is valuable, whether you want to spend more of it with your family, or spend it making more money for your family. When I hear about someone who is able to diligently organize over $100/month of coupons, analyzing what the family needs, finding the right coupons, getting them to the right stores to be used at the right time before the expiration date, etc., I don’t see an effective coupon saver. I see someone who has the number smarts and organization skills to take a training course in Quickbooks and get part-time work as a bookkeeper to earn extra income for the family, which can pay with not just a few dollars of one-time savings at the cash register this week, but with increased income for a lifetime.
So the bottom line is that I won’t deny you can save some "decent" money with coupons, and that there are a number of people who use it effectively for some modest savings. But the decisions we make about big purchases, like the car we’ll drive or the home we’ll live in, often have far more financial impact, yet we focus less on the savings there. I realize that it feels cooler to save 50% on a bottle of mustard than 3% on your car or 1% on the cost of your house, but the reality is that the latter can create more lifetime savings. And active couponing takes time as well; time that, if we’re going to look at it financially, could potentially be far better spent getting some training to advance your existing career or even just find new part-time work, which can have a radically higher lifetime financial impact. I’m not trying to say that coupon activity is bad. It’s just that we’re giving it far more credit than I think it deserves, and ignoring other, more important, pieces of the financial pie in the process. The path to financial success is not about picking up coupons along the way.
So what do you think? Does your family "coupon" actively? Does it feel like a good use of time? Is the savings effective? Or do you just not bother? Don’t think it’s worth the time and effort? Savings isn’t meaningful for you? As a planner, do you ever counsel your clients to use coupons more as a financial savings step?