Written by Kelley Keehn
Friday, October 19th, 2018
Let's play a quick game. You're in the market for a blender, and you've found the perfect one! It's $100 and you're at the self-serve checkout getting ready to scan it. Just before you do, a friend of yours taps you on the shoulder and tells you the exact same blender is on sale for $50! It's at the competitor's store two blocks away.
Do you go? Of course you do!
You did a quick mental calculation and realized that's a 50% savings! Certainly worth a quick trip!
What Would You Do for Savings?
Two weeks later, you're shopping for a new sound system for your condo.
You've spent nearly an hour narrowing down your options and feel great about your choice. You're getting ready to insert your debit card to pay the $1,175 at the till, and just as you do, your friend again happens to be in the store and taps you on the shoulder. Your savvy shopper friend tells you that you can get the exact same system at the competitor's store for $1,125. It's only a few blocks away as well.
So, the question again is: Do you go?
You do a quick calculation in your head and realize that's only a small percentage of savings. Actually, you don't do the math at all, because it's well, too math-y! It's less than 5%. You decide that unlike the blender, this isn't worth pursuing. If you noticed, in both examples, the savings was $50. If you would go for the less expensive blender in the first example, why wouldn't you for the costly sound system? It's the same $50.
Dollars vs. Percentages
Retailers are counting on you paying attention to what works more in their favour. That new car is only $104 per week. You're only paying 3.75% on your line of credit, so why not renovate your kitchen now?
Where the Trick can Trip You Up
- Heading for the sale rack to buy something you don't need or want just because it's at a discounted price.
- Driving around town for something that's on sale for a dollar or two less really represents a very small savings. If butter is 25% less elsewhere, which translates to only a 75 cent savings, is it really worth your time to chase that deal? Or to drive 30 minutes for cheap gas that might only be a $7 savings for a full tank?
- Buying fresh food in bulk that gets wasted in your fridge.
- Taking on a payday-type loan because they said the interest was just 31 cents per day (but translates to 45% per year - and actual payday loans can be as much as 600% annually!).
- Being swayed to get a department store credit card because you'll get an instant 10% or 20% savings but will then have a credit card with a 29% interest rate, which could translate to hundreds or even thousands of dollars in interest costs.
- Ignoring the fee of working with a financial advisor – the 1% advice component you're paying for might seem insignificant, but what does that actually mean in dollars out of your pocket? What about the fees for your investments?
- Ignoring the difference that 1% more could make on your investments – if you had $50,000 invested for 20 years at 5% or at 6%, that's a $27,691 difference!
- Taking a horrible flight on your family vacation to save a couple hundred dollars that ruined part of your trip.
Sometimes we look at numbers differently or ignore one completely. But even when we're mindful of this flaw, it can get the best of us. The best thing to do is slow down, crunch the numbers when making a purchase in the future, and be sure to calculate and factor in what your time is worth and the joy factor of life, if you're chasing a discount.