When Deals Matter

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Some people are into deals. They collect and organize their coupons, they check prices on the internet, they shop multiple stores, they keep an eye out for surplus or discontinued items on sale, they buy used, they buy at auction, they negotiate with sellers. These are all good strategies, but they all take effort. This post is on figuring out when the effort is worth it.

Obviously, whether it's worth it comes down to the interplay of two factors. First, how much effort is it? Second, how much can you save?

The first factor is complicated by the fact that some people enjoy some aspects of the wheeling and dealing. If sorting your coupons is better than comfort food, it almost doesn't matter whether you save much money or not. If searching for deals is as much a hobby as it is a way to save money (and doesn't tempt you to buy stuff you don't need just because it's cheap), then looking for deals can be a lot less expensive than scuba diving or stamp collecting.

The second factor is a bit more amenable to analysis. It comes down to three things.

1. Size of the purchase

Getting a deal simply matters a lot more on a big purchase than a small one. Even a 50% discount on a box of generic tea just doesn't matter at the level of your weekly grocery bill, let alone at the level of your monthly grocery budget. On the other hand, 3% off the price of a new car or a new house is worth quite a bit of effort, because you're talking about hundreds or thousands of dollars.

That's not to say that you shouldn't put a little effort into minimizing costs on all your little purchases as well. Something like keeping a price book, that lets you know when you're seeing a really good price so you can stock up, is just good sense. But don't let the idea that you're "saving money" draw you into wasting time that could be put to better use; keep the effort commensurate with the return.

2. Size of the discount

There are some items where bargaining is expected and large discounts are possible — houses, cars, oriental rugs. You have to know the market and push for a discount or you'll overpay.

Other items — large commercial transactions, for example, but also things like cell phone and cable TV plans — have very complex pricing structures. You can save a great deal of money if you know exactly what you need and put some effort into putting together a deal (or finding a plan) where you minimize the amount you pay for stuff that you don't care about.

3. Recurring expenses

This is really just a special case of "large purchases," because over the course of a few years, even a small monthly expense turns out to be a large purchase. In fact, specifically because each individual payment may be modest, this is the area where there's often a surprising amount of payoff for putting some effort into finding a deal.

Balancing

Personally, I don't get much enjoyment out of searching for deals. My inclination toward frugality has its roots in simplicity, so anything that complicates my life has to save quite a bit of money before I find it worth any effort.

Because of that, I have to push myself to put in a certain minimum level of effort looking for deals on the large and recurring expenses.

If you're intrinsically motivated to look for deals, you may need to push for balance from the other direction: Resist the urge to constantly look for deals on small, ephemeral purchases. (Instead, put the time into efforts that yield more value — earning money or spending time with your family or making music.)

Either way, you don't need to fight your natural inclination too hard. There's a broad middle ground where there's no objective reason to prefer one choice over another. Within that broad center, find a spot where you're comfortable, then quit worrying about it.