By Michael Kitces
As prices of many items in the grocery store creep higher, more and more people are using coupons to save at the checkout line. And while it’s gratifying to save a little money, especially for retirees on a fixed income or those trying to build up a nest egg, let’s keep it all in perspective: clipping coupons, a little or even a lot, is not the key to a comfortable retirement.
In reality, it’s the big purchases that have the greatest impact on your long-term financial success. I’m talking here about where you live, and how you get around; in other words, your home and your car. Making smart spending decisions about these big items has a more significant impact on your lifetime financial success than do smaller-scale spending choices. Diligently saving $40 per week on coupons is good; saving a few thousand dollars buying a cheaper car, or several hundred dollars a month on cheaper rent or a not-quite-so-big house is better.
What’s more, I’m not even certain $40 per week is a realistic amount to save with coupons 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 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 six months of canned goods, and you won’t get much more savings on those items for a long time. That’s because stocking up further doesn’t help at that point: 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 it one, three, five or even 10 years later, you didn’t actually save anything. And getting a discount to buy something you don’t need and probably won’t use isn’t saving money, it’s wasting it. Yes, you might still manage to save $1,000 over the span of a year with diligent couponing, but frankly there are lots of ways to change your habits to save $1,000 per year. In fact, you can save about that much by kicking the 5 day-a-week Starbucks habit and just brewing the coffee yourself.
Furthermore, for many, the challenge of coupons isn’t just about the savings, 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, 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.
The bottom line: I won’t deny you can save “decent” money with coupons, and that there are a number of people who use it effectively for 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 a greater financial impact. 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 wealth and retirement success. 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 to 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. In effect: The road to retirement success is not paved with coupons.
Readers, what do you think? Do you think couponing is worth the time and effort?
Michael Kitces, CFP, is the director of research for Pinnacle Advisory Group, a private wealth management firm located in Columbia, Maryland that oversees approximately $850 million of client assets. He is the publisher of the e-newsletter The Kitces Report and the blog Nerd’s Eye View through his websitewww.Kitces.com. Kitces is also one of the 2010 recipients of the Financial Planning Association’s “Heart of Financial Planning” awards for his dedication to advancing the financial planning profession. Follow Kitces on Twitter at@MichaelKitces.