When getting a deal isn’t a deal
March 6th, 2008 by KimHow often have we all done this: prices at the nearest gas station are outrageously high today, so you cross town to get a deal, saving a couple cents per gallon.
But is it really a deal?
I do this compulsively. Besides driving the extra couple miles to save two cents per gallon for gas, I’ll skip over certain items while grocery shopping, then go across town to a store where I know I can buy them cheaper. That unfortunately sometimes leads to me not having milk or dish sponges for weeks because I’m not willing to spend an extra 50 cents.
Pointless, right?
Jean Chatzky, editor at CNN Money Magazine, shares a tip from Tim Ferris, author of the bestseller “The Four-Hour Workweek:” if you think you’re getting a deal by spending an extra few hours shopping for a deal, well, guess what — you may not be getting a deal.
Chatzsky recently spent days shopping for a flat-screen TV. When after all these hours she finally found one for $3,000, she couldn’t bring herself to buy it, wondering if she could find a better deal — if only she had shopped around some more.
After this experience, she writes:
It’s easy enough to measure how much money you can save by shopping around or by taking on an unpleasant chore, but most of us don’t run the numbers on our time.
There’s a quick, and enlightening, way to estimate that, Ferris explains. Say you make $100,000 a year. Remove the last three zeros ($100), divide the number in half and you get your approximate hourly rate, in this case $50. Unless you’re “making” that much by shopping for your TV or constantly combing the Internet for slightly higher CD yields (or whatever your time-suck happens to be), you’re losing money.
If you think you might be wasting time looking for the best deal, Chatzky suggests you log your hours. If you spend 40 hours to save $200, you have to question: Is my time worth more or less than $5 an hour?
She also suggests measuring your enjoyment while “shopping around.” If you enjoy spending six hours looking for the best deal on shoes, then there are intangible benefits to the experience. On the other hand, if you can’t wait to get out of the appliance store while looking for a lawnmower…
Good advice. I’ll remember this next time I go grocery shopping.
Tags: money
March 6th, 2008 at 9:49 pm
Kind of like driving 20 miles to 24 hour fitness to run on the treadmill for 20 minutes, eh?
March 6th, 2008 at 10:39 pm
It’s all about being penny wise and pound foolish. I don’t ever have enough hours in the day to do just about anything so time is more valuable to me than anything.
March 7th, 2008 at 12:24 am
Some people are born shoppers. The rest of us have to work at it.
You really need to weigh the shopping time against your opportunity cost. Using your hourly pay is wrong since it only accounts for 40 hours a week. Nobody is working 24/7.
Among the intangibles is the feeling of satisfaction knowing I found a good deal. Or at least got my money’s worth. How many of you get buyer’s remorse when you buy something expensive and find out later you could’ve gotten it cheaper at the store down the street? Or goes on sale the day after you bought it?
March 7th, 2008 at 6:34 am
Agree with “Pake In Training,” like that name btw, is it because you working towards being the ultimate cost conscience spender?
In my case, I have more time than money and I do enjoy researching products and looking for the best deals. I even subscribed to “Consumer Report” online, expired now, but very useful in reviewing stuff before buying but the problem sometimes is that the items no longer available. Product forums are also useful. You can spend hours doing this. My son is the same way. This is not grocery shopping but for stuff like electronics, cars, coffee makers, lawn mowers, computers, etc.
March 7th, 2008 at 8:02 am
In a somewhat related topic, sometimes I see CEOs or high-profile people doing photo-ops at homeless shelters, or wherever, and while it’s good they’re donating their time (and maybe money) to a worthy cause, I can’t help but think that the time they spent there is probably worth thousands of dollars and could, in turn, be used to hire dozens of people.
March 7th, 2008 at 8:38 am
Got a Sony LCD HD TV and sved $400 by shopping aroud for a week before buying. Found the lowest price at Mid-Town Radio in Waipahu probably the only small mom and pop store left for appliances. The old lady there knew my dad and my grandpa from 80 years ago. Costco has it for $3000 after rebates got it for $2600 with tax. The most expensive was Best Buy. I go to Safeway, Long’s and K-Mart every weekday at lunch just to look around so pricing stuff is easy. Also sometimes it’s not justa bout saving money such as boycotting the regular gas stations and going strictly to costco because they have the most reasonable price for gas.
March 7th, 2008 at 8:59 am
Exactly.
At the same time, however, your time is the most valuable resource you have: it’s the ONLY resource you don’t get more of.
I used to be guilty of extensive comparison shopping, but as I get older, I get less concerned with it. It’s the same reason I stopped bothering to use P2P programs for mp3s once I got a real job; the hours it takes finding and assembling an album of mp3s that are good quality and actually are the songs the track titles suggest just aren’t worth it to me anymore (and, y’know, it’s illegal. whoops).
This is why it may not make sense for, say, a company executive to spend time every week looking through newspaper ads and clipping coupons, but it may make a lot of sense for a housewife whose husband only makes $35k a year to do so.
March 7th, 2008 at 9:38 am
Yeah. Gas is ‘frickin’ obscene! I just filled up at ‘frickin’ Costco for $3.39 for cheap gas. WTF?! With gas being so high, IDK if it’s worth it any more to travel someplace to save a couple bucks for the fact that your ‘frickin’ gas is gonna cost you more. Better to just buy your items close to home. Hopefully you have a Walmart close by.
March 7th, 2008 at 10:07 am
Time is money. When performing a time consuming action, you need to take into account the opportunity cost of that time spent. This cost needs to be factored into the total cost of the action. Example: Cost Plasma Screen TV + Opportunity Cost of time spend shopping). Personally, I in the case of gasoline I don’t think shopping around will make economical sense. On average your tank may hold 15 gallons. If you fill up when you only have 2 gallons left, and you drive to the gas station that is 3 cents cheaper than the one by your house, you save a whooping 39 cents. Not to mention if you are one of those economists who believe price gouging is good for the economy, you will be more than happy to pay the higher price. But is price gouging good for the economy when it comes to gasoline?
March 7th, 2008 at 10:46 am
Its the same with parking, I laugh at people who will drive around and around to look and wait for the closest stall near the store, when they could have parked a little further and be already in the store. Wasted time and gas and not to mention creating traffic for the rest of us!
March 7th, 2008 at 12:12 pm
This was the argument for, and the contributing factor to, the rise of places like Circuit City and Toys ‘R’ Us in the late 80s and 90s.
Before the nation flipped for Walmart and low prices, Circuit City and Toys ‘R’ Us routinely did not have the lowest prices but offered the convenience of having everything for you in one place.
Their assumption was that saving a little bit of time is worth paying a little bit more.
To them, time savings was the economical utility benefit, not cost savings.
It seems ten years later, with WalMart thriving (and arguably offering both time and money savings) and Toys R Us all but going under, the nation’s priorities have changed.
Blame the ensuing economic crisis and rising gas prices? Sure. Blame Bush? Why not.
But, I think it is the internet’s fault.
March 7th, 2008 at 12:42 pm
all depends on the person. if you don’t mind doing it, then why not. i don’t personally look all over deals but if i come across one, then i do. granted i am not rich or anything, but i just rather spend the time i have free getting my item and going on to do other things. i suppose if one’s time feels well spent looking for deals, then so be it, feels rewarding:)
have a good weekend peeps:)
March 8th, 2008 at 12:55 am
Deal or no deal. I just recently bought some airline tickets to Vegas… of course i shopped around for the best price!! It’s not about “wasting” my time lookin for the best price, a better price is just a click away. But drivin all over the island for the “best” gas price doest make sense. I believe people will still drive their cars even if price of gas went up to $5. Honestly, what price would it take for people to stop drivin and start walkin??
what do you think Kim?