“Savings” discounts can put a dent in your finances

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Anytime you buy two of something and get a third item for half off, or add a few dollars to an online order to secure free shipping, you’re “saving.”

Sterilization It is a combination of “spending” and “saving”: spending more to stimulate saving.

But don’t kid yourself, experts say: Overspending is mostly spending.

“It’s always more spending. It’s not always more saving,” he said. Jeff Galakassociate professor of marketing at Carnegie Mellon University’s Tepper School of Business in Pittsburgh.

I’ve been blaspheming In the northeast of the countryws Recently. It sounds like something new: this term rarely appears in this publication. It’s not on Merriam-Webster online dictionary. Type it into your word processor and watch your spell checker revolt in protest.

“Booting”: A concept as old as shopping malls

However, the concept behind Spaving goes way back.

“Spading, besides being a terrible word, is not a new idea,” Galak said. “These promotions have been around forever.”

Here’s the basic concept: A merchant tempts a customer to spend a little more, or a lot more, by offering a discount as a reward. Buy a third, fourth, or fifth item and get the last one for free. Add another ten dollars to your cart, and the $5 shipping fee disappears.

Who needs a gallon of extra virgin olive oil? Maybe you will, for the right price.

Customers may see a lot of savings offers this summer. Inflation has led to higher prices. A dozen eggs cost about twice what they did in 2019. Overall, consumer prices rose by Nearly one-fifth Between 2019 and 2023, federal data show.

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Consumers are backing down. In response, retailers are rolling out deals.

Fast food chains are reviving value meals following a consumer backlash against reports that a Big Mac costs $15.

Target and Walgreens announced price cuts over the summer. More customers are choosing discounted Store brands.

Spending less on the same Happy Meal you bought a week ago is a no-brainer. In contrast, speeding can quickly get out of control.

“Frugality” can lead to wasteful spending and unnecessary purchases

The problem with overspending, experts say, is that it can lead a shopper to overspend on something they don’t want, don’t need, and won’t use.

“It’s always good to save money. The problem is when you spend money you wouldn’t have spent otherwise,” he said. Kimberly Palmerpersonal finance expert at NerdWallet.

Palmer herself recently gave in to the savings offer.

“It was buy one, get one free,” she said. “I never intended to get a second shirt. It was for my daughter. I went ahead and bought two.

The second shirt was free, so Palmer got a great deal, right?

Well, maybe not. I paid full price for the first shirt. If it weren’t for the dredging deal, she would have asked for a discount. In the end, she said, “I spent more than I wanted to.”

When is a “bootstrap” a good deal?

There’s really only one type of money-saving offer that guarantees a good deal, experts say: the kind that makes you spend less money in the end.

“Let’s say you’re going to checkout, and your cart is $5 less than the minimum to save $30 on shipping,” he said. Cassandra Happy, an analyst at WalletHub. “Then maybe spending $5 to get free shipping is a good idea.”

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However, most of the time, overspending makes you spend more: that’s the point, at least from the retailer’s point of view.

And if you spend more, are you still getting a better deal? It depends.

Before you commit to buying more of something to get a discount, experts say, ask yourself these questions:

  • Is it something you would buy anyway?
  • Can you bear it?
  • Are you going to use it all?
  • Is it perishable?
  • Do you have space to store it?

Stocking up on laundry pods, frozen steaks, or tissue paper at discounted prices might make all the sense in the world.

“My husband and I work from home,” Happy said. “So, necessities like toilet paper, things like that, we buy in bulk now, because we know we’re going to go through it.”

However, be careful if you see a display of steaming on ears of corn, bananas, or unfrozen steaks. Or anything with a short shelf life. Or anything your family might get tired of consuming. Or something you wouldn’t buy anyway.

What is the psychology behind “sterilization”?

The appeal of saving is obvious: consumers like to think they are saving money.

“You feel this temporary emotional high because you feel like you’re locked into a good deal,” he said. Chris Yamanoa partner at Crewe Advisors in Scottsdale, Arizona.

The problem comes when consumers want to save money so badly that they end up spending more of it, and on things they won’t use, Yamano said.

“You walk into Target, and you’re just there to buy dish soap,” she said. “But then, there’s a deal in the next aisle, and you walk out with a cart full of stuff you don’t need.”

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The calculations behind divergence can be difficult.

Let’s say you buy three pairs of shoes, with a 50% discount on the third.

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A quick calculation reveals that you’re not really saving 50%. You save that much money on just one item. If each pair costs $50, you save $25 on your entire purchase, cutting the tab from $150 to $125: a saving of about 17%.

What if the third pair costs only $30? In a typical savings deal, the retailer gets a discount on the cheapest item. Now, you’re saving just $15, bringing the price down from $130 to $115. Your savings drop below 12%.

The consumer can find out using the iPhone calculator. But few of us have time to do the math.

“A lot of times, with the distancing, it’s a very stressful situation,” Palmer said. “It will expire in the next few hours, at the end of the day, so there is some urgency to that.”

more: Do we really need a million dollars in retirement savings? “Not even close,” says one senior economist.

Here are some additional tips from experts on how to shop — and “save” — without overspending:

  • Make a shopping list, and stick to it.
  • Set a budget, don’t blow it.
  • If you’re considering a money-saving offer, do the math.
  • Before you commit to a savings deal, take some time to think.

“I would give myself 24 to 48 hours before buying anything,” he said. Jack Howard, Head of Money Wellness at Ally Financial. After that pause, she said, “If it’s still on my mind, that’s okay.”

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