"Buy four get the fifth one free," says the ad. It sounds like a good deal. After all, what could be a better deal than "free?"
But then, do you really need five? No, you don't even need four. In fact, you were only planning on buying two!
Just like that, you've fallen prey to the trap of spaving - spending more to maximize your savings. But the spend-to-save mentality isn't all it's cracked up to be.
In most cases, it causes you to spend more overall on items you don't need and won't use. And for merchants, that's the point! It's the very reason why you see so many advertisements like the example above.
And that's only one example of the dangers of spaving.
5 Common Spaving Mistakes
Here are the 5 most common ways people get sucked into the spaving trap and end up losing money.
Overbuying GroceriesThe example up top ("Buy 4, get 1 free!") is a popular form of grocery advertising. It's why you end up buying more of an item instead of the one or two you planned on.
In fact, you could end up doubling every planned purchase on your shopping list - and then some! You might add items that weren't on your list simply because they were a "good deal."
So what happens next? You find out your household can't consume or use all the items you bought before they expire. A big part of that "good deal" goes right in the trash.
Furthermore, there's a flip side to the “buy one get one” shopping mentality: over-consumption. We think, "It's such a good deal, it makes sense to stock up." And it does, in theory, or with certain items that you'll always use at a consistent rate, like toilet paper.
The truth is, if you "stock up,” you might use all of your items too quickly. Then you spend more than if you rationed with a carefully planned budget.
We're about to break the hearts of all coupon clippers everywhere.It takes all the fun out of shopping to think logically about spending. But it should be done.
Specifically, why do coupons exist? No, it's not because companies just want to be nice and charge you half price for once.
It's because marketers know that it's going to make them more money than they're losing to the discount. They know because it's a fact of marketing, proven by decades of marketing data.
They know you'll get hooked on a different product or brand that you wouldn't have tried without the coupon. Or they know if the coupon brings you to the store, you'll buy more than you came in for.
The only time they don't make money on the deal is when the coupon doesn't change what you were planning to buy. And that only happens when you write your shopping list first and then check if you have any coupons for your planned items. But, if you let coupons tell you what to buy, they'll tell you to spend more – every time.
Ever fill your cart with just one more item so you can qualify for free shipping? Every time you do this, you could be losing money.This is another classic marketing trick. It increases the average purchase price for everyone placing small orders because no one wants to “waste” money on shipping.
Now, you may think you're saving money because the item you add costs less than the shipping would have. But it's a waste to add an item you didn't need.
It's more frugal to buy from brick-and-mortar stores where shipping isn't a bargaining chip. Or, if you are going to shop online, make sure it's for large orders of purchases you were already planning.
Recurring Spaving Account Memberships
Think about Amazon. You can pay yearly for Amazon Prime so shipping is always "free." Except it isn't. It costs the yearly fee you pay to use Amazon Prime.Furthermore, will you use this service often enough to cover the shipping you would have paid? Better yet, could you have saved even more by shopping at brick-and-mortar stores in the first place? Only you can answer that (by tallying up your yearly purchases).
But from what we've seen, this leads to the same problem of over-consumption or even shopping addiction. Ironically, reports show that Prime users are spending more per order than unsubscribed Amazon users.
Costco has also made its money this way for years. Depending on how you shop, it's possible to save money this way. But, for most people, this isn't the case.
Don't take our word for it, though. See for yourself. Take time to run the numbers of your own yearly spending towards these services.
Electronic Spending "Bonuses"
Bank cards and credit cards often have incentive programs to encourage certain types of spending. For example, you can earn reward points if you use your credit card instead of cash at the grocery store.But this also makes it easier to lose track of how much you're actually spending. Then you might pay more than you get back in credit card interest. This is why the envelope budgeting method (spending only from budgeted envelopes of cash) can help you save for real.
Don't Spend to Save. Just Save.
When it comes to spaving, resist the urge. When you spend to save, you are playing into the marketers' well-laid plans. And they want you to spend - not save.
On the other hand, we do want to help you save. And we have a blog full of excellent tips to do just that. Next, read 8 Budgeting Pitfalls and How to Avoid Them.
Better yet, sign-up for Thinkflow and let us do the heavy lifting on analyzing your finances for you.