What, are they saying white women are cheap?

Note: This post appeared in a vastly different form on Adaptu, where Greg contributes. Really, the only similarities are the message and the title. Go there and read it, after this.

In the 1930s, people made ends meet during the Great Depression by moving out of the Dust Bowl and eating possum stew. Today, people ravaged by the worst financial crisis since then are valiantly fighting economic stasis with…scissors and paper clips.

With the rarest of exceptions, coupon clipping is penny wisdom and pound folly. For all the effort the average coupon clipper puts into saving a few quarters on toaster pastries and bottled water, there are better and more financially rewarding ways to spend one’s time.

(Oh, and by the way? “Coupon” is a noun, not a verb. Now excuse me as I resume paragraphing.)

The jar of pickles that your coupon reduced from $2.99 to $2.59 is not a 40¢ saving. It’s still a $2.59 outlay. Food producers aren’t in the habit of leaving money on the table, any more than anyone else is. Rather, they’re just testing multiple prices on the same public and seeing which guinea pigs bite, as it were. If a manufacturer issues a coupon and thus reduces its profit on each jar by a few pennies, but the result is that significantly more people each buy a jar than otherwise would, then the manufacturer’s learned some valuable information about its clientele.

Of course, we’re more interested in coupons from the consumer’s perspective, not the producer’s. From the consumer’s perspective, the time involved in achieving that miniscule saving is almost never worth the effort rendered. Especially when there are so many easier ways to save money, and especially when people insist on confusing spending with saving.

Take the recent multitudes lining up to buy the TouchPad, Hewlett-Packard’s dead-on-arrival competitor to Apple’s ubiquitous iPad. The rush on TouchPads didn’t start until HP announced they weren’t going to make any more of them. Ever. No improved model down the road, no software updates. Just the opposite, in fact.

TouchPads went for $500 the day before HP announced they’d stop making them, $100 the day after. To the common gullible consumer, that means an extra $400 in his pocket. But here’s a truth that’s so obvious that it’s easy to miss:

Buying a consumer product – any consumer product – doesn’t make you money. It’s not as if each customer is skipping out of Best Buy, triumphantly waving four $100 bills that he wouldn’t have if he’d never entered the store.

Retailers dropped TouchPad prices 80% out of necessity – unsold inventory is no fun – and the masses did what masses do. Given how quickly smartphones and tablets lose resale value (my own HP Pre went from $550 to a $30 eBay cut-and-run sale in under 2 years, an inevitable byproduct of technological progress), even $100 for an end-of-line product can be a lot.

Why do people spend beautiful Sunday afternoons indoors, sorting through flyers when they could be out enjoying life? Or waiting in line for a durable good that will almost certainly be a paperweight in a couple years’ time?

They fall victim to the oldest psychological trick in the retailer’s playbook, anchoring. Instead of offering a product at price x, offer it at price x+y with a y discount. It sounds so simplistic that you’d think it couldn’t possibly work, but it does. In the early 2000s a sewing supply shop in CYC’s hometown took out the same tiny ad in the local paper, every day. The ad stated that you could bring it in to buy a particular sewing machine for $168, or pay $899 without the ad. This example is more blatant than most, but it’s an important reminder that a coupon has no intrinsic value. It’s not worth 40¢, $1, or in the case of the sewing supply store, the price of a flight to London. If you’re altering your behavior to spend money because of a perceived saving, think about the 100% saving you’d enjoy if you didn’t spend the money in the first place.

Speaking of psychological tricks, say you can buy a certain shirt at a store across the street for $40. But the exact same shirt is available on the other side of town for $10. Would you drive across town to buy it? (Or to phrase it differently, Would you still buy it across the street for 4 times the price?) Most people who like the shirt, and even some who don’t, would make the trip for a colossal 75% saving. Sounds reasonable, right?

Okay then, would you buy a new car for $29,658 across the street, when a dealer on the other side of town is selling it for $29,628? Most people (who haven’t been exposed to the previous question) would prefer to stay close to home, rather than waste time and fight traffic to take advantage of a measly .1% saving.

Hopefully I don’t need to point out that the two scenarios are equivalent. To be consistent, you should say yes either to both or to neither. A $30 saving is a $30 saving, regardless of how expensive the underlying item is.

Why are coupons so popular? Because taken at face value, they appear to be one-sided marketplace victories gained without effort. I got one over on the grocery store. But more often than not, using a coupon means buying something that you’d otherwise have been ambivalent about at best.

Instead of spending valuable hours saving microscopic amounts, go for the big fish. Every year, buyers leave billions on the table because they’d rather spend their time dealing in impersonal printed discounts than learning the fundamentals of negotiating. The same people who devote one day a week to clipping coupons are by and large the ones who are terrified to try to talk a house seller or mortgage lender down a few thousand dollars.

If you’re buying necessities, and don’t have to change your behavior to acquire them, coupons could make sense in theory. (You’ll notice that your power company and water utility aren’t in the habit of issuing coupons.) If you’re buying frivolities, things that only caught your eye because of the reduced price, then you’re not saving money no matter how hard you justify doing so. And if you’re buying expensive necessities – a house, a vehicle – the amount you’ll save by learning how to stand your ground and walk away if necessary will dwarf anything you’ll save by making the supermarket clerk scan Universal Product Codes.

This popular article is featured in  the following carnivals:

**The Carnival of Financial Planning: Edition #209**

**The Totally Money Blog Carnival #42**

**The Carnival of Financial Planning Edition #211**