Doing the Math on Coupons
Brett Arends
Thursday, February 11, 2010 Buzz up!249 votes
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This article is part of a series related to being Financially Fit
They're back in fashion, with good reason: An hour spent cutting and clipping can yield about $100 in savings.
Clipping coupons hardly sounds like the subject of high finance -- or even medium finance.
Save a dollar on cat food, some detergent or a couple of boxes of cereal. Who can be bothered? Who has the time?
A growing number of people, it turns out. And they're shrewder than it may at first appear.
The Great American Coupon is making a big comeback -- thanks to the Great American Recession.
We redeemed some 3.3 billion coupons last year -- a remarkable 27 percent leap from 2008, and the first year-on-year increase in 17 years, according to a report issued at the end of January by Inmar, a coupon-processing agent. (Online coupon use skyrocketed -- companies issued twice as many as in 2008, but redemptions rose 360 percent.) The big upturn took off in October 2008, just after Lehman went belly up.
At first blush you can see why coupons fell out of fashion for so long -- and why so many consumers still ignore them.
You have to make time to visit a coupon Web site or collect the flyers from your mailbox, the supermarket or newspaper inserts. You need to sort through to find the ones you want, cut them out, stick them in your purse or wallet -- and remember to use them when you are at the cash register and you are trying to remember whether you bought everything on your shopping list and where you parked the car.
Average saving per coupon: Just $1.44, according to the Inmar report.
But let's treat this low finance topic for a moment the way we treat high finance. Let's subject it to the same math.
How long does it actually take to clip and use a coupon? Certainly the more you use, the less overall time you will spend per coupon, because so many of the costs -- getting flyers, sorting coupons and so on -- are generalized. Let's assume you spend a minute per coupon.
Saving $1.44 for a minute's effort is the equivalent of saving $14.40 for 10 minutes'.
Hourly rate: $86.40.
Maybe this would be as good a time as any to point out that the typical American working stiff -- those lucky enough to have jobs right now -- climbs out of bed each morning, goes through the miseries of commuting and endures the daily grind at the workplace for about $20 an hour.
Furthermore, money saved comes with an additional benefit. Unlike the money you earn at work, it is tax free. No payroll taxes. No federal or state income tax.
If your marginal tax rate were, say, 20 percent, you would have to earn $108 before tax to take home $86.40. If your marginal tax rate were 30 percent, you'd have to earn $123.
Very few of us ever do this kind of math, because we tend to treat low finance differently from high finance, and small sums differently from big ones. No wonder, even today, 99 percent of coupons are thrown away unused.
Yet finance isn't a separate topic from the rest of our personal lives. For all of us, our scarcest resource is time. Putting the right value on it, and putting it to the most productive use, is a financial challenge, as well as a personal one.
And the individual amounts of money may seem small, but they prove the old adage about tiny acorns and mighty oaks. Someone who saves $25 a week will save $100 a month, and $1,200 a year. Over a lifetime that can easily grow to $100,000 or more -- even after accounting for inflation.
If motivation is an issue, the next time you find yourself facing a stack of coupon booklets and flyers don't ask yourself if you can be bothered. Try asking yourself if you'd like to earn more than $100 an hour for a job you can do, at home, while sitting on the sofa watching TV.
